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Depending on the type of business you own, there may come a time when you need heavy machinery to get your work done, transport large items, or make improvements. The only problem is that most heavy machinery is pretty expensive to buy or rent, whether it’s new or used. That’s where financing or leasing could come into play. 

Are you looking for a tractor, construction tool, or another form of heavy machinery? If that’s your goal, find out what heavy machinery financing and leasing can do for you. 

What Is Heavy Equipment Financing? 

Most heavy machinery is quite pricey but there are several ways of making it more affordable over time. Two of the most popular forms of heavy equipment financing are loans or leases, both of which involve paying your equipment off in installments. However, each option is different and comes with its own benefits and drawbacks. 

What Can You Finance With Heavy Machinery Financing?

This type of financing can help you cover the base price of almost any heavy machine or vehicle that requires a special license or training to use, including but not limited to:

  • Farming vehicles (tractors, grain feeders, etc.) 
  • Construction implements (dump trucks, cement mixers, etc.)
  • Warehouse equipment (forklifts, cargo loaders, etc.)
  • Restaurant appliances (refrigerators, ovens, etc.)
  • Medical care equipment (examination machines, life support systems, etc.)  

What’s The Difference Between Heavy Machinery Financing And Leasing?

As mentioned, two of the most common ways of financing heavy machinery are:

Installment Loans

The first option would be to borrow a loan from a bank, credit union, or alternative lender. Once approved, the funds will be deposited into your business bank account. You can then use the money to buy whatever heavy machinery you need, then repay the lender through installments (with interest) over a set schedule. Some lenders will also pay the equipment dealer directly.


If you’d prefer not to purchase heavy machinery, there are many equipment dealers and lenders who will offer you a lease contract, which essentially allows you to rent the equipment for a predetermined period. Similar to a regular car lease, there’s usually specific wear and tear limits that you must abide by if you want to eventually return the equipment without being penalized.  

Where To Get Financing For Heavy Equipment

In Canada, there are several locations where you can apply for heavy equipment financing or leasing, such as:

Banks & Credit Unions 

Many financial institutions offer loans to finance heavy machinery. Some business owners prefer to borrow from their bank or credit union out of convenience or because they may be eligible for lower interest rates, longer terms, and other customer benefits. Once approved, you can use your liquid funds to purchase or lease equipment.  

However, bank loans can be harder to qualify for. You normally need a high credit score and a decent monthly/yearly revenue to qualify for an affordable financing plan. Not to mention, large amounts of equipment financing can take several weeks to be approved and deposited, so this may only be a good option if you have enough time to spare. 

Find out why you may be rejected for a business loan.

Alternative Lenders 

If you’re unable to secure a bank loan or would prefer to explore other financing options, you may be able to find an alternative lender that offers a bit more flexibility. While privately funded loans can sometimes be smaller, qualifying is usually faster and easier because lenders are more focused on your revenue, rather than your business credit.

That said, alternative lenders often charge higher interest rates and fees, especially if you are considered a “risky” client due to poor credit, low revenue, or serious debt problems like a recent bankruptcy.  

Equipment Lenders & Providers

If none of the above options seems right for your business, there are also many equipment providers that specialize in heavy machinery financing and leasing. Here, you may be able to find even better rates and terms than most banks or alternative lenders can offer. Plus, you won’t have to borrow from a third-party organization.

Nonetheless, direct equipment financing can carry the same sorts of risks as traditional lending or leasing, like potentially high rates, less affordable plans, and the possibility of getting scammed. Be sure to research your lender or equipment provider to verify their authenticity before you give them any information about yourself or your business. 

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Heavy Equipment Financing Qualifications

Heavy machinery can be very expensive and valuable, so it can be tough to qualify for a loan or lease, particularly if your business is struggling financially. To be eligible for heavy equipment financing, you may have to provide the following information: 

Time In Business

Since age often shows experience, most lenders and equipment providers are more willing to work with a business that’s been operating for a long time. Although it’s still possible for a startup to get approved, you’ll usually need a solid business plan and projected revenue to qualify.

Personal & Business Credit Score

Most financing sources pull your personal and business credit scores when you apply because they showcase the way you handle debt. If you have bad personal or business credit, you may get denied or only qualify for a small amount of financing, a high-interest rate, and a short term.

Debt-To-Revenue Ratios

Once again, one of the primary factors needed to get a good financing or leasing deal is strong business revenue. Lenders need to know that you’ll be able to make all your payments on time, so if your business has a poor debt-to-revenue ratio, your approval odds may go down. 

Business Plan

While this is more necessary for traditional business financing, some lenders/providers will ask for your business plan before offering you a heavy equipment loan or lease. The plan should contain information like your revenue, assets, and company status (sole proprietorship, partnership, etc.). 

During the application process, you may also have to provide these documents: 

  • Personal government identification (driver’s license, passport, etc.)
  • Your latest 3 – 6 months of business bank statements
  • Your previous year’s business tax returns & financial statements
  • A price quote from your equipment vendor
  • A pre-authorized debit form or VOID cheque (for payments/transfers)

Basically, most heavy equipment financing providers just need to confirm that your business is in good financial shape and that you’ll be able to cover all your payments on schedule. The stronger your credit scores, assets and current/projected revenue are, the easier it should be to get approved for an appealing loan or leasing contract. 

Learn more about what you need to get a small business loan.

Getting Approved For Heavy Equipment Financing With Bad Credit

Yes, while the process can be a bit more difficult, there are ways to get your business approved for heavy machinery financing or leasing, including but not restricted to:

  • Apply with an online/alternative lender with easier approval standards
  • Find a lender/provider with good credentials and customer reviews
  • Increase your current and projected business revenue as much as possible 
  • Offer some valuable collateral as security for the lender 
  • Offer a large down payment (20% of the price or more is recommended)
  • Pay off your business’s outstanding debts 
  • If recently discharged from a consumer proposal or bankruptcy, wait until your finances and credit have recovered slightly prior to applying

Before you apply for bad credit heavy equipment financing or leasing anywhere in Canada, remember that alternative lenders and providers generally charge higher interest rates and fees for smaller amounts of financing and shorter repayment terms. 

Putting Up Collateral To Get Approved For A heavy Equipment Loan

If you’re applying for heavy equipment financing, particularly a large loan, your lender may request some form of collateral, such as one of your assets, before they can approve your business. They will then take temporary possession of your asset, which helps protect their investment by giving them something to sell if you default. 

In most cases, the heavy equipment itself will be used as collateral and if you miss too many loan payments, the lender could repossess and resell your machinery. So, if you’re worried about this kind of risk, it may be a safer idea to apply for heavy equipment leasing instead, where no collateral or down payment will be required. 

What Is The Average Term Length For A Heavy Machinery Loan Or Lease?

The length of your repayment term can depend on several factors, such as:

  • Where you’re applying for the loan or lease
  • Whether you’re financing or leasing the machinery
  • How much you can offer as a down payment (if any) 
  • How strong your finances and credit scores are 
  • How much value the equipment will retain over time

If you plan on using the equipment full-time, a repayment plan of several years may be necessary to finance it in full. Thankfully, some lenders offer loan terms upwards of 5 – 10 years. On the other hand, leasing companies usually offer shorter rental terms and will give you the option of renewing your contract when your lease expires.

Despite the fact that larger loans and leasing deals often come with longer terms, a shorter term will help you save on interest and fees over the life of your financing.   

Check out if you should get a fixed or variable rate for your truck loan.

What Interest Rate Will I Get For Heavy Machinery Financing?

Heavy equipment financing interest rates also vary depending on certain factors, like where you apply and how healthy your finances are. For instance, if your business is struggling financially, has bad credit or is less likely to make payments on time for some other reason, you may only qualify for a small loan with a high rate and short term. 

Interest rates get even higher if you apply with an alternative or bad credit lender. If you’re looking for low-interest rates, appealing loans/leases and long terms, you must prove that you’re creditworthy. The best way of doing that is to apply when you have:

  • A solid revenue
  • A good personal and business credit score
  • A low level of debt (ideally none) 
  • A minimum down payment of 20%
  • Some type of collateral to offer
  • No recent bankruptcies or consumer proposals 

Looking For Heavy Machinery Financing Or Leasing In Canada?

Before you apply for any sort of business financing, including a heavy equipment loan or lease, it’s extremely important to do a lot of research and find a lender or vendor who offers the best rates, fees and terms. Don’t worry, no matter what kind of equipment you’re searching for, Loans Canada can help you find the right sources of financing. 

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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