Can I Get Financing for Construction or Farm Equipment? Here’s What You Need to Know

If you’re looking to finance construction or agricultural equipment, knowing the main requirements and options can help you prepare for the application process. Here’s a quick guide to assess your chances and improve your approval odds.

1. Debt-to-Income Ratio (DTI)

Your Debt-to-Income (DTI) ratio is crucial when seeking financing. OEMs (Original Equipment Manufacturers) usually accept DTI ratios no greater than 30% and 40%, though this depends on your credit history. A lower DTI often reflects better financial stability and can improve your approval chances.

2. Common Grounds for Financing Rejection

OEMs have stringent criteria, and they often reject applicants with any of the following issues:

• Bankruptcies: Any history of bankruptcy can impact approval.
• Repossessions: If you’ve had equipment or other assets repossessed, this may be a red flag for OEMs.
• Limited Credit History: A credit record shorter than 24 months is usually insufficient.
• Lack of a Valid Driver’s License: Having a valid driver’s license is a standard requirement, especially when financing equipment that requires operation certification.

Importantly, OEMs do not help to establish or rebuild credit. Applicants need a solid, established credit record to proceed.

3. Key Requirements for Approval

OEMs prefer applicants with:

• Proven On-Time Payments: Ideally, 24 months or more of on-time payments on loans of similar or higher value than requested.
• Matching Credit History: Your credit history should add up to the amount you’re requesting or exceed it, though this varies per case.
• Mortgage-Backed Credit: If you have a mortgage, its total value should ideally be at least three times the amount you’re looking to finance.

4. Third-Party Lenders: A Backup Plan

If an OEM isn’t willing to finance, consider third-party lenders who specialize in construction and agricultural equipment. These lenders often work with higher rates but can provide a solution if OEM requirements are out of reach. This alternative can open doors to getting the equipment you need, even if it means paying a bit more in interest.

Preparing your finances and understanding the requirements can boost your chances of securing financing for the equipment you need.

Additional Pointers

This guide covers the primary considerations for equipment financing, though it’s not a step-by-step process. Meeting these requirements can increase the likelihood of approval but does not guarantee it. A thorough assessment of your financial history, credit, and income before applying can provide a better picture of your approval chances.