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For businesses that function using heavy equipment, investing in these machinery is essential for the growth of the company. However, the cost of purchasing this heavy equipment is usually a challenge for many business owners.

Many business owners struggle with providing enough capital to finance heavy machinery essential to their business operations. In these cases, getting a business loan for heavy equipment is the best option to explore. 

But how exactly do these loans work? Below, we have provided everything you need about business loans for heavy equipment and how to get them.

A huge yellow crawler excavator and a construction dump truck standing next to it while working on a sunny day against a blue sky

What Is A Heavy Equipment Loan?

Running a business can be hard. Running one that requires heavy equipment for operation is even more difficult. Heavy equipment or heavy machinery is self-propelled, self-powered, or pull-type equipment and machinery used to handle large-scale or heavy-duty tasks.

It is an umbrella term that refers to a specific category of fixed assets, including construction, forestry, mining, and industrial machines. Heavy equipment is commonly earth-moving machines such as excavators and bulldozers.

However, today, the term refers to equipment used for drilling, lifting, grading, suctioning, paving, and compacting activities. Some examples of heavy machinery include skid steer loaders, backhoe loaders, wheel tractor-scrapers, and cranes.

As anyone can envision, heavy machinery is large, powerful, and requires a lot of mechanics to run. As a result, they are usually more expensive to obtain or replace than smaller machinery. To avoid creating a dent in the business budget, many business owners look to heavy equipment loans as a solution to obtain heavy equipment.

Heavy equipment loans are equipment financing options that allow businesses to borrow money to purchase heavy equipment. With this option, business owners do not need to pay upfront for heavy equipment.  By taking out a heavy equipment loan, businesses can quickly and easily purchase new heavy equipment or replace old ones when necessary.

Since these businesses rely on these machines for operation, getting this financing option is a great way to remain in operation while efficiently managing business finances. The process for taking out a heavy equipment loan is similar to many loan options in the business world.

However, being knowledgeable about the process is essential to getting the most benefits out of this financing option. With a heavy equipment loan, a business owner gets a loan provider to finance the equipment. The loan provider is usually financial institutions such as banks.

In this type of loan option, the lender provides the purchase amount with an additional interest rate that the business is required to pay over a stipulated period. The process does not require collateral as many financing options do.

This is because the equipment serves as collateral in the funding agreements. By doing this, the business can pay for the equipment without having to shoulder the entire cost in one go. This makes it easier for new business owners to start operations or replace old equipment that may be hindering the success of the business’s operation.

Businesses like construction companies, aviation businesses, and agricultural establishments use heavy equipment financing.

How Does A Heavy Equipment Loan Work?

Heavy equipment loans provide capital to purchase equipment that would otherwise leave a dent in a business’s finances. It is a wise financial decision that ensures businesses do not jeopardize their cash flow to purchase the necessary heavy assets.

Heavy equipment loans work for any heavy equipment. However, the amount of money the lender gives often depends on the kind of equipment the entrepreneur wants to purchase. It also depends on other factors, like whether the equipment is new or used and the entrepreneur’s eligibility.

In most cases, a heavy equipment loan works like a regular loan process. However, the difference, in this case, is the lack of the need to turn in collateral. This is because the purchased equipment will be used as collateral.

If the borrower defaults on payment, the equipment will be taken away. As previously mentioned, the terms of a heavy equipment loan vary with the lender. However, other factors such as equipment’s characteristics and expected useful lifespan determine the term extension. 

Most heavy equipment loans have an interest rate between 8% and 30%. The lender will determine the length or duration of the repayment. However, some repayment durations are more flexible than others, which makes it important to research lenders before taking out a loan.

It is also important to note that not all lenders offer 100% of the amount needed to purchase the equipment. The amount lenders are willing to pay usually varies from 80% to 100% of the equipment purchase price.

This amount is usually given without needing a deposit (unless the lender’s terms say otherwise). Once the loan is fully repaid, the entrepreneur gets to keep the heavy equipment. Once again, this duration varies with the lender.

However, many lenders insist on a monthly repayment plan until the pain and all interest are paid. Some lenders may require a personal or business lien to approve the loan. This is usually a form of security. If the entrepreneur defaults on the loan, the lender can take back any personal or business property used as security.

To fully understand all terms, it is important to review the loan agreement. It might also help to get professional help while reviewing the terms to ensure you do not miss any important information that might be detrimental to your business in the future.

How Do You Get Heavy Equipment Loans?

There are various options for securing business loans for heavy equipment. These options vary with the lender. Some financial solutions to get heavy equipment include:

1. Small Business Administration (SBA)

Many business owners favor SBA loans due to their high approval. SBA loans are loans guaranteed by the SBA. These loan options can be used by small, medium, or large businesses. The first thing to note when trying to get an SBA loan is that SBA loans are not paid from the SBA’s wallet.

The U.S. Small Business Administration focuses on helping small businesses get funding by setting loan guidelines and reducing lender risk. Essentially, the SBA is a guarantor to increase an entrepreneur’s chances of getting a loan.

The SBA partners with financial institutions such as local or regional banks. It is these financial institutions that provide the loan when the SBA approves a business owner for a loan. The upside is the entrepreneur does not have to meet metrics such as having a very good credit score (although that helps).

SBA loans also come with other advantages, such as:

  • A generous repayment term length, such as a 10-year term on non-real estate loans
  • Lower interest rates than at traditional banks
  • Financing between 80% and 90% of the equipment cost
  • Lower down payment required.

Different types of SBA loans are used to categorize instances in which entrepreneurs may require a loan. To get a heavy equipment business loan backed by the SBA, business owners must apply for an SBA 504 machinery and equipment loan.

This loan option is under the SBA’s 504 Loan Program. It is no different from any other SBA 504 loan, except that it is used to secure capital for long-life fixed machinery. The 504 machineries & equipment loan option offers:

  • Up to 90% financing at below-market, fixed interest rates. This means no future interest rate fluctuations, offering business owners safety from racking unpredictable interest debt too high in the future


  • 10-, 20- and 25-year amortization terms are available. However, this depends on the useful life declaration from the manufacturer or appraiser


  • The fees and soft costs associated with approving the loan can be financed in the loan minimizing out-of-pocket costs


  • A wide range of loan availability: Up to $5 million of aggregate SBA eligibility on standard and public policy 504 projects; up to $5.5 million per 504 project involving small manufacturers with no limit on the total SBA dollars available; and up to $5.5 million per 504 energy efficient green project do not exceed $16.5 million in the aggregate.


  • Funds total projects from $125,000 to $20 million+.


The funds received from the SBA are used to install new or used long-life machinery and equipment, such as heavy and highly calibrated machines, manufacturing equipment, and printing equipment. While this is great, it is important to know that SBA loans are not easy to get.

They may sometimes require a lien (at the lender’s request) and usually take up to 3 months to approve. If you require fast funding for heavy equipment, SBA loans are not your best option.

2. Traditional Banks

The first place any business owner will look for a loan to finance heavy equipment is a bank. Banks are great options to try out when sourcing a loan for heavy equipment. However, the application process can be rigid, tough, and difficult to navigate.

Banks usually have a lot of terms for providing heavy equipment capital. The terms vary with the bank. Some of the equipment includes:

  • A specific duration the business has been in operation (typically two years old)
  • Submission of certain documents such as cashflow and business statements
  • Certain annual revenue
  • A good credit score (above 650)
  • A collateral

Although these terms may be more difficult to meet than an SBA, traditional banks tend to pay a large percentage of the amount needed to purchase the equipment. They also offer faster approval processes.

3. Online Lenders

Online lenders are another good place to look for loans. However, they can be very picky with who they choose to fund expensive equipment for. Online lenders may be private lenders or online financial institutions.

They usually have access to better technology which makes it easier and faster to process applications. However, it is important to note that loan terms usually vary widely.  Some online lenders may require a good credit score, and some may not care.

Some may require collateral, while some will use the equipment as collateral. The interest rates also vary widely. One problem with taking loans from online lenders is the possibility that the interest rates will increase over time.

Some lenders may also choose to craft the repayment terms. Regardless, online lenders are worth a good shot when looking for equipment loans.

How To Qualify For A Heavy Equipment Loan

Lenders consider several factors when choosing business owners to give heavy equipment loans. This is because loans can be risky to lenders, and these lenders want to ensure they are making a good decision when they choose who to give loans to.

If an entrepreneur does not meet up to the requirements needed to qualify for the loan, they risk being denied. So, how exactly do you ensure you qualify for a heavy equipment loan?

  • Good Credit Score: A credit score is a numerical expression based on a level analysis of a person’s credit files. It represents a person’s creditworthiness and is used as a metric to check your reliability for paying off the debt on time. A credit score is between 300 and 850, with 300 meaning terrible credit. Credit scores from 580 to 669 are considered fair, numbers 670 to 739 are considered good, numbers 740 to 799 are considered very good, and 800 and up are considered excellent. Only about 1.6% of Americans have a perfect credit score of 850. Leaders may use credit scores of 700 and above to judge which borrowers they can lend heavy equipment loans to.


  • Time In Business: How long have you been in business? Many lenders prefer to give loans to businesses with at least two years of business history. Others may require at least six months of business history. However, SBA loans and online lenders also offer loans for start-up businesses. Do your findings to know what your lender’s requirements are and if they require business history.


  • Annual Revenue: Some lenders (especially traditional banks) require a business to have a certain minimum annual revenue before it can be eligible for a loan. This revenue ranges anywhere from $100,000 to $250,000. Some other lenders are more lenient with their requirements and do not require a certain annual revenue.


  • Down Payment: Some lenders may require a downpayment to secure a heavy equipment loan. This is usually a 10% contribution from the borrower.

Modern farmers over the laptop heavy equipment loan

How To Apply For A Heavy Equipment Business Loan

There are no one-way-fits-all step-by-step formulas for applying for a business loan. Each process depends on the source you choose to seek the loan from. However, some steps make up the foundation of the application for a business loan. These include:

  • Know why you need the loan and what equipment you want to purchase
  • Know the price of the equipment, as it will be necessary for the application process
  • Research your lending option (SBA, traditional banks, online lenders, or other options)
  • Get in contact with the lender 
  • Gather the necessary documents required by the lender (such as bank statements, invoices for the equipment, and personal & company tax returns or audited financials)
  • Write and send in an application letter (this might be done online or offline)
  • Carry out any instructions given during the review process
  • Be patient, as the lender will review your application and reach out to you to know if it has been approved or denied
  • Pay fees after approval.

Are You Thinking About Getting A Heavy Equipment Loan?

Getting approved for a heavy equipment loan can be a frustrating process. Even worse, striking a deal with bad loan terms can damage an entrepreneur’s business. To help, we offer fast, easy, and fair heavy equipment financing solutions to help you secure the necessary equipment.

At Coastal Kapital, our equipment financing solutions include an equipment finance agreement (EFA), a $5,000 to $500,000 loan, and a 10% Put option buy. We offer long repayment terms, low-interest rates, and fast approvals to ensure you get the necessary finances.  Apply for a loan now by filling out the online application form on our website!

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