Answering your construction equipment funding questions flexbase

Zaid's picture
Zaid Rahman
October 26, 2021

Maybe you’ve just won a bid for a job that requires you to have an additional truck for your crew.

Or perhaps your business is expanding organically and you simply need more equipment to sustain the growth.

Applying for construction equipment funding can be a painstaking and oftentimes nerve-wracking experience for contractors, especially if funding is needed yesterday.

Dealing with…

  • Long wait times
  • High interest rates; and
  • Difficult payback terms

…with the banks can be the cause of lost projects or stunted growth.

If you’re trying to secure construction equipment funding for your business, there are some important factors you need to consider.

In this article, we’ve compiled everything you need to know about construction equipment financing and freeing up your cash flow so that you can focus on the job — and not your bills.

Table of Contents

Flexbase: Your Solution for Construction Equipment Financing With One-Click Working Capital

What is Flexbase and how can we help with construction equipment funding?

Flexbase is the one-stop-shop for all of your payment automation needs. From contract to payment applications —and everything in between.

With Flexbase, contractors can:

  • Streamline all of the paperwork required on a project
  • Eliminate human error and avoid costly mistakes; and
  • Get paid sooner.

In addition to automating the payment processes and freeing up valuable time, Flexbase works with top lenders to secure construction equipment financing for construction companies of any size.

Flexbase can provide high-quality data to lenders from the get-go because we can:

  • Access your past statements
  • Integrate with all of your business tools and banks accounts; and
  • Analyze the data before sending anonymously to lenders.

As a Flexbase customer, not only will you save yourself the hassle of dealing with creditors and banks, you will know instantly whether your company is prequalified for a construction equipment loan.

Instead of waiting weeks for approval from the bank, you can get working capital now.

Let Flexbase free up your cash flow with construction equipment funding in 24 hours.

Construction Equipment Funding Can Refer to Financing for Heavy Equipment or Technology Upgrades

Depending on your specific needs, applying for and securing construction equipment funding can be a colossal nightmare. Banks take a long time and often require smaller construction companies to make personal guarantees.

The risk is high and can be a costly undertaking for many companies. Here’s what you need to know.

What are Heavy Equipment Loans?

Heavy equipment loans give businesses the ability to borrow money used to purchase heavy machinery.

Paying upfront for heavy equipment is impossible for some construction companies so heavy equipment financing allows businesses to make scheduled payments and frees up valuable cash flow.

Heavy equipment financing includes construction equipment, such as:

  • Bulldozers
  • Cement mixers
  • Cranes
  • Forklifts
  • Loaders
  • Etc.

What is an Equipment Loan?

When a business needs to purchase or repair the equipment needed to…

  • Manufacture
  • Process; or
  • Produce

…a product, they may require an equipment loan.

Businesses may apply for an equipment loan to either purchase equipment outright or lease it over a dedicated number of months.

Construction equipment loans typically fund job site equipment, such as:

  • Computers
  • Tools and materials
  • Vehicles
  • Etc.

Benefits of Construction Equipment Loans

Most construction companies understand that balancing the need for equipment and machinery while maintaining cash flow and reserves can be very tricky.

It’s not uncommon in the construction industry for customers to take 60 to 90 days or more to pay, making it difficult for contractors to float the cost of a project.

And for this reason, construction equipment financing is a popular choice for contractors.

Some benefits to securing construction equipment funding include:

  • Flexible payment solutions: Small to mid-sized contractors who may not have the working capital to outright purchase equipment benefit from the flexibility monthly payments offer.
  • Preserving capital: Making large investments with working capital can present a huge financial risk, especially for smaller companies. Construction equipment loans mitigate the risk and allow construction companies to allocate existing working capital elsewhere.
  • Up-to-date equipment and technology: To be competitive in today’s construction environment, it’s important to have the latest tools and equipment for contractors to thrive. Construction equipment funding allows companies to acquire better equipment sooner.
  • Business cycle flexibility: Depending on the type of loan, flexibility such as lower initial payments at the start of a project, or adjusting payment schedules to account for seasonal fluctuations, is a huge benefit to small or mid-sized construction companies whose revenue stream is less consistent.
  • Section 179 tax benefits: The US government incentivizes companies who borrow or lease the tools needed to grow their business. Under Section 179, businesses can write off 100% of the value of the purchase in the current tax year.

7 Construction Equipment Financing FAQs

You know what you need to successfully operate your business.

But, knowing what you need is only half the battle — the easy half — and knowing how you’ll pay for that equipment is the not so easy half.

Securing construction equipment funding is not always simple, so we’ve answered the most common questions asked by contractors about financing and how it works.

#1: How Does an Equipment Loan Work?

Equipment loans allow contractors to make periodic payments, including principal and interest, over a fixed term. Upon full payment, the financed equipment is owned and free of any liens.

Rates and terms of an equipment loan will vary and depend on current market conditions and the qualifications of the applicant.

Some loans are structured with liens upon your business assets or may require you to make a personal guarantee.

It’s very important to read the terms of an equipment loan to fully understand the personal risks.

Failure to pay a loan within the agreed-upon terms could result in repossession of your business or personal assets.

#2: How Hard is it to Get an Equipment Loan?

Companies that can prove good revenue have an advantage when securing an equipment loan. While credit scores are important, proof of cash flow is equally important.

Most lenders prefer to do business with companies that have been around for a few years. However, companies with low cash reserves or not enough financial history may be able to qualify for an equipment loan with a down payment.

Leasing equipment is an option that usually has less stringent qualification requirements and is a good alternative for newer businesses that don’t have a consistent revenue stream or multiple years of financial statements.

#3: How Long Can You Finance Construction Equipment?

Depending on the applicant’s qualifications and the original loan amount, construction equipment financing ranges from 1 to 25 year terms.

Conventional financial institutions may offer terms up to 84 months, however with an SBA-backed 504 loan, small businesses may qualify for loan terms of 10, 15, or 25 years.

It’s important to note that while SBA/504 loans typically charge a lower interest rate, they usually require a 10% contribution from the borrower.

Not all businesses have access to this kind of cash reserve, especially where heavy equipment loans are needed.

#4: What Does a Typical Construction Equipment Funding Application Process Look Like?

If you’re trying to acquire construction equipment financing with traditional lenders, such as banks, you can expect a considerable amount of paperwork.

In addition to having to provide…

  • Financial statements
  • Personal information
  • Business records; and
  • Credit scores

…many institutions can take weeks to process everything, and even then you’ll be facing delays in receiving actual funds.

Flexbase customers are automatically pre-approved by our preferred lenders, making the application process a breeze.

Because Flexbase can…

  • Securely access your financial statements
  • Integrate with each of your bank accounts and business tools; and
  • Analyze all the data before sharing it with our lenders

…our customers never have to worry about the hassle of construction equipment financing applications and long wait times.

Forget waiting weeks — or even months — for funding.

With the Flexbase pre-approval system, you get the benefits of 24-hour construction equipment funding deposited directly into your business account.

#5: What is Generally Required to Qualify for Heavy Equipment Financing?

Heavy equipment equals a heavy price tag.

So, for that reason, most contractors opt to apply for heavy equipment loans, rather than draining valuable cash reserves.

Lending institutions usually require contractors to…

  1. Provide current and historical financial statements
  2. Have been in business for more than one year
  3. Show a credit score of 600 or more

… in order to qualify for heavy equipment financing.

And even then, a down payment may be required.

#6: What Are Construction Equipment Financing Rates Like?

When it comes to construction equipment financing, rates vary from applicant to applicant.

It’s not uncommon to see rates for heavy equipment financing as low as 5-6%, or even lower at the dealer, but these rates are rare and usually reserved for buyers with a large down payment and a stellar credit score.

What you pay in interest depends on:

  • Your credit score
  • Your revenue stream
  • Years in business
  • Down payment amount
  • Type and condition of the equipment

Generally speaking, interest rates can range from 8-30%, depending on the lending institution.

#7: Is it Possible to Get a Construction Equipment Loan With Bad Credit?

In short, yes.

You don’t need a perfect credit score to acquire construction equipment funding, but your credit score will ultimately determine factors, such as:

  • If a downpayment is needed
  • How much interest is charged
  • The term of the contract
  • The possibility of personal guarantees

While it’s not impossible to get financing with a poor credit score, it may take some time to find a lender willing to work with you.

Flexbase Provides a Holistic Overview of Your Finances for Simple, Fast Construction Equipment Funding

It’s no secret that major cash flow issues exist within the construction industry.

In 2019, slow payments cost construction companies $64 billion, and on average contractors waited a whopping 50-75 days for payment.

For small to midsize contractors, this can cause big problems with business expenses such as payroll and materials.

Rather than digging into your reserves and paying upfront, construction equipment funding provides cash flow relief by spreading out the cost of needed materials for your business over time.

Flexbase customers are automatically pre-approved by our lenders because the information that would normally take the banks weeks to sift through and approve, is already at our fingertips.

With a Flexbase subscription, customers can enjoy:

  • Instant pre-approval for all construction equipment loans
  • Preferred interest rates
  • No down-payment
  • 24-hour turnaround on cash deposit

Not only do our customers reap the benefits of quick and easy construction equipment financing, but our integrative software also gets our contractors paid sooner with automated tools such as:

  • Project tracking
  • Payment applications
  • Legal reminders
  • And much more

Schedule your free demo to see how Flexbase can get you paid sooner, secure construction equipment financing instantly, and free up your cash flow today.

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