Heavy Equipment Financing

Heavy equipment financing enables companies to replace and secure items such dump trucks, bulldozers, cranes, graders and many other large expense pieces of equipment. For many companies, the profit lies in the day in and day out use of these pricey machines, so replacing outdated or inefficient equipment is vital. And deciding how to pay for them is also vital, particularly in a business climate that is so uncertain. There are a number of reasons companies finance their big machinery in the manner in which they do, and all of it has to do with cash flow. Consider these various factors:

If a company is a brand new start-up and lacks substantial cash, the business may consider machinery financing from a leasing standpoint. Leasing these behemoths makes sense for the start-up from an accounting point of view. Lease payments do not show up as debt and thus do not hurt a company's financial statement. This is a very popular way to approach heavy equipment financing because over eighty percent of all US companies lease at least some or most of their machinery. Leasing approval is usually a much quicker process than heavy equipment financing and can be done in a few hours in many cases. Leasing programs for these large machinery pieces can also include maintenance if the company desires.

But if a company wants to actually own these large scale tools for their services, then heavy equipment financing is probably the way to accomplish such a task. There are traditional ways to buy these tools and also non-traditional ways. If a start-up excavation company for example, needs to purchase two million dollars worth of machinery for their service, the first look may be to a bank, which would probably offer the most reasonable interest rates for the purchase. But in these very difficult economic days, the availability of easy credit is gone, and the borrowing parties involved in such transaction will have to have sterling credit histories to even be considered by a bank. Heavy construction equipment does not have the depreciation that a car might have, or office equipment might experience, and obsolescence is not as planned a factor as might be with a computer or copier. So despite the lack of those negative factors and that the bank would hold title to the machinery, the business owner and other partners would have to possess almost perfect credit to pass the bank smell test. Banks rates will be the lowest of any other source, but if that option falls through, there are other possibilities.

Perhaps this construction company cannot find an agreement with a bank, and so the next step in heavy equipment financing may be to look for an angel investor group. In most cases, these private investors only invest in tech businesses. Medical, bio-tech and related fields are the most appealing for this niche group of lenders, but an entrepreneur with excellent financials and a very aggressive business plan might persuade these wealthy investors to lend. Of course with any private investing group, the cost will be high in terms of interest rates, but often these investors are big in assisting new businesses and may craft a more palatable agreement. There is another non-traditional option for heavy machinery financing and that is the hard money lender.


In most cases, the hard money lender is a wealthy investor living in the same geographic area as the project to be financed. The hard money lender will probably be very aware of the entrepreneur who is seeking the heavy equipment financing money, and may even know the person on a friendship basis. Since this is totally private money being discussed, there are no regulations or limits to define the parameters for such an agreement. In most cases, a hard money lender is not interested in anything other than a twelve or eighteen month lending agreement; just long enough for the entrepreneur to find more traditional sources of backing. In some cases, however, the hard money lender may be quite interested in a portion of the business as part of the financial agreement. The interest rates will be high on the borrowed money, points on the one year loan will be as many as four or five and this kind of lender will only lend between sixty and seventy percent of the needed cash, leaving the entrepreneur to find the rest. In many cases, the hard money lender will ask the borrower to put up not only the purchased machinery, but also property, such as an office building or a personal residence as collateral.

In most cases, there will always be money from somewhere for heavy equipment financing. Even Middle Eastern banks advertise online to fund American requests for equipment cash. Banks, angel investors, hard cash lenders and other yet unexplored resources are there as financial possibilities. For the Christian there is great comfort in knowing that God is very much in control of our lives and knows our every need. "Be careful for nothing; but in everything by prayer and supplication let your requests be made known unto God and the peace of God which passeth all understanding shall keep your hearts and minds through Christ Jesus." (Philippians 4:7, 8) Some online equipment financiers tout that entrepreneurs only need a FICO of seven hundred to make a heavy equipment financing loan. Moving earth may not be so hard after all, if the borrower can get past obstacles in his way.