Heavy Equipment Financing Companies

September 25, 2019|
Financing Blog|

Heavy Equipment Financing Companies

Having a company that requires heavy equipment can be very expensive and requires a lot of maintenance. This kind of equipment may be necessary to move earth/dirt, or any other type of activity that requires heavy-duty equipment. There are options for heavy equipment financing companies and this article will show you how to do it.

If you own a large company, you may be thinking that you don’t have to worry about financing construction equipment. Always remember that it never hurts to run the numbers to see what fits your financial situation best. If you read more on the post, you will be able to read about what it takes to obtain heavy equipment financing, and what the appropriate steps are.

Here are the steps that we will go over: Leasing compared to financing, How to qualify, terms and costs, tax benefits, and who provides this service.

Equipment Leasing vs Financing

Financing is more or less the same as a car or a home. There are financing terms with monthly payments that are due. At the end of the agreement, you own the equipment. It is yours to do what you want with it.

Leasing heavy duty equipment may be a valid option for a “one and done” type project. The leasing terms include you making monthly payments for a contracted time frame. After this term ends you either pay the remaining amount or purchase the equipment, or you return it.

How to Qualify

Qualification for a heavy equipment financing option is very similar to most financing options. It involves having good credit score and a down payment. If you don’t have a good credit score, then you can apply based off of your company’s cash flow. If you have high revenue, odds are you shouldn’t have a problem getting approved.

Application Requirements

If you know that you are able to qualify for a loan for heavy equipment, then you must have the appropriate documents ready. This will make the process of getting approved a lot quicker and smoother. Exactly what every company should want. Here is a list of the documents that most lenders require:

Valid ID
Voided Business Check, as well as 90 day bank statement
Statements of cash flow (Financials)
Previous Tax Returns (Business and Personal)
Credit Score
Utility Bills
Equipment Quote

Remember to always shop around for the best deal. There are online lenders as well as brick and mortar lenders. Make sure to shop around and find the best deal. With these huge dollar amounts, a quarter of a percent can make a huge difference.

Neal Business Funding — Heavy Equipment Financing- 315-699-4703

Terms and Cost

Heavy equipment financing is just like the majority of many other loans, the equipment that is being financed serves as a collateral. If the monthly payments are not being made, then the lender can easily come and seize their equipment.

That being said, interest rates can be on the lower end. The lender will not be taking on that much risk, as the equipment can be seized. The absolute lowest that will be advertised is roughly around 5-6%. It may be difficult to get such a rate. The higher end of the rates could be upwards of 30%.

This is when shopping around for interest rates will really pay off. That is a wide variety of interest rates when shopping for heavy equipment financing.

When buying a home, it can take up to a few weeks for the process to actually finish. Luckily with a construction equipment loan, it can be as fast as a few business days. You’ll have all the money you need to fund the equipment that you need to perform your activities.

Costs

Down Payments are not always required when looking to finance heavy equipment. Some of the lenders may require one, some may not. If you have a high interest rate, you can always attempt to buy the rate down.

If you have a good credit score and decent financials, then you should not have to worry about making a down payment. Making a down payment will only help your monthly payment be smaller. If you are worried about a large monthly payment or a long loan, then you might want to make some sort of payment at the beginning.

Tax Benefits

Taxes can get confusing on what credits you can take, what deductions you can take, and all the other stuff that is included within taxes. It can be very complicated, but also very simple if you know what you are looking for. Here are some of the benefits that you can find for financing heavy equipment:

Depreciation

Every year equipment depreciates. Just like an automobile. It depreciates in value, meaning that it is not worth the same amount of money a year after you purchased it. It will be worth less.

The government wants us to be able to take advantage of losing value in our expensive equipment. They give us an opportunity to take a small deduction every year, and for the rest of the life of the machinery.

Talking with a tax professional will be the best practice to insure that you are making the proper and best decisions for this action.

Section 179

The government again lets us take advantage of a tax deduction, again we recommend talking with a tax professional in order to properly participate in this.

To be more specific, this is an opportunity to deduct the FULL COST of the machinery up to $1 million in the year of purchase. This would be used if you did not want to depreciate the machinery every year. This does it at the same time.

If you want to read further about this topic, here is some more information.

Interest expense

Loan interest or lease payments are able to be written off as a business expense. This will be done on your yearly tax return.

Finding a Lender

Trying to find a lender who will provide heavy equipment financing may seem challenging, but just remember that this may be able to be done through bank funding. It never hurts to look around and find the best deal. It will most likely be time consuming, but it is better to spend time finding the best lender than getting stuck with a company that you do not wish to do business with.

Different lenders have multiple attractive attributes. It can be difficult to finally choose the one that works best for your situation. It can be compared to different types of trucks. Most of them do the exact same thing, just depends on how they do it.

Here are some of the questions that you will want to ask yourself when looking for heavy equipment financing companies: How quickly do you need it funded? Do you want to eventually own the equipment? How can you utilize the tax benefits to best fit your situation? How often will you use the machinery?

These questions must be asked when looking for a different lender. There may not be a wrong lender, but there most likely is a better one.