Heavy Equipment Financing Frequently Asked Questions
TopMark Funding does not only finance heavy-duty trucks, we also finance heavy equipment. Here are some questions that we receive about financing heavy equipment.
How will I know if I need heavy equipment financing?
The simple answer to this might seem to be if you do not have enough cash on hand to purchase the equipment in full. However, a better rule to use is if the additional revenue from the equipment will exceed the costs of interest.
Here is an example: Tom Park has an extra $150,000 to invest in his construction business. He wants to expand his fleet of commercial excavators for his business. He could either purchase one excavator outright for $150,000 or he could finance five of them with a 20% down payment on each.
Tom predicts a new excavator will generate him $6,000 more per month, a second new excavator, $5,000, a third, $4,000, a fourth, $3,000, and a fifth one, $2,000.
The terms of the loan are seven years at 3% interest, paid monthly.
If Tom purchases a single excavator, he avoids paying any interest and generates $6,000 per month. If he does $600,000 worth of financing, however, he will pay $1,500 in interest monthly, while generating $14,000 per month. Assuming his predictions for revenue are correct, that is an extra net income of $12,500 per month. Tom has more than doubled his monthly income.
The cash flow is a little different. To make payments, Tom would be spending $7,928 each month. He would still be getting $6,072 per month added to his bank account, slightly more than if he had one machine.
How do I qualify for heavy equipment financing?
To qualify for heavy equipment financing, you will most often need paperwork. This could include business registration and licenses, personal and/or business score, and income statements. If the machinery is especially dangerous, you will likely need to provide proof that the person who will be operating the machinery has the training and certification to do so.
Can I get such financing from a bank?
Yes, but loans from the bank can take a lot of time to negotiate the details. Banks generally do not specialize in heavy equipment, and may not understand terms used to describe a machine and be harder to sell on why financing your purchase is a worthwhile investment. Nobody would want to risk losing money on something they do not understand.
My credit score is less than perfect, what are my options?
A credit score is only one of many factors that determine if you can get a loan. If your credit is bad, but your company’s income statements prove that your business is profitable, or have other personal income streams such as stock dividends, you are more likely to get a loan than if your business is struggling to make ends meet.
However, a lower credit score is always worse than a good credit score. If you have ways to increase it, such as paying off credit cards, it would be worth the money to do so.
What is the application process?
First, you fill out the contact form. A representative gets in contact with you within one business day and asks you to authorize a soft credit pull, which allows TopMark Funding to see your credit history without impacting your credit score in the process. Then we estimate what financing we will be able to get for you.
Do I have to put up collateral?
Heavy equipment loans are self-securing, meaning the equipment you purchase is the collateral for the loan. If you fail to make payments, the financing institution may repossess it.
How long does funding take?
With TopMark Funding, we can get you the loan terms in approximately one business day, and if you approve, the funding for the purchase in two business days.
What are the term lengths?
The term lengths are negotiable, the longer the length the higher the interest rate due to the increased risk for the lender, but usually the loan length will not exceed the useful life of the equipment. If you plan to use a bulldozer for eight years, it will be very difficult to get a ten-year loan.
What is the interest rate for heavy equipment financing?
The interest rate is different in every financing scenario, and depends on many factors:
- Credit score.
- Down payment percentage.
- Length of the loan.
- Useful life and condition of the equipment financed.
- Estimated income, from the financed equipment and supplementary.
- Comparable credit accounts paid in full.
- Current economic factors.
The interest rate can vary anywhere from 3% to 50% APR.
Can I pay back the loan at a quicker rate, and if I do, are there no penalties for paying back early?
If paying back your loan early interests you, there are some options for it. Generally speaking, it is better to not loan more than you initially need for the transaction.
Financing heavy equipment like a bulldozer may seem like a large project, but the truth is that it is very similar to financing a big rig, which we at TopMark Funding are already very experienced in doing. If you are interested in financing heavy equipment with us and our lenders, keep reading below.
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ABOUT TOPMARK FUNDING
TopMark Funding is a top-rated semi-truck financing and equipment financing company located in Roseville, CA. We specialize in commercial trucking and heavy equipment. Our mission is to become your long-term financial partner by helping you grow your trucking business and fleet.
We’re not here for the short-term, we’re on the long-haul with you!
We have financing options for semi-trucks, commercial trucks, trailers, and small businesses. We have great rates, low down payments, and flexible monthly payments regardless of credit history.
Learn more about Semi-Truck Financing
Fill out the contact form or give us a call at (866) 627-6644. One of our truck financing specialists will contact you as soon as possible to go over your truck lease needs and learn more about you and your business financing goals.