Most construction firms don’t buy excavators and loaders outright with cash—those machines are six-figure cheques. Instead, they spread the cost using a mix of loans, leases, and asset-backed facilities that are built around the life of the equipment and the company’s cash flow.
Here’s how that usually works in practice, from a lender’s perspective.
Core ways to finance excavators, loaders, and other “yellow iron”
Equipment loans (term loans / chattel mortgages)
With an equipment loan, you own the machine from day one and repay the lender over time.
- The lender advances most or all of the purchase price.
- You make fixed monthly payments over 3–7 years (sometimes longer for larger units).
- The excavator or loader itself is primary collateral; sometimes there’s also a general security agreement or personal guarantee.
This is common when:
- You plan to keep the machine for its full useful life.
- You want the asset and depreciation on your balance sheet.
- You’re comfortable with a slightly higher monthly payment in exchange for ownership.
Canadian equipment lenders and brokers highlight loans as a way to buy heavy machinery while spreading the cost and reducing cash strain, with fixed terms and the asset used as collateral.
Equipment leasing (capital / operating leases)
Leasing is often the go-to structure for excavators, loaders, and other heavy construction equipment.
- Capital/finance lease: functions a lot like a loan, but you typically buy out the machine at the end for a small residual (e.g., $10 or a small percentage).
- Operating lease: you’re essentially paying for use; you may return, upgrade, or buy at fair market value at the end.
Key advantages:
- Lower upfront cash outlay and often lower monthly payments than an equivalent loan.
- Option to upgrade more frequently and hedge against obsolescence, which Uplend and other Canadian providers emphasize for construction clients.
- In many structures, payments are fully expensed (confirm tax treatment with your accountant).
Brokers like Fincap and CEF specifically showcase leasing as a flexible way to acquire excavators and loaders while preserving working capital and borrowing capacity.
OEM and dealer financing programs
Many construction brands offer captive or dealer-backed financing:
- John Deere, Kubota and others promote tailored loans and leases for heavy construction equipment, often with promotional rates, skip-payment options or seasonal structures.
- Some dealers can accept trade-ins as part of the collateral mix or structure deferred/step-up payments while a big project ramps up.
These programs can be attractive if:
- You’re buying new equipment from a single OEM.
- You qualify for low-rate campaigns.
- You want simple, bundled paperwork through the dealer.
The trade-off is that terms are often tied to that brand; a broker can compare OEM programs to independent lenders if you’re open to different manufacturers.
Rent-to-own and long-term rentals
For companies that aren’t ready to commit immediately, rent-to-purchase options can bridge the gap between short-term rental and full financing:
- You rent an excavator or loader for several months.
- Part of the rent can be credited toward a purchase if you decide to keep the machine.
- Dealers and distributors like SMS Equipment highlight rent-to-purchase on 3–12-month terms as a way to “try before you buy” and keep flexibility.
This works well when you’re:
- Unsure if the workload will stay high enough to justify long-term ownership.
- Testing a new type of machine or entering a new type of work.
Refinancing and sale-leaseback on equipment you already own
If you’ve built a small fleet and paid down some machines, you may be able to:
- Refinance existing excavators/loaders with a new loan; or
- Use a sale-leaseback:
- A lender purchases the equipment at an agreed value.
- You lease it back and keep using it.
- You free up cash to fund more units or cover working capital.
This is common when a contractor wins a large new project and needs to scale quickly without draining cash or bringing in equity.
Asset-based lending and equipment lines (for larger fleets)
Once you have multiple machines and a decent balance sheet, you can move beyond single-machine deals into asset-based lending (ABL) or equipment-backed facilities:
- The lender looks at the forced liquidation value of your machines and advances a percentage against them.
- Facility can be structured as a revolving line or a term loan, sometimes combined with receivables or inventory.
- This approach is increasingly used by construction and industrial companies in Canada to fund rapid growth or large contracts using their machinery as security.
ABL is more complex, but it can give you ongoing capacity instead of reapplying every time you buy a new excavator.
What lenders look at for heavy construction equipment deals
Regardless of structure, underwriters tend to focus on:
- Time in business and revenue: many want at least 6–12 months of operations plus a consistent revenue stream.
- Cash flow coverage: can you comfortably handle the new payment along with existing obligations?
- Down payment: 0–25% is common, depending on credit strength, age of equipment, and whether it’s new or used.
- Equipment details: make, model, year, hours, condition, and whether it’s a mainstream brand with good resale value.
- Credit profile: business and (often) personal credit, especially for smaller contractors.
- Project pipeline: signed contracts or strong backlog help justify adding more iron.
A clean package—vendor quote, equipment list, recent bank statements, financials, and a short explanation of what work the machine will do—usually leads to faster approvals and better terms.
How Mehmi typically structures this in Canada
From our side, a common pattern for Canadian construction clients is:
- Use a lease or loan for the excavator/loader itself.
- Consider OEM programs when promotions are strong, but compare them to independent lenders for total cost over the full term.
- Layer in refinancing or sale-leaseback once you’ve built equity in your fleet.
- Keep working capital (fuel, payroll, materials) on a separate facility (line of credit, working capital loan, or factoring), not on your equipment loan.
If you’re planning to add one or more excavators or loaders and want to see how the payments would look under different structures—or whether your current balance sheet supports it—feel free to contact our credit analysts. We can walk through your quotes, cash flow, and project pipeline and help you choose a structure that fits your risk tolerance and growth plans.
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