construction equipment financing

Construction Equipment Financing: FAQs & To-Dos

​​When it comes to construction projects, having the right equipment is essential. Whether you’re a small contractor just starting or a seasoned professional looking to expand your fleet, financing construction equipment can be a smart move. In this comprehensive guide, we’ll answer some frequently asked questions and provide you with valuable insights into construction equipment financing. We’ll also discuss the ins and outs of financing used construction equipment. So, let’s dive in!

What is Construction Equipment Financing?

Construction equipment financing is a specialized form of financing that allows individuals or businesses to acquire the heavy machinery and equipment they need for construction projects. Instead of paying the full cost upfront, borrowers can secure loans or leases to spread out the payments over a period, making it more manageable and budget-friendly.

Frequently Asked Questions about Construction Equipment Financing

1. What Credit Score Do You Need to Get Approved for Construction Equipment Financing?

Your credit score is an important factor that lenders consider when approving equipment financing applications. While requirements can vary from lender to lender, a good rule of thumb is to have a credit score of at least 600 to 650 for a better chance of approval. However, some lenders may work with borrowers who have lower credit scores, albeit with higher interest rates.

Maintaining a good credit score is crucial to improving your chances of approval and securing better terms. This includes paying bills on time, reducing outstanding debts, and managing your credit responsibly.

2. What Are Typical Terms for Construction Equipment Financing?

The terms for construction equipment financing can vary depending on several factors, including the lender, the equipment’s cost, and your creditworthiness. Here are some common terms you may encounter:

  • Loan Terms: Construction equipment loans typically have terms ranging from 3 to 7 years. The length of the loan can affect your monthly payments, with longer terms resulting in lower payments but potentially higher overall costs due to interest.
  • Interest Rates: Interest rates can also vary widely. Generally, borrowers with better credit scores receive lower interest rates. Rates can range from 5% to 15% or more, so it’s essential to shop around for the best deal.
  • Down Payment: Some lenders may require a down payment, which is a percentage of the equipment’s purchase price. This can range from 0% to 20% or more, depending on the lender and your credit profile.
  • Monthly Payments: Your monthly payments will depend on the loan amount, interest rate, and loan term. It’s crucial to calculate these payments to ensure they fit within your budget.
  • Equipment Value: Lenders may finance up to 100% of the equipment’s value or a percentage thereof. Understanding the loan-to-value ratio can help you determine how much you need to finance.

3. What Types of Equipment Can You Finance?

Construction equipment financing covers a wide range of machinery and tools needed for construction projects. Common types of equipment that can be financed include:

Whether you need earthmoving equipment, transportation vehicles, or specialized tools, you can often find financing options to suit your needs.

4. Can You Finance Used Construction Equipment?

Yes, you can finance used construction equipment. In fact, financing used equipment can be a cost-effective option for many construction professionals. However, there are some important considerations when financing used equipment:

  • Age and Condition: Lenders may have restrictions on the age and condition of the equipment they are willing to finance. Older equipment or machinery in poor condition may be less likely to secure financing.
  • Resale Value: Lenders will assess the resale value of the used equipment. Equipment with higher resale value may have more favorable financing terms.
  • Interest Rates: Interest rates for used equipment financing may be slightly higher than those for new equipment. Be prepared for this potential cost difference.
  • Maintenance and Inspection: Lenders may require proof of maintenance and inspection records to ensure that the used equipment is in good working order.

5. Should You Lease or Buy Construction Equipment?

Whether you should lease or buy construction equipment depends on your specific circumstances and preferences. Here are some considerations for both options:


  • Lower Initial Costs: Leasing typically requires a lower upfront cost, making it more accessible for businesses with limited capital.
  • Flexibility: Leasing allows you to upgrade to newer equipment at the end of the lease term, keeping you up-to-date with the latest technology.
  • Tax Benefits: Lease payments are often tax-deductible as a business expense, providing potential tax advantages.


  • Ownership: Buying equipment gives you full ownership, allowing you to build equity in the asset.
  • No Monthly Payments: Once the equipment is paid off, you won’t have ongoing monthly lease payments.
  • Resale Value: If the equipment holds its value well, you can sell it in the future and recoup some of your investment.

Ultimately, the decision between leasing and buying will depend on your financial situation, long-term goals, and equipment needs.

To-Dos for Construction Equipment Financing

Now that we’ve covered some frequently asked questions let’s explore the essential to-dos when seeking construction equipment financing:

1. Assess Your Needs

Before applying for financing, assess your equipment needs carefully. Determine the type of equipment required, its specifications, and whether you need new or used machinery. Knowing exactly what you need will help you choose the right financing option.

2. Check Your Credit

Review your credit report and score to ensure they are accurate and in good shape. If your credit needs improvement, take steps to boost your score before applying for financing. This can include paying down outstanding debts, addressing any errors on your credit report, and establishing a history of responsible financial management.

3. Create a Budget

Calculate your budget to determine how much you can comfortably afford in monthly payments. Consider all associated costs, including insurance, maintenance, and operational expenses. Having a clear budget will help you avoid overextending your finances.

4. Research Lenders

Shop around for reputable lenders that specialize in construction equipment financing. Compare interest rates, terms, and requirements from multiple lenders to find the best deal. Don’t hesitate to ask questions and seek recommendations from industry peers.

5. Prepare Documentation

Lenders will require various documents during the application process. Be prepared to provide financial statements, tax returns, business plans, and equipment quotes. Having all necessary documentation ready can streamline the approval process.

6. Evaluate Financing Options

Consider the different financing options available, such as loans, leases, or equipment financing programs offered by manufacturers. Each option has its pros and cons, so choose the one that aligns best with your business goals.

7. Negotiate Terms

Once you’ve chosen a lender, don’t hesitate to negotiate the terms of your financing agreement. You may be able to secure a lower interest rate or more favorable terms with effective negotiation.

8. Read the Fine Print

Before signing any agreement, carefully read and understand all the terms and conditions. Pay attention to interest rates, repayment schedules, penalties for early payment, and any other relevant details. If you have questions or concerns, don’t hesitate to seek clarification from the lender.

9. Plan for Maintenance and Insurance

Budget for equipment maintenance and insurance costs, as these are essential for keeping your equipment in good working order and protecting your investment.

10. Monitor Your Finances

Once you’ve secured financing, continue to monitor your financial health. Make timely payments, stay on top of maintenance, and track your equipment’s performance to ensure a successful and profitable operation.

Charter Capital is Your Construction Equipment Financing Partner

Construction equipment financing can be a valuable tool for construction professionals looking to acquire the equipment they need to succeed. By understanding the ins and outs of this type of financing, improving your creditworthiness, and following the essential to-dos, you can navigate the process with confidence and set your construction projects up for success. 

Charter Capital has been serving businesses for over 40 years. Our construction equipment financing services allow businesses to purchase or lease the equipment they need. Contact us online today for more information.