Did you know the Canadian government invests between $17-$23 billion into building construction every month?

If you have expertise in industries like construction, you're uniquely positioned to build a healthy business. However, these businesses tend to require specialized (and expensive) industrial equipment.

Luckily, you can rely on heavy equipment financing to make your dreams come true, and we'll explain all you need to know in this guide.

We'll cover:

• What counts as heavy equipment & why people finance it
• How to apply for it
• Financing vs. leasing vs. buying
• Where to get heavy equipment financing
• Terms, conditions, and interest rates

P.S. — are you a homeowner? If you are, you can use your home ownership to get more favourable terms on home equity loans and lines of credit, making starting your construction business even easier. Lotly works with you to find loan options customized for your financial situation, drawing on our national network of 50+ lenders. Book a free consultation to learn more today!

What counts as heavy equipment?

Heavy equipment refers to industrial machinery and vehicles used for construction, agriculture, mining, transportation, and other similar industries.

These machines are usually large in size and require specialized training to operate. Examples of heavy equipment include:

• Bulldozers
• Excavators
• Loaders
• Cranes
• Dump trucks
• Forklifts

Why is financing important for heavy equipment?

Purchasing heavy equipment can be a significant investment for businesses of all sizes. While some companies may have enough capital to buy the necessary equipment outright, others may need financial assistance.

Financing allows businesses to acquire the equipment they need without draining their cash reserves or taking out a large loan. Moreover, heavy equipment can often have a long lifespan, so financing can help companies spread the cost over several years.

What are the types of heavy equipment financing?

Various types of heavy equipment financing options are available, depending on the needs and financial situation of the business. Some common options include:

• Equipment loans: This is a traditional loan option where businesses borrow money to purchase equipment and pay it back with interest over time.
• Equipment leasing: With this option, businesses can rent equipment for a set period instead of purchasing it outright. Leasing allows for regular upgrades to newer and more advanced models.
• Line of credit: A line of credit gives businesses access to funds they can use to purchase or lease heavy equipment when needed.
• Equipment financing through manufacturers: Some heavy equipment manufacturers offer financing options for their own products, making it easier for businesses to acquire the necessary machinery.

Factors to consider when getting heavy equipment financing

When deciding on a heavy equipment financing option, businesses should carefully consider several factors, including:

• Interest rates and fees: Different lenders may offer different interest rates and fees. It's crucial to compare these costs to find the most affordable option.
• Repayment terms: The length of time a business has to repay the loan or lease can vary. Choosing repayment terms that align with the company's cash flow and budget is essential.
• Credit score: Lenders will consider your credit score when determining the terms of a loan or lease. A higher score may result in more favorable rates and terms.
• Down payment: Some financing options may require a down payment, which can affect how much funding a business needs to secure.
• Type of equipment: Certain lenders may specialize in financing specific types of heavy equipment, so it's essential to research and find a lender that offers financing for the needed machinery.

Once you've thought through these factors and have chosen a financing option, it's time to get started.

How to apply for heavy equipment financing (step by step)

1. Determine your equipment needs: Before applying for financing, businesses should have a clear understanding of the type and amount of heavy equipment they need. This will help determine the loan or lease amount required.
2. Gather necessary documents: Lenders will require specific documents during the application process, such as financial statements, tax returns, and business licenses. Have these prepared before beginning the application.
3. Research lenders: As mentioned previously, different lenders may offer different rates and terms — research your options to find the best fit for your business needs.
4. Fill out an application: Once you've selected a lender, complete their application thoroughly and accurately with all the required information.
5. Submit the application: Most lenders allow businesses to submit applications online, making the process quick and convenient.
6. Wait for approval: Lenders will review your application and may request additional documents or information before making a decision. This waiting period can vary in length depending on the lender.
7. Sign agreements: Once approved, carefully review and sign all loan or lease agreements. Be sure to understand all terms and conditions before signing.
8. Receive funding: After all agreements are signed, funding will be provided to purchase the heavy equipment.

Financing vs. leasing vs. buying heavy equipment

Depending on where your business is financially, how risk-tolerant you are, and your long-term plans, there are different options for acquiring heavy equipment. The three main options are financing, leasing, and buying. Let's review each one, their pros and cons, and how to know if it fits you.

Financing

Pros:

• Builds equity: Financing heavy equipment means you'll eventually own it outright, building equity for your business.
• Tax benefits: Interest and depreciation may be tax-deductible, reducing your taxable income.
• Flexible terms: You have the option to negotiate terms with the lender.

Cons:

• Requires a down payment: Most lenders require a down payment of 10-20% of the total cost of the equipment.
• Higher monthly payments: Loan payments can be higher than lease payments since they include interest and principal.

Leasing

Pros:

• Lower upfront costs: Leases typically do not require a down payment, making it easier for businesses with limited funds to acquire equipment.
• Tax benefits: Lease payments may be tax-deductible as an operational expense.
• Flexibility: Leases often have more flexible terms and options for upgrades or extensions.

Cons:

• No equity built: Since you don't own the equipment, you won't build equity in it.
• Higher overall cost: Leasing can ultimately cost more than financing due to interest and other fees.

Buying

Pros:

• Complete ownership: Buying heavy equipment outright means you have full control over its use and maintenance.
• Long-term savings: Over time, buying may end up less expensive than leasing or financing due to avoiding interest charges.

Cons:

• High upfront costs: Buying requires a significant upfront investment, which can be a challenge for small businesses.
• Maintenance and repair costs: As the owner, you are responsible for all maintenance and repairs on the equipment. These costs can add up over time.

So, how do you know which one is right for you?

• If you have the funds available and want complete ownership, buying may be your best option.
• Leasing could be a better fit if you want lower upfront costs and more flexibility.
• Financing may be the way to go if you prefer to spread out payments over time and potentially have tax benefits.

Overall, you should carefully consider your business needs and financial situation before deciding on whether to buy, lease, or finance your equipment. It may also be helpful to consult with a financial advisor or accountant for expert guidance.

Where to get heavy equipment financing: lenders and institutions

JLG Financial

JLG Financial offers financing solutions for various heavy equipment needs.

• Interest rate: Competitive rates (specific rates not disclosed)
• Loan amounts: Starting at $3,000
• Repayment terms: Pre-approvals lasting up to 120 days
• Additional info: Provides 100% financing for all makes and models, both new and used.

Equipment Finance Canada

If you couldn't tell by the name, Equipment Finance Canada specializes in financing and leasing solutions for heavy machinery. Interest rates and loan amounts will vary by borrower.

• Repayment terms: Terms ranging from 12 to 84 months
• Additional info: Offers financing for both new and used equipment, with quick approval processes.

Soluco Financial Group

Soluco provides leasing solutions for new and used construction equipment tailored to business needs. However, you'll have to reach out directly for more detailed information.

• Repayment terms: Quick approval within 48 business hours or less
• Additional info: Offers lease financing for a wide range of equipment and heavy-duty machinery in the construction industry.

If you're a homeowner, you might be able to get even better rates. A home equity loan lets you tap into the value of your home to finance large purchases like heavy equipment — Lotly specializes in this kind of financing, and we work with our network of lenders to find you the best possible deal. If that sounds like something you'd be interested in, get in touch!

Terms and conditions associated with heavy equipment loans

For a heavy equipment loan, you'll have to keep the following things in mind as you compare terms and conditions:

• Repayment period.  How long will you have to repay the loan? This can range from a few months to several years.
• Interest rate. What is the interest rate on the loan? This will determine how much you end up paying in total for the equipment.
• Collateral requirements. In most cases, heavy equipment loans require collateral to secure the loan. Make sure you understand what type of collateral is accepted and what happens if you default on the loan.
• Fees and charges. Are there any additional fees or charges associated with the loan? This could include origination fees, processing fees, or early repayment penalties.
• Credit score requirements. Lenders will typically check your credit score before approving a heavy equipment loan. You must know your credit score and whether you meet the lender's minimum requirements.
• Repayment options. Some lenders offer flexible repayment options such as monthly, quarterly, or annual payments. Choose an option that works best for your business's cash flow.
• Penalties for early repayment. If you plan on paying off the loan before the agreed-upon term, make sure there are no penalties for early repayment.

Once you have thoroughly reviewed and compared the terms and conditions of different lenders, you can choose the best heavy equipment loan for your business. It's essential to carefully consider all aspects of the loan to ensure it is a good fit for your financial situation and future plans.

Interest rates: finding the best rate for your business

The interest rate is one of the most important factors to consider when taking out a heavy equipment loan. This will determine how much you ultimately repay on top of the original loan amount. To find the best interest rate for your business, you can follow these steps:

1. Research different lenders and their interest rates.
2. Check if there are any special promotions or offers available.
3. Look at your credit score and financial history to see if you qualify for lower rates.
4. Consider the length of the loan term and how it will affect your interest rate.
5. Negotiate with lenders to get the best possible rate for your business.

It's important to remember that a lower interest rate may not always be the best option. Make sure to carefully consider all other aspects of the loan, such as repayment terms and any additional fees or charges, before making a decision based solely on the interest rate.

Get the best deal on your financing today with Lotly

Let's quickly recap what we've covered here:

• Understand what qualifies as heavy equipment and the importance of financing. Heavy equipment includes machinery like bulldozers, excavators, and cranes, and financing helps businesses acquire these costly items without depleting cash reserves.
• Choose the right financing option based on your needs and financial situation. Options include equipment loans, leases, lines of credit, and manufacturer financing, each with unique benefits like tax deductions or flexible terms.
• Evaluate terms and conditions carefully before applying for a heavy equipment loan. Consider factors like interest rates, repayment terms, collateral requirements, and potential fees to ensure the loan aligns with your business's cash flow and long-term plans.

Homeowners: If you're interested in financing your construction or agricultural business' heavy equipment with flexible, affordable loans, consider Lotly. We work with you to find personalized loan options optimized for your financial situation, all from our network of over 50 loan providers nationwide. Get in touch today to see how we can help!

Frequently Asked Questions

Do I need good credit to finance heavy equipment?

Not necessarily. While having good credit can help you secure a lower interest rate or better terms, there are financing options available for those with less-than-perfect credit.

Can I finance used heavy equipment?

Yes, you can finance both new and used heavy equipment through various loan options.

How long does the application process take?

The length of the application process varies depending on the lender and type of financing. Some loans may be approved within a few days, while others may take several weeks.

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