Definitive Guide to Construction & Commercial Equipment Financing

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, Terms, Fees And More

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. 

What Are the Requirements?

Looking to purchase shiny new equipment for your small business?

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!

National Business Capital & Services is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.

Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Matt Carrigan

Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!


Dislcaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital & Services and the author. Do no 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 in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.