A construction company doing $1.2M a year finances an excavator on the machine, not on the company's revenue. The excavator is the collateral, so the lender sizes the loan to the iron: a $150K to $400K machine, about 10% down, a term of 6 months to 10 years matched to how long you'll run it, funded in days off four months of bank statements. Because the machine carries the loan, the company's revenue-based capacity (roughly 10 to 15 percent of annual gross, so $120K to $180K at $1.2M) stays available for the mobilization and payroll the new machine creates. That's the whole answer: the excavator funds on its own, and it doesn't eat the working capital you'll need to put it to work.
Here's what that looks like on a real file. A residential contractor in Covington, Kentucky, moving into commercial work needed an excavator, two skid steers, and two service trucks, from three brands, all at once. One facility, $560K, funded in 6 days, about $56K down. The contractor was cleared to bid commercial work the following week, and the same facility covers the next machine without a new approval. Nobody asked what the company grossed last year before saying yes. They asked what the machines were worth and whether the deposits covered the payment.
what a mixed excavator-and-fleet purchase took to fund when the machines were the collateral
— Covington, KY contractor: $560K equipment facility, three brands, one application
What Decides Your Terms
Three things, in this order.
The machine. New or late-model iron from a major brand holds value, so it secures more of the price and earns the longer term. A 10-year-old excavator with 9,000 hours still finances, but expect a shorter term and a bigger down payment, because the lender is looking at what it could sell the machine for in year three.
The deposits. Four months of business bank statements. The lender wants to see the monthly payment fitting inside what already flows through the account, with no pattern of overdrafts. At $1.2M in revenue, a $300K excavator's payment is a rounding error against the deposits, which is why these files move fast.
Time in business. Six months operating is the floor. Under two years is fine; it just means the file is built on statements instead of tax returns. Past two years with returns showing a profit, pricing gets better. What it buys you: the lender's confidence is coming from the machine and the deposits, not from your credit score, so a 650 owner with clean statements gets a better file than a 750 owner with a commingled account.
Bottom line:
Equipment financing is sized to the machine. A $1.2M company doesn't need to prove it can "afford" $300K; it needs a machine worth $300K and deposits that cover the payment. That's a different conversation than the bank's, and it closes in days.
Finance It, Lease It, or Pay Cash
Pay cash and $150K to $400K leaves the account the week before you need it most. A new excavator means a new class of job, and a new class of job means mobilization, a bigger crew, and 60 to 90 days before the first pay application clears. The companies that write a check for the machine are usually the ones calling about working capital in month two.
Lease it when you'll turn the machine over in three years and don't want to own it. The payment is lower; you build no equity; at the end you hand it back or buy it at residual. For an excavator you'll run for eight seasons, you're paying for the privilege of not owning something you'd have wanted to own. Equipment financing vs. leasing walks the math.
Finance it when the machine is going to earn for years. You put about 10% down, the payment is fixed, the machine is yours at the end, and the full purchase price is deductible in year one under Section 179 and bonus depreciation. On a $300K excavator, that's a $300K deduction against a $30K down payment. The write-off is bigger than the check you wrote.
What the Machine Is Really Buying
A bigger excavator isn't a $300K expense. It's the bids you stopped turning down. One site-work contract you currently subcontract out, taken in-house, usually covers the first year of payments by itself. The question isn't whether you can afford the machine. It's what the jobs you're declining are costing you.
Finance the machine on the machine.
Start Your Funding Request →A Bigger Version of the Same File
When the machine is one piece of a larger move, each piece goes to the lender that prices it. A Denver contractor making the same jump into commercial work needed a shop and yard, excavators and loaders, and bonding capacity, $2.5M in total, funded in 24 days: $1.4M of owner-occupied real estate on the shop, $800K of equipment financing on the iron, $300K of working capital for bonding and the first mobilization. The excavator layer closed the same way it would have closed alone. The other two layers just closed next to it. That's capital stacking, and the construction hub shows the full set of structures contractors fund with.
| Purchase | How it's sized | Down | Speed |
|---|---|---|---|
| One excavator, $150K–$400K | The machine | ~10% | Days |
| Mixed fleet, $560K | The machines, one facility | ~10% | 6 days |
| Shop + iron + bonding, $2.5M | Three layers, three lenders, one application | Varies by layer | 24 days |
Model your own machine in the equipment financing calculator: price, down payment, term, payment, and the Section 179 savings on one screen. Contractors in Texas and Colorado run the same numbers every week.
What to Have Ready
Four months of business bank statements. A quote or spec sheet for the machine (year, make, model, hours, price). Your last two years of business returns if you have them; if you're under two years, the statements carry it. That's the file. A commingled account is the one thing that slows it down, so if personal spending runs through the business deposits, separate it before you apply.
Finance the machine on the machine
One application, one soft pull. The excavator is the collateral; your working capital stays free for the jobs it wins.
Here's What Most People Get Wrong
They size the purchase to what the bank said the company can borrow, instead of to what the machine is worth. They put the down payment and the first three months of payments on the operating account and then wonder where the mobilization money went. Or they lease a machine they'll run for a decade. The companies that grow out of the $1.2M bracket finance the iron on the iron, keep the working capital for the work, and buy the machine the bids require, not the one the bank was comfortable with.
Frequently Asked Questions
How much down payment does a $1.2M construction company need to finance an excavator?
About 10%, because the machine is the collateral. A $300K excavator is roughly $30K down. Newer companies and older machines push that up; strong deposits and late-model iron pull it toward the low end.
How long is the term on excavator financing?
Six months to 10 years, matched to how long you'll run the machine. Most excavators finance over five to seven years so the payment fits comfortably inside monthly deposits and the machine is still earning when it's paid off.
How fast does equipment financing fund for a contractor?
Days, not weeks. The $560K mixed-fleet file above funded in six days from application. A single excavator on a clean file is usually faster.
Does equipment financing use up my working capital capacity?
No. Equipment is sized to the machine; working capital is sized to your deposits, roughly 10 to 15 percent of annual gross. At $1.2M that leaves $120K to $180K of revenue-based capacity for mobilization and payroll on the jobs the excavator wins. They're separate lenders, often in the same application.
Can I write off the full price of the excavator in year one?
Under Section 179 and bonus depreciation, yes, on qualifying equipment placed in service that year, financed or not. A $300K machine with $30K down is a $300K first-year deduction. Confirm the specifics with your CPA.
Can a construction company with limited credit still finance heavy equipment?
Usually. The machine and the deposits do most of the work. Six months operating, four months of clean bank statements, and a machine that holds value get a file funded that a bank would decline on the score alone.
Bobby's Take
The excavator question always comes in as a rate question, and it's never really a rate question. It's an owner at $1.2M who knows the next bracket needs a machine he doesn't have, asking permission to buy it. The permission comes from the machine. Finance it on the iron, keep the operating account for the operating, and take the Section 179 deduction the year you put it in service. The contractors I've watched stall at $1.2M are the ones who paid cash for the machine and then couldn't float the job it was bought for.
