Heavy equipment financing companies fall into four groups: banks, manufacturer finance arms, independent equipment lenders, and brokers that place deals with all three. Each weighs your credit, time in business, and revenue, and the machine's age, hours, and resale value. A site-work contractor buying a used excavator gets different answers from each.
Take that site-work contractor: an excavation and utility company with $3.4 million in annual revenue, eleven years in business, and a fleet of six machines. It wants a used 30-ton excavator with 4,200 hours from a dealer two states away, plus a hydraulic thumb and a tilt bucket. The dealer offers financing. The bank that holds its operating account says it'll look at it. An online lender promises an answer by tomorrow. The owner wants to know which of these to trust with a $240,000 machine.
What types of heavy equipment financing companies are there?
They differ more in what they'll finance than in what they're called.
| Type | Strengths | Limits |
|---|---|---|
| Your bank | Relationship pricing; may bundle with your operating line | Slower; strict on older and used machines; often wants a blanket lien |
| Manufacturer finance arm | Promotional programs on new machines from that brand | Mostly that brand, mostly new or certified used |
| Independent equipment lender | Used, older, private-party, and mixed-brand deals | Pricing varies widely by credit and machine |
| Broker | One application placed with several lenders | Should disclose how it's paid; doesn't lend its own money |
Sagamore is a broker. We don't lend, and we're not tied to a brand. Our lending partners finance equipment from $10,000 to $5 million, new or used, and can cover up to 100% of the cost.
What do heavy equipment financing companies look for in you?
Every lender starts with the business. Sagamore's lending partners require:
- A credit score of 600 or higher
- At least one year in business
- At least $400,000 in annual revenue
Past those minimums, heavy equipment underwriters look for:
- Bank statements that show deposits big enough to carry the new payment alongside the existing ones
- Existing equipment debt, usually as a schedule listing each machine, lender, payment, and payoff
- Experience running the equipment. An excavation contractor adding a fifth excavator is a different risk from a landscaper buying its first dozer
- Work for the machine. A signed contract, backlog, or a history of renting that type of machine shows it will earn its payment
- Industry. Construction, paving, and utility work are routine. Logging, mining, and long-haul trucking are financed by narrower groups of lenders
Owners who have rented the same class of machine for two years can show the rental invoices. Nothing shows demand more clearly.
What do lenders look for in the machine itself?
Because the equipment is the collateral, the machine gets underwritten almost as closely as you do.
| Factor | Why it matters |
|---|---|
| Make and model | Common, liquid machines resell easily; niche brands and models don't |
| Age and hours | Many lenders cap age at term-end, or limit hours for the class |
| Seller | Dealer and auction sales are easiest; private-party sales need lien searches and more documents |
| Condition | Older or high-hour units may need an inspection or appraisal |
| Price vs. value | The loan amount is tested against what the machine would bring at auction |
| Attachments | Common attachments add value; specialized ones may not be financed at full cost |
For the site-work contractor's excavator, 4,200 hours on a popular 30-ton model from a dealer is a straightforward deal. The same machine at 12,000 hours from a private seller would likely need money down, a shorter term, or both.
How do you compare heavy equipment financing offers?
Not by the monthly payment alone. A lower payment from a longer term can cost more in total and leave you owing more than the machine is worth in year four. Line up each offer on the same terms:
- Total cost: every payment plus fees, down payment, and any buyout
- Term vs. useful life: the machine should outlast the loan with room to spare
- Lien: does the lender take only this machine, or a blanket lien on all business assets?
- Prepayment: is there a penalty for paying off early, or for selling the machine before the term ends?
- Balloon or buyout: is there a large final payment or a residual you'll owe to own it?
- Insurance: what coverage the lender requires, and whether it adds its own if yours lapses
- Fees: documentation, origination, and filing fees, stated in dollars
The lien question matters more than most owners realize. A blanket lien from an equipment lender can block your next line of credit or receivables facility. Our explainer on UCC liens covers how to spot one.
Should you finance, lease, or rent heavy equipment?
It depends on how many months a year the machine will work. Finance machines you'll run steadily for years, lease when you want to upgrade on a cycle or keep payments off a balance sheet, and rent for one job. Our comparison of equipment financing vs. leasing works through the numbers.
A quick test: if you've paid rent on the same class of machine for more than about half the year, two years running, owning is likely cheaper.
What paperwork should you have ready?
- Equipment quote or invoice with make, model, year, serial number, and hours
- 3 to 6 months of business bank statements
- An equipment schedule of what you own and owe
- Business tax returns or year-end financials, especially above a few hundred thousand dollars
- For used machines: photos of the serial plate and hour meter, and for private sales, a bill of sale and proof of clear title
Decisions on equipment financing through Sagamore typically come back within 24 to 48 hours, and funding follows within 1 to 3 business days after you accept, depending on how fast the dealer or seller provides final paperwork.
Can you deduct financed heavy equipment on your taxes?
Section 179 and bonus depreciation can let a business deduct much or all of a machine's cost in the year it's placed in service, even when it's financed. The deduction depends on your tax situation and the year's limits, and a deduction isn't the same as cash. Confirm with your tax advisor before the purchase, not after.
Where does equipment financing fit for a contractor?
Machines belong on equipment financing, with terms matched to how long they'll work. Materials and payroll belong on a line of credit for contractors. Billed work waiting on payment can be pulled forward through invoice factoring for construction companies. Mixing them up, such as buying an excavator on a revolving line, leaves the line full when the next job needs it. Our guide to construction contractor financing shows how the pieces fit on a single job, and our construction financing page lays out each use on its own.
If you have a quote on a machine and want offers from more than one lender, start an application. One application goes to several equipment lenders, and the first review is a soft credit pull.
