Your Complete Guide to Financing Heavy Equipment

Choose the Best Heavy Equipment Financing Option for You

When you hear the word “financing” your first thought may be loans. Loans are a great choice if you want to prioritize equity and ownership. But if you have other needs to consider, you’ve got options. Here are the three most common types of financing you can choose from.

• Loans – Loans let you own a machine right away but pay for it over time. You can get to work immediately and build equity as you make payments.
• Leases—If you want to maintain some financial flexibility and free up cash, then leases are for you. Lease heavy equipment for lower monthly payments than a loan. Often leases give you options to buy at the end of the lease period.
• Lines of credit—If you foresee multiple purchases (think parts, repairs, etc.) a line of credit is the best for you. You’ll make payments on both the principal and interest and always have access to funds within your credit limit.

Once you’ve decided what type of financing is best for you, it’s time to choose a lender. Most people choose between an Independent financer, Cat Financing, or a Yancey credit account.

• Independent financer—Use your bank, credit union, private lender, or equipment financing company, or small business loan. It’s important to investigate repayment terms and interest rates of each to ensure you’re getting the best value.
• Cat financing—Cat Financial isn’t a traditional bank, it’s part of the Cat family. They understand things other lenders don’t and have developed solutions around the unique needs of Caterpillar customers. This is a good option if you need flexibility.
• Yancey credit—This line of credit is available to Yancey customers. Consolidate your day-to-day transactions under one account, gain greater visibility to your costs, and receive convenient 30-day terms.

Whether you need a machine fast to take on a new job or you’re in a tough spot financially, having options can make all the difference in getting what you need when you need it.

Calculate the Heavy Equipment Financing Details

You’ve decided what type of financing is right for you and which lender matches your needs. Now it’s time to think through the financing details and ownership costs so you can minimize unnecessary costs and maximize your investment.

• Interest rates—this is the amount of money charged by the lender over and above the principal sum. Be sure to determine if your lender uses simple or compound interest. Simple interest decreases as your principal decreases, while compound interest accrues as the life of the loan continues. 
• Payment terms—Payment terms outline how, when, and by what method you’ll repay your loan. This way you’ll know how often you should make payments, and what forms of payment are accepted. 
• Tax implications—Heavy equipment is essential for your business and as such, it often comes with hefty tax benefits. For example according to the Internal Revenue Code, in 2021 a business could deduct the full cost of heavy equipment from their taxes as long as the equipment is used 50% of the time.
• Cost of ownership—This is all the costs you’ll accrue from maintaining your equipment including maintenance and insurance. Keep in mind that Cat equipment can be rebuilt multiple times and extend your investment.
• Experience—How long has your lender been in business? Consider if your lender has enough experience to give you the peace of mind you need.
• Reputation—Similar to experience, a good reputation built over time is a powerful recommendation when it comes to choosing a lender. You want to be able to trust your lender to do what they promise. 
• Customer service—Customer service is often an overlooked consideration, but it shouldn’t be. In contracting work, time is money. Spending hours on the phone haggling with subpar customer service can cost you both stress and cash.

It’s important to be honest with yourself about which of these items matter most to you. For example, if saving money long-term is a high priority for you, then low-interest rates and cost-of-ownership might be at the top of your list while customer service ranks much lower in importance. But if you value efficiency and peace of mind, you might place customer service, experience, and reputation above other considerations.

Remember, there’s no one “right” way to configure financing. The best way to choose financing options is the one that aligns most closely with your goals.

Consider Refinancing Strategies for Heavy Equipment

Financing the initial purchase of your heavy equipment doesn’t mean you’re locked into those terms forever. Refinancing heavy machinery can reap many rewards including better interest rates, shorter or extended terms of payment and improved cash flow.

For example, maybe you took out less-than-perfect financing to acquire your heavy equipment when you needed it. But now interest rates have lowered and you’re looking for better terms. Or perhaps you have multiple loans for multiple pieces of machinery. Consolidating your debt into one loan with lower interest and monthly rates can free up cash flow and smooth business operations. Heavy equipment is also a powerful source of equity for your business. If you need cash quickly for raw materials, real estate, and improvements, you can refinance your equipment to access the cash you need.

Contact Yancey

Yancey has over 100 years of experience helping Georgia customers get the quality equipment, parts, and service they need. We can help guide you through the finance process and answer all your questions along the way. Don’t go it alone, let us help you get the equipment you love for a price you can afford.