Heavy Equipment Financing & How to Get Loan Approval

10 min read

Loans for heavy equipment can provide funds for businesses to purchase expensive machinery outright through manageable monthly payments. Also known as industrial equipment financing, these types of loans will allow you to free up your cash reserves when purchasing new or used or new equipment.

Whether you’re a contractor, farmer, or construction developer, being able to have the equipment you need right away, will help you win more bids and get the job done too.

Before you apply for a heavy equipment loan, you’ll want to know what to expect from financing companies, what to watch out for, and what funding options are typically available.

Equipment Types

There are a number of different types of heavy equipment that you can get a loan for, including industrial and construction equipment. Additionally, you can get a heavy equipment loan for both new and used heavy equipment, which provides flexibility for the types of assets you can fund.

Heavy equipment loans can also include more generalized requirements for financing, such as office technology or restaurant equipment. Some machinery can also be classified for heavy equipment funding, which is not limited to, but can include:

  • Commercial vehicles and forklifts
  • Cranes, bulldozers, and farm equipment
  • Generators

Loan Benefits

Equipment purchases, especially those of heavy machinery, can get very expensive and place a major drain on cash flow reserves. If you don’t even have the funds to spare, you can get stuck in an expensive lease, with an even more expensive end-of-contract buyout.

Full Ownership

Financing your machinery purchase through a heavy equipment loan will allow you to own, rather than just lease, as well as, use your equipment as collateral when you need to upgrade in the future.

The affordable monthly payments are similar to those of a lease, but you won’t have to return the machinery when your loan term is complete.

Positive Cash Flow

Since you’ll be paying your loan over a lengthy-term, there will only be small monthly hits to your cash flow, which you can recoup now that you have the equipment to take on more jobs. Maintaining your positive cash flow will also help your business stave off and endure future difficulties.

Ease Your Tax Burden

Section 179 of the internal revenue code dictates that your business is allowed to deduct the entire cost of specific purchases up to $1 million. Buying heavy equipment for your business will ensure you qualify for this deduction in the year you place your new machines into operation.

Equipment Purchase Savings

Buying heavy equipment with a loan is similar to buying it with cash, the main currency attached to discounts. This can be especially true when buying used equipment were providing the seller with the cold hard cash they need, can help drop their price considerably.

Collateral Upgrades

If you lease your equipment, you’ll either incur large penalties when returning them in mid-contract or have to find someone else to take over the lease. If you buy your equipment via a loan, you can leverage the balance you’ve already paid off, to finance newer equipment.

Reduce Repair Costs

If you’re buying new machinery, chances are it will come with a decent warranty attached. Not having to constantly do bandaid repairs to keep aging equipment operational can free up much-needed cash flow.

Meet Safety Standards

By replacing worn-out machines that have become a hazard on the working site, can allow you to meet the safety standard your employees deserve to be working under.

How it Works

From banks and credit unions to alternative online lenders, the application process and the documentation required will differ from lender to lender.

Approval Variables

The approval variables within a heavy equipment loan will depend on:

  • The amount of money you want to borrow
  • The length of term you require
  • The state of your business financials
  • What you are buying
  • Who is lending you the money
  • What document you are able to provide


If you’re only able to qualify for a high-risk loan and have no collateral, you may be required to make a deposit to get approval from a bank or credit union.


If you want a 0% interest loan for 9 to 15 months, you’ll generally have to commit to paying a loan fee to an online lender. The advantage of paying the fee (9-10% of the loan amount) is:

  1. The lender will move mountains to find someone willing to accept your application
  2. You’ll generally get approved and have the cash in your bank within a few days.


If you need a quick loan approval to buy your heavy equipment, you first have to understand what you actually qualify for. Loan pre-screening will make sure you’re not punching above your weight class on loan applications, or being overwhelmed by denials.

Pre-screening will also let you know what documents you’ll need to prepare before applying or if you need to boost your credit score to qualify for a certain lender or loan amount.

This safety precaution can also prevent hard pulls on your credit score, since pre-screening is basically, to figure out what loans you might qualify for BEFORE you apply.

Fast Approval

For a smoother and faster approval process for a heavy equipment loan, be sure to follow the steps below.

  1. Get a loan pre-screening, so you know what you might qualify for and the documentation you’ll require.
  2. Boost or rebuild your credit as need to qualify for the lender you desire
  3. Prepare all the appropriate documents mentioned in our pre-screening
  4. Gather as much data as possible about your heavy equipment from dealers and manufacturers, including machinery specifications and purchase offers.
  5. Save up enough money to cover the loan deposit or fee (if required due to poor credit, no collateral, etc.)

Financing vs Leasing

There are many differences between financing your heavy equipment and leasing it, with the biggest caveat being ownership.

Both methods require regular monthly payments to be made throughout the term of your contract and allow you to use your equipment while making payments.

With a lease, you own nothing. With financing, you can at least sell the equipment for scrap if you ran it into the ground. If you did the same with a lease, you’ll pay the roof upon returning it.

Lease Contract

In the case of an equipment lease, the machinery is either returned at the end of the lease contract or you have to buy out the contract. The final buyout is called a balloon payment, and if that sounds big, it’s because it generally is.

To keep your monthly lease payment and balloon buyout payment low, you’d have to make a big initial deposit before getting your equipment. If you return the equipment at the end of the lease, rather than buy out the remainder of the contract, you generally lose your deposit.

If you pay the balloon payment, your total cost will be a lot more than if you simply financed it from the start.

Basically, the only advantage to having a lease contract, is that the equipment will make a lot more than you pay for it, and you want to rid of it, as soon as the contract is complete. If you can’t keep the equipment in good condition prior to your lease end, you just may find yourself paying a hefty penalty upon returning it.

Financing Contract

In case of financing, the equipment becomes your property as soon as the payment in your agreed-upon term is complete. Thus, you can either keep it and continue working with it, if it is in a proper condition.

You can also sell it second-hand to someone else, or use it as collateral to get another loan to purchase newer equipment.

The key here is simply ownership. You buy it, you own it, and are able to do whatever you please once your contract is complete.

Approval Requirements

Here is what you need to know about the lenders when applying for heavy equipment financing. Here are the parameters that you need to take into account:

Before applying, remember to get a qualifying pre-screen to ensure you at least can come close to qualifying.

After applying, you will most likely you will be the subject of a hard credit pull, which can have a negative impact on your business credit score, especially if you get denied.

Business Age

Most lenders will require you to have had been in business for a minimum of two years before granting you equipment financing, but there are few online lenders who have fewer requirements.

Business Credit Score

A high business credit score is the key towards approval and higher funds and low, interest rates. Banks and credit unions generally only approve those with good credit, while online lenders work with anyone they can qualify.


As long as you can offer a collateral as guarantee for the loan, you will obtain lower interest rates. This is also a way to greatly increase the chances to receive loan approval. Banks and credit unions generally want collateral, while several online lenders will be happy to approve without it.

Down Payments

A down payment is another way to compensate for a bad business credit score or to decrease interest rates. Basically, before the lender gives you any money, you have to let them hold on to several months of payments in advance.

Lender Fees

This is usually more common in online lenders who offer approval of equipment loans with a 0% interest rate over the first 9 to 15 months of your loan term.

Where to Apply

The best places to apply for equipment loans are local credit unions and banks, or the bank where your business account is located.

Once you exhaust those options, it’s unlikely that a national bank will take you on either unless they’re aggressively promoting in your area. At this point, your only options would be private lenders, who are near impossible to find, or reputable online lenders of which there are plenty.

Banks and Credit Unions

if you’re going to request a heavy equipment loan from banks and credit unions, go local and small. Seek out those who advertise and seek out small businesses themselves, as when they do, they’re more likely to lower their approval standards, and well their interest rates.

If you have a business bank account with someone already, talk to a business loan officer and see if they offer loan pre-screening. The last thing you want to do is apply for something you have no hope of qualifying for, lowering your credit score even further upon denial.

No matter the option, whether national or local, do note that banks and credit unions are very thorough in the credit checks. If your application smells fishy, they’ll happily throw it back in the ocean.

Their thoroughness extends to the application process as well, which is generally complex enough to require a detailed business financial history and collateral.

If you’re looking for quick cash with an easy-peasy application process, banks and credit unions are not the place to seek them. If interest rates are a concern, then you probably won’t find rates when shopping around, especially when including those obscure, small community banks.

Online Lenders

If you’re looking for a simple application process and fast approvals, then online lenders are waiting for you to call. The flip to this is that lender interest rates here are generally higher than banks and some even require you to pay an application fee, and/or large fee upon approval.

Since there are no set standards in this industry, each alternative lender will have its own risk algorithm, and its own, varying terms and conditions.

Loose application requirements, however, are their bread and butter, so they typically cater to those who’ve already been turned down by the banks and have nowhere else to go.

Some documentation will be required, with possible requests for items below.

  • Tax returns for the business and the owner’s if the first is not good enough
  • Recent bank statements, financial statements, and other trade references.

If you can add anything else that proves your current business state, or growth/business plans, that also can be helpful.