The Ultimate Guide to Equipment Loans for Contractors: How to Secure Financing Quickly

For contractors, having the right equipment can make or break a project. However, investing in new machinery or heavy-duty tools often comes with a hefty price tag. This is where equipment loans come in. By helping contractors secure the necessary financing, these loans allow businesses to grow and take on bigger projects without draining cash reserves.

But how can contractors successfully secure an equipment loan? What steps should they follow, and what requirements will they need to meet? This guide answers all your questions and provides actionable insights into the equipment loan process.

Here’s what we’ll cover in this blog:

• An overview of loan pricing and terms

• The timeline to secure funding

• Required documentation for different loan sizes

• Special financing options for startups

• Key requirements for equipment purchases and sale-leasebacks

*Just a quick note to be fully transparent: We do participate in ROK Financials affiliate program, which means we may earn a commission if you choose to use their services through the affiliate link below. This comes at no additional cost to you. Although we believe that ROK Financial is a good option for our readers, please don't feel that this is your only choice. If you have someone else in mind, please do your own research and use the financial company that works best for you.

Typical Costs and Terms for Equipment Loans

Before applying for an equipment loan, it’s important to understand what to expect in terms of cost, term lengths, and processing time. Here’s a breakdown:

Typical Interest Rates

Interest rates for equipment loans generally range from 8% to 30%, depending on your credit score, financial history, and the loan provider. A strong credit profile and healthy business financials can help you lock in lower rates.

Loan Term Lengths

Loan terms can range anywhere from 12 months to 84 months, offering flexibility based on the amount you borrow and your repayment capability. Longer terms can reduce your monthly payment but may result in higher cumulative interest costs.

Funding Timeline

The great news? Equipment loans can often close quickly, with funding available within 48 to 72 hours. However, this timeline may vary depending on the equipment vendor and whether the equipment needs to be built or customized. Vendors requiring prepayment can benefit from a "pre-funding" option to expedite manufacturing.

Documents You'll Need to Apply

These are the documents required by ROK Financial, and they’re often similar to what many other lenders may request. The specific paperwork needed for an equipment loan will vary. Typically, you’ll need the following:

Loans Up to $50,000

If you’re requesting $50,000 or less, the process is straightforward:

• Completed a Financial application (Most will require a minimum 600+ FICO credit score)

• Equipment invoice(s) from the approved vendor(s)

This type of financing is efficient for smaller purchases, making it a great option for contractors looking to add essential equipment to their fleets.

Loans Up to $150,000

For loans in this range, lenders will typically require additional documentation:

• Completed Financial application (minimum 600+ FICO, and in some cases, corporate credit alone may suffice if the business has at least 5 years of time in business)

• Equipment invoice(s) from the approved vendor(s)

• Last 4 months of business bank statements

Pro Tip: Startups with an excellent credit score (675+) can use personal statements to secure financing up to $50,000.

Loans Over $150,000

For larger equipment purchases, lenders require more comprehensive financial documentation:

• Completed Financial application (minimum 600+ FICO, or 10+ years of time in business for corporate consideration)

• Equipment invoice(s) from the approved vendor(s)

• Last 3 years of corporate tax returns

• Current Profit & Loss (P&L) statement

• Current Balance Sheet

• Business debt schedule

• Last 3 months of business bank statements

Note: If your equipment purchase exceeds $500,000, additional financial benchmarks must be met:

• Annual revenue of at least $1.5 million

• Profitable EBITDA

• Debt Service Coverage Ratio (DSCR) of at least 1.15

*Having these documents ready to go in advance can significantly speed up the approval process.

Requirements for Equipment Purchases

When securing an equipment loan, there are specific requirements to keep in mind (ROK Financial Requirements):

• Minimum Loan Amount: The minimum financing request is $5,000, making it accessible for both small and large-scale purchases.

• Ownership Threshold: Borrowers must own at least 20% of the business applying for the loan.

• Restricted Equipment : Certain categories of equipment are not eligible for financing. These include:

  • Adult entertainment-related equipment

    1. Vending machines

    2. Bitcoin/crypto mining equipment

    3. ATM machines

    4. Equipment intended for rental

    5. Tanning equipment

Special Option: Equipment Sale Leaseback

For businesses in need of working capital, an equipment sale leaseback can be a viable option. Here’s how it works:

1. Businesses sell existing equipment to a lender.

2. The lender provides immediate funds and leases the equipment back to the business.

3. Companies retain possession and use of the equipment while paying monthly lease payments.

Sale Leaseback Requirements

• Minimum Financing Request: $100,000 (typically for "yellow iron" machinery)

• Minimum Annual Revenue: $1 million

• Business Longevity: At least 2 years in operation with financial statements required

Restricted Industries

Similar to equipment loans, sale leasebacks are not available for industries tied to adult entertainment, crypto, vending machines, and tanning equipment.

Key Considerations for Startups

Startups often face unique challenges while securing financing due to limited financial history. However, personal credit strength can help kickstart your business operations. If you have a 675+ credit score, you may qualify for financing up to $50,000 without extensive business documentation. This option is ideal for younger businesses looking to scale quickly.

Take the Next Step Toward Growing Your Business

Equipping your business for success starts with securing the right resources. With flexible terms, scalable solutions, and transparent processes, equipment loans can give contractors the competitive edge they need in today’s market.

Are you looking for the right loan partner? Check out our friends at ROK Financial! To apply online today use our affiliate link below—it’s quick and easy. Just fill in your info, and their team will reach out to you ASAP to help you secure the funding you need!