More than 79% of all construction companies finance their equipment (according to the Equipment Leasing and Finance Association). For many business owners and operators, purchasing the necessary equipment outright isn’t feasible. Equipment financing can help business owners preserve cash, get tailored payment options, manage risks, and build credit. Our team at Bevel Financial is here to help buyers understand the ins and outs of heavy equipment financing.
As a $1 trillion industry, heavy machinery is fundamental within construction, agriculture, transportation, medical, and aviation. Each industry constantly evolves to have specific needs and uses, so developing an equipment financing strategy is integral to successful financial management.
New vs. Used Heavy Equipment
Much like purchasing a new or used car, you should assess whether new or previously owned equipment is the right choice for your business.
New Equipment
New equipment boasts the latest technology and dependable operations but tends to come with higher upfront costs. A manufacturer’s warranty might be available to cover repairs or technical issues for a set period, which can reduce your maintenance costs out of the gate. Depending on the size of your fleet, buying new equipment may help you standardize the equipment in your fleet, enabling easier operator training, maintenance, and parts management.
Used Equipment
Used equipment can offer significant upfront savings—sometimes 20-50% below the price of a new model. Used equipment is typically much more accessible and readily available than purchasing a new machine and waiting for delivery. Purchasing used equipment allows you to mix and match equipment from various manufacturers rather than being limited to what new inventory is available. Contrary to popular belief, used heavy equipment has a long and useful life when well maintained with service records.
You will generally get the best terms on new equipment purchases because there is no wear and tear to consider. Most lenders will offer a financing solution that covers up to 100% of your cost on new equipment purchases, and many manufacturers offer a subsidized rate on new inventory (think 2% for 60 months or similar). Be aware that when you’re using a subsidized rate program mentioned above, the actual cost of the machine may be higher than if you brought your financing or paid in cash.
Used equipment financing is a little more tricky. Depending on the age of the machine, you may be capped at a shorter financing term, and you might have to put more money down to get your lender across the finish line.
Financing heavy equipment isn’t the only option; leasing heavy equipment is also a solution. Leasing offers some perks, such as greater flexibility, lower upfront costs, and tax benefits. When working with our team, we can discuss and find the right solution for your needs.
Heavy Equipment Loan Rates
As of this writing, interest rates have been at their highest level since 2008 but are historically in an average range. For most mid to high-quality borrowers, you can expect rates to be between 8% and 12%.
Longer Terms for Heavy Equipment
Heavy equipment has a longer use life, and Bevel Financial strongly advocates for longer financing terms on your equipment purchase. A typical financial institution will offer a 5-year term with a 5-year amortization. At Bevel, we work directly with our network of lenders to achieve longer terms and longer amortization periods. Look at this example of how a buyer saved 23% on monthly payments by shifting to a 7-year term and 7-year amortization.
Use our equipment financing calculator to test out different financing variables that could free up monthly cash flow for your financed heavy equipment.
Financing Factors to be Aware Of
The type of financing a buyer will be able to obtain depends on numerous details about the financial health of the business:
- Credit score: The higher your credit score, the better financing options will be available.
- Type of equipment: Industry, size, category, and useful life are all considerations when financing your fleet.
- Cash flow: Stronger cash flow within your business will allow you to negotiate more flexible financing solutions.
- Market: The current state of the market plays a huge role in whether lending institutions are able and willing to lend to buyers.
- Stage of Business: Lending to a startup is usually much riskier than an established business. Years in business and success will also play into a lender’s decision on financing.
Purchasing heavy equipment is a big investment. Don’t do it alone. Bevel’s Commercial Financing Consultants advocate for you—not the lender. With intimate knowledge of your business, we craft flexible financing built specifically for your needs. Our team at Bevel digs into details like payment flexibility, cost savings, and long-term equipment performance to offer you the best terms the market can bear.
Don’t settle for financing that doesn’t fit. Connect with our experts today. We know heavy equipment and finance inside out. Get the advantage of specialists who become an extension of your team.
