Your Complete Guide to Heavy Equipment Financing
Is your company interested in investing in, say, a new backhoe? You might be surprised to see how much one will cost.
Small backhoes that dig up to six feet deep are available for somewhere between $10,000 and $20,000. Medium-sized backhoes, meanwhile, that dig up to 14 feet deep will run you between $50,000 and $90,000. And large backhoes that dig up to 16 feet deep often go for well over $100,000.
These prices make it difficult for most companies to buy backhoes and other pieces of heavy equipment. But heavy equipment financing makes it possible for businesses to get the equipment they need without breaking the bank.
Would you like to learn more about heavy equipment financing so that your company is able to afford everything you need to succeed? Here is a guide on how to obtain it.
Create a List of the Heavy Equipment Your Company Needs
First things first: Before you start trying to apply for heavy equipment financing, you need to sit down and make a list of all the heavy equipment you’re thinking about buying. This will help you decide how much money you’ll need to try and borrow to buy it.
There are so many different types of heavy equipment that you can buy when you obtain financing for it. We just mentioned backhoes a little bit ago, but that’s just one example of a piece of heavy equipment you can purchase with heavy equipment financing.
Outside of construction equipment, you can also buy things like:
- Cars, trucks, and other vehicles
- Industrial machinery
- Medical equipment
- Office furniture
Whether you’re starting a new business from scratch and buying equipment for it or replacing old equipment for your existing business, you can benefit from heavy equipment financing in a big way. But you can’t do it until you know what you need.
Think About If It Makes More Sense to Lease Equipment Than to Buy It
Prior to purchasing a piece of heavy equipment, ask yourself one simple question: “How often am I going to use this equipment?” This will let you know if it’s something you need to spend thousands or even tens of thousands of dollars on.
If you find that you’re only going to be using a piece of heavy equipment every six months or so, spending money to buy it might be a waste. Instead, think about leasing the equipment as needed as opposed to sinking a bunch of money into it only to use it every so often.
Equipment financing and leasing are both great options for companies. Make sure you weigh both options before settling on one over the other.
Consider Purchasing Used Equipment Over New Equipment
If you ultimately decide that you are, in fact, going to buy heavy equipment over leasing it, there is another way you may be able to save some money on it.
Rather than buying brand-new heavy equipment right off a dealer’s lot, you can go with used equipment. Used equipment will cost just a fraction of what new equipment will while still getting the job done for you.
There may be some additional maintenance and repairs that will come along with buying used equipment over new equipment. You might also need to replace used equipment much sooner than you would have to replace new equipment.
But it’s an option worth considering for those who are going to be using heavy equipment financing.
See How Much You Can Expect to Pay for Your Preferred Heavy Equipment
Regardless of whether you choose to go with new or used heavy equipment, you should have a good idea of how much the equipment you need is going to cost you before applying for heavy equipment financing.
Shop around to see what kind of equipment you’re interested in buying on behalf of your company. Look for the best deals you can find on equipment so that you can gauge what you’re going to have to pay for it in the end.
There is, of course, a chance that you may not qualify for enough financing to buy your preferred equipment. It’s why you should avoid falling in love with any equipment before you get your hands on the financing for it.
But by price shopping for heavy equipment, you’ll give yourself some sense of how much money you need to borrow from a lender. This will help you steer clear of applying for a loan that is either too small or too large.
Apply for Heavy Equipment Financing Through Different Lenders
At this point, you should be committed to taking out a loan to buy heavy equipment. You should also know which equipment you want to buy and have some general idea of how much it’ll cost.
Once you have all that in place, start the process of applying for heavy equipment financing through different lenders. Locate lenders that specialize in giving out loans that are specifically designed to help those who need heavy equipment.
When you apply for these types of loans, you’ll often be asked to share important financial information related to your company. Lenders will also take a look at your company’s credit history to see how much you qualify to borrow.
From there, lenders will begin sending you loan offers one by one. In a perfect world, you should try to get at least a few loan offers since every lender will provide you with an offer that’s slightly different.
Look at the Financing Terms Offered to You
After you’ve received a few equipment loan offers from lenders, spend some time sifting through them to see what they’re all about. It’s well worth your time to take a deep dive into loan offers so that you understand what lenders are willing to give you.
More often than not, different lenders will offer you different amounts of money. One lender might offer you the exact amount of money that you need to buy heavy equipment, while another might only offer you a percentage of what you’re looking to borrow.
Different lenders will also extend different interest rates to you. These interest rates will determine how much interest you end up paying over the life of your equipment loan.
Ideally, you want to try and find a loan that provides you with the money you need to buy heavy equipment as well as a low-interest rate so that you don’t pay way more than you should have to for equipment. Reading through loan offers is the best way to ensure that you’re able to do this.
Accept the Best Financing Option That You Receive
After you’re finished looking through all the loan offers that have come in, it’ll finally be time to make a decision as far as which one you’re going to take. Take one final glance at your options and choose the one that is going to work best for you.
Contact the lender who offered that loan and let them know that you would like to accept it. You will then have to fill out a bunch of paperwork to finalize your loan before obtaining the heavy equipment financing you need.
Come Up With a Plan for Paying Your Heavy Equipment Loan Back
There are so many benefits that come along with getting heavy equipment financing.
Doing it can help you obtain heavy equipment you may not have been able to afford otherwise. It can also prevent you from having to put down a large sum of money to buy equipment outright, which can help you retain working capital.
But you’re obviously going to have to pay back equipment loans over time. So you should have some sort of plan in place for how you’re going to do it as quickly as you can.
Your lender will work with you to come up with a repayment schedule. But if possible, you should also try to go above and beyond that schedule so that you can pay your equipment loan back quicker than expected.
In theory, the heavy equipment that you’re buying should make your business more profitable than ever before. It should also make it easy for you to pay back the money you borrowed in a reasonable amount of time.
Get Your Hands on the Money You Need to Buy Heavy Equipment Now
Is a lack of heavy equipment holding your company back? Do something about it today by applying for heavy equipment financing.
With the right financing in place, you can buy all the heavy equipment your company needs to be successful. You can also do it without having to spend the working capital your company needs to have on hand at all times.
Applying for equipment loans won’t take much time and effort on your part. But it could change the way that you do business moving forward and make it easier for your company to grow in the coming months and years.
Read our blog for more information on other types of personal and business loans.