heavy equipment financing

Best Small Business Loans for Heavy Equipment Financing

Ezra Cabrera | September 15, 2021


    Key Takeaways

    • Heavy equipment financing is the best loan solution for purchasing construction and inventory-related equipment, from forklifts to tractors.

    • Some businesses may also opt for heavy equipment leasing, in which the lessee pays for the time they use a particular piece of equipment to support temporary work. However, in this setup, the lessee has no right over the equipment they rented, even if they are paying to use it.

    • There’s no guarantee that borrowers will get the full amount of the heavy equipment loan they are applying for, but if they have a favorable credit score and other supporting documents, they are likely to receive 100% of the loan.

    Some business owners apply for heavy equipment loans even if they have the money to pay for their machines upfront. Why? Because they understand that running a small company is very unpredictable. The money they would use to pay for heavy equipment may be put to better use as a reserve for emergencies or for more value-adding investments like opening a new location.

    Heavy equipment financing gives you the convenience and flexibility of having heavy-duty machines that keep your business operating without having to shell out a large amount of money outright for them. That’s why many business owners have relied on heavy equipment loans.

    In this article, we’ll talk about heavy equipment financing and why it's the best loan solution for making large machine purchases.

    What is Heavy Equipment Financing?

    Heavy equipment financing (or construction equipment financing) allows businesses like yours to borrow money to purchase heavy machinery and pay it off over time.

    It’s a strategic move that allows you to finance the equipment necessary to boost productivity and profitability without depleting your cash reserves. You’ll secure a loan to cover the equipment cost, making a manageable monthly payment instead of a large upfront investment.

    Heavy equipment financing is most commonly used to pay for construction equipment, including bulldozers, forklifts, tractors, and other construction and engineering equipment.

    What are The Benefits of Heavy Equipment Financing?

    Small business owners and managers often need equipment to make their products, keep their operations running smoothly, and grow their businesses. That's where heavy equipment financing comes in handy. It helps them get the money they need to buy big machines or replace old, worn-out equipment before it harms their business.

    If you're facing similar challenges, getting heavy equipment financing can help improve your business operations. Here are the benefits of having extra funds for your heavy-duty equipment needs.

    • Preserve your capital

      Don’t tie up your cash in a single purchase. Keep your working capital readily available for unforeseen expenses, emergencies, or strategic investments, like expanding your reach to new locations or launching impactful marketing campaigns.

    • Invest in cutting-edge equipment

      Financing lets you acquire the latest, most technologically advanced equipment available. This translates to increased productivity, improved operational efficiency, and a competitive edge within your industry. Modern equipment often boasts improved fuel efficiency, reduced maintenance costs, and enhanced safety features – all factors that contribute to significant business advantages.

    • Fast and streamlined process

      We know waiting for loan approvals can stall your projects. That's why our online application takes minutes and provides pre-approval estimates quickly. Our dedicated team guides you through the process, ensuring a smooth experience. With fast turnaround times, you'll get approved quicker, minimizing downtime and letting you focus on what matters – growing your business.

    • Predictable budgeting

      Monthly loan payments provide clarity and structure to your financial planning. You’ll be able to forecast expenses more effectively, confidently make informed business decisions, and allocate resources efficiently.

    Best Small Business Loans for Heavy Equipment Financing

    As a small business owner, you know that equipment purchases can eat into your operating budget. That's why it's crucial for you to explore various funding options, particularly when acquiring heavy equipment.

    It's best to examine all available financing options to make informed choices carefully. Doing so lets you determine how equipment financing can best support your small business needs.

    Here are some of the best heavy equipment loans for you:

    Construction Equipment Financing

    Equipment financing is a convenient way for businesses to acquire used or new equipment without bearing the full cost upfront. Instead of paying a lump sum, businesses make regular payments over time, which is particularly helpful for managing cash flow.

    Heavy Equipment Loan vs. Equipment Lease

    There are two primary types of equipment financing: equipment loans and equipment leases.

    Equipment Loans: With a construction equipment loan, businesses borrow a specific amount to purchase the equipment outright. This means the business owns the equipment from the start. The borrowed amount and interest are repaid over a predetermined period through regular payments. One significant advantage of equipment loans is that the business gains ownership rights immediately, allowing for tax depreciation and potential equity buildup.

    Heavy Equipment Leasing: On the other hand, construction equipment leasing involves renting the equipment from a leasing company for a set duration. Unlike a loan, the business doesn't own the equipment but pays periodic lease payments. While leasing offers flexibility, often requiring lower initial costs and including maintenance services, the company doesn't enjoy ownership benefits. At the end of the lease construction equipment term, you can return the equipment, renew the lease, or purchase it at its fair market value.

    SBA 7(a) and CDC/504 Loans

    SBA 7(a) loans and CDC/504 loans are financing provided by the Small Business Administration (SBA) to help small businesses grow. Here's what you need to know:

    SBA 7(a) Loans

    SBA 7(a) loans, provided by the Small Business Administration (SBA), offer small businesses a versatile financing solution for various needs, including heavy equipment purchases. These loans stand out for their lower down payment requirements and longer repayment terms, making them appealing options for businesses looking to invest in essential equipment while maintaining cash flow.

    CDC/504 Loans

    On the other hand, CDC/504 loans are specifically tailored for acquiring major fixed assets like equipment or real estate. While they cannot be used for working capital or inventory, CDC/504 loans offer long-term, fixed-rate financing, providing stability and predictability for small businesses. This makes them ideal for construction businesses financing heavy equipment purchases without straining their financial resources.

    Asset-Based Loans

    An asset-based loan is a financing option that uses your existing business assets, like equipment, inventory, or even real estate, as collateral to secure a loan. With this loan, you're using something you already own to borrow money for something new.

    An asset-based loan can be a valuable tool for financing heavy equipment purchases. Here's how it works: Let's say your business needs a new excavator, but your current, paid-off bulldozer is still valuable. An asset-based lender will consider the value of your bulldozer as security for a loan to finance the new excavator. Essentially, the financing company sees your existing equipment as a guarantee that you'll repay the loan. This approach can be beneficial for businesses that are newer or have a lower credit score, as it offers an alternative way to qualify for financing.

    Term Loans

    Term loans offer businesses a straightforward method of financing, providing a set amount of money to be repaid over a predetermined period. This type of borrowing is beneficial for heavy equipment financing due to its flexibility and stability. With fixed interest rates, businesses can accurately predict monthly payments, while extended repayment periods spread the cost over several years, easing financial strain.

    Term loans are a popular option because they offer competitive interest rates and get you the equipment you need quickly. You'll secure the loan for the total equipment cost, then make fixed monthly payments that factor in both the principal amount (the actual cost of the equipment) and the interest. This structured approach frees up your cash flow for other business needs while allowing you to acquire the equipment to boost your productivity and growth.

    Why Work With SMB Compass to Get Heavy Equipment Loans?

    SMB Compass has a proven track record in providing small business financing solutions. We will work hand-in-hand with you to ensure that you get the right equipment for your business. Our expertise is derived from our decades-long experience in various industries, which allowed us to make calculated decisions that will benefit your business.

    Common Questions. Straight Answers.


    The credit score required to finance heavy equipment can differ based on the lender and the type of loan. At SMB Compass, we typically look for a minimum credit score of 650. However, having a higher credit score improves your chances of qualifying for better terms and rates.

    Different traditional and online lenders may have varying credit score requirements, so it's best to inquire directly with your chosen lender. Your credit score is a crucial factor in determining your eligibility for financing and can impact the terms and rates offered to you.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.