Definitive Guide to Construction & Commercial Equipment Financing [2020]


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Definitive Guide to Construction & Commercial Equipment Financing

5 min read. Updated on April 7, 2022

Regardless of your industry, chances are that you rely on some type of equipment to help customers and clients. From cutting-edge technology to industrial equipment, having access to the best gear available can go a long way for your business. When you need new equipment to continue running (or improve) your business, you have two options—buy it outright, or consider commercial equipment financing.

Commercial equipment financing takes the difficulty out of purchasing new equipment by easing cash flow issues. Instead of paying upfront, you can get new equipment right away, and pay it down over time. 

Here’s what you can expect when it comes to commercial equipment financing. 

commercial equipment financing

How Commercial Equipment Financing Works

Before getting into specifics about commercial equipment financing programs you might qualify for, it’s important to understand the basics. 

Simply put, this financing option allows you to buy new equipment for your business (which you’ll then own), and pay back the lender over time.

Through doing so, you can get the new equipment you need right away. Whether you need to replace old equipment, or buy new equipment to grow your business, this can be a game changer.

Commercial equipment loans (though they’re actually considered financing, not loans) don’t normally require collateral. In most cases, the equipment itself acts as the collateral. In the event you default, or can’t make payments, lenders reserve the right to take the equipment. 

However, you may have to personally guarantee the equipment as well. This means that you’d still be held personally responsible for payments in the event your business defaults.

Through many financing programs, you can finance up to 100% of the equipment’s cost, with no upfront fees. 

Unlike commercial equipment leasing—in which you pay the owner rent—financing equipment allows you to own it. After you’ve finished making payments, that equipment is yours. 

You can also take advantage of used equipment financing programs, in which you finance equipment from resellers. 

Commercial equipment financing carries outstanding tax benefits for small business owners, too. You can write off the full cost of the equipment in year 1, but if you have other deductions, you’re not out of luck. For up to 20 years, you can carry over deductions.  

What Industries Can Take Advantage of Commercial Equipment Financing?

Small business equipment financing isn’t limited by industry. In fact, businesses in almost all industries can take advantage of these programs.

For example, commercial fitness equipment financing can help a gym to purchase additional exercise machines. 

Commercial lawn equipment financing might help a landscaping company double its revenue by funding machinery for a second route. 

And of course, construction equipment financing helps contractors take on new projects that they currently lack the tools for (without losing money on leasing).

These are some of the most common industries that take advantage of commercial equipment financing:

  • Medical (including dental): Private practices often finance new equipment that improves patient care
  • Construction: Many contractors purchase additional equipment to take on high-paying jobs 
  • Restaurants: Restaurants that need to replace outdated appliances or streamline things purchase new equipment 
  • Manufacturing: When manufacturing companies grow and/or take on new clients, many require new machinery 
  • Cannabis: Commercial equipment financing can help cannabis companies buy new equipment as they scale, and demand increases

Small Business Equipment Financing Rates

Now that you understand how commercial equipment financing works, what can you expect? 

The rates, terms and amounts depend entirely on your business, history, and the equipment you’re looking to finance. 

Equipment financing works differently than other small business loans and financing options, so the expectations aren’t exactly the same. If new equipment will help grow your business, though, then commercial equipment financing is probably the ideal option.

Generally, you can finance the entire cost of the equipment, rather than only a fraction. Most trustworthy equipment financing companies also don’t charge any upfront fees. 

Interest rates will depend on your business’s financials, including credit score, annual sales, and previous debt payment history. The stronger your financial profile, the better offers you can receive.

In the same vein, terms will also be determined based on your business history. While different options may be available to every business, you can qualify for terms as short as 1 year, or as long as five years. 

Some commercial equipment financing companies limit your purchasing options. For example, GE commercial equipment finance companies deal exclusively with General Electric equipment. However, most trustworthy equipment financing companies should allow you to purchase equipment from any vendor. 

This equipment financing calculator will help you to get a better understanding of your payback amounts, rates and terms. 

Equipment Financing Loans – What Are the Requirements?

Qualifying for commercial equipment financing isn’t a clear-cut process. The qualifications will vary depending on your business and goals, but there are a few boxes you must check off.

First, let’s dive into credit score requirements.

As a business owner, you can generally qualify for an equipment financing program with any credit profile. That being said, a higher credit score (above 650) will always give you better options. Regardless of your credit score, though, most commercial equipment financing companies will have options available.

Your small business’s annual revenue can also play a part in determining what you qualify for. Programs for cheaper equipment may not have sales minimums, while programs for financing more expensive equipment might. Generally, having over $120K in annual sales puts you on the fast-track to obtain the best approvals, though options are certainly available to newer businesses with lower sales. 

The same goes for how long you’ve been in business. When it comes to equipment financing, there aren’t any strict requirements for time in business, but more established businesses tend to qualify for the other requirements.

Before receiving your options, most lenders will request financial statements to find more information about your business. At National, you’ll only have to submit bank statements, and potentially your most recent tax return. Other marketplaces and small business equipment financing companies may request more information.

Learn Your Options In Minutes, Get Financed in Hours

If your small business needs new equipment, then there’s no sense in waiting to get the ball rolling.

At National, we can help you explore your commercial equipment financing options in minutes. After completing a quick, 1-minute application, you’ll be contacted by a Business Financing Advisor who will work to understand your needs, and guide you through your options. 

Our process is quick, simple and easy. 

Get started today by applying now!

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National Business Capital helps entrepreneurs secure quick and fair financing to save time and cultivate sustainable growth.

Our stress-free online platform is designed for simplicity and speed, helping business owners go from application to approval in a matter of hours. And while we remain a leader in the Fintech industry, our clients agree it’s our personalized service and award-winning team that sets us apart.

From SBA loans to lines of credit, to equipment financing, and more, business owners can access all the different financing programs available to them in one place. Through our streamlined process, we have helped clients secure $2 billion in financing since 2007, and, more importantly, we’ve helped entrepreneurs save a tremendous amount of time and grow faster.

About the Author, Joe Camberato

Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.

Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advice from National Business Capital and the author. Do not rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely on this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there may be errors, omissions, or mistakes.