How to Finance Heavy Equipment in Canada
To finance heavy equipment in Canada, apply through banks, credit unions, captive finance programs, or private lenders. You will need a credit score of 550 or higher, a 10-20% down payment, and basic business documentation. Approval takes 24 hours to three weeks depending on the lender. Equipment financing is secured by the machine itself, which makes approval more accessible than unsecured lending.
You found the machine you need. Maybe it is a Cat 320 excavator sitting on a dealer lot with 1,200 hours and fresh paint. Maybe it is a used Komatsu PC210 that a retiring operator listed last week for $145,000. Maybe you are staring at a John Deere 310 backhoe that would let you take on utility work you have been turning down for six months. You know any of these machines will pay for themselves inside two or three good jobs. The problem is you do not have six figures in cash lying around, and even if you do, tying up that much working capital in one piece of iron is a bad move when you still need to cover payroll, fuel, insurance, and the twenty other things that keep a contracting business alive.
That is where equipment financing comes in. And in Canada, you have more options than most contractors realize. This guide walks you through the entire process from start to finish — who lends the money, what they look at, how to structure the deal, what the rates actually look like, and how to avoid the mistakes that slow things down or cost you thousands in unnecessary interest.
How Equipment Financing Actually Works
Equipment financing is a form of secured lending. The machine itself acts as collateral for the loan. If you stop making payments, the lender can repossess the equipment and sell it to recover their money. This is fundamentally different from an unsecured line of credit or a credit card, and that distinction works in your favour as a borrower.
Because the lender has a physical asset backing the loan, they can be more flexible on credit requirements, offer longer terms, and approve deals they would never consider on an unsecured basis. A $150,000 unsecured loan for a contractor with a 640 credit score is almost impossible. A $150,000 equipment loan for the same contractor to buy a well-maintained Cat 330 excavator is very doable, because the lender knows that machine holds its value and can be resold.
The basic mechanics are straightforward. You identify a piece of equipment you want to buy. You apply for financing. The lender evaluates your creditworthiness and the equipment's value. If approved, they fund the purchase — either paying the seller directly or reimbursing you. You make monthly payments over an agreed term, typically 36 to 84 months. At the end, you own the machine free and clear (on a loan) or you exercise a buyout option (on a lease).
Key takeaway: Equipment financing is secured by the machine itself, which means lenders can be more flexible than with unsecured loans. Your credit score matters, but it is not the only factor — the equipment's resale value carries real weight in the approval decision.
Types of Lenders in Canada
Not all lenders are created equal. Each type has a different appetite for risk, different speed, and different pricing. Understanding who is who saves you from wasting time applying at the wrong place.
| Lender Type | Typical Rates | Approval Speed | Min. Credit Score | Best For |
|---|---|---|---|---|
| Big Five Banks (TD, RBC, Scotiabank, BMO, CIBC) | 5-8% | 1-3 weeks | 680+ | Established businesses with clean books |
| Credit Unions (Servus, Conexus, Desjardins) | 6-9% | 1-2 weeks | 650+ | Local businesses with existing relationships |
| Captive Finance (Cat Financial, John Deere Financial, Kubota Credit) | 5-10% | 3-7 days | 650+ | Buying that specific brand new |
| Private Equipment Lenders | 9-16% | 24-72 hours | 550+ | Speed, flexibility, challenged credit |
| Brokers (IronFinance) | Varies by lender match | 1-3 days | Any | Shopping multiple lenders with one application |
Banks offer the cheapest money, but they are slow and picky. They want two or more years of financial statements, clean tax returns, and a personal guarantee. If your books are solid and you are not in a rush, a bank gets you the lowest rate. But if you need to lock down that Bobcat S650 before someone else grabs it this weekend, a bank is not going to work.
Credit unions operate similarly to banks but can be more flexible if you have an existing relationship. If you have been banking at Servus or your local credit union for ten years, walk in and talk to their commercial lending team. They sometimes bend rules that the big banks will not.
Captive finance arms are the lending divisions of major equipment manufacturers. Cat Financial, John Deere Financial, Kubota Credit, and Volvo Financial Services exist to help sell machines. They understand equipment values intimately and often run promotional rates — sometimes as low as 0% for 24 months on new inventory they need to move. The catch is they only finance their own brand.
Private lenders are specialized equipment finance companies. They move fast, typically 24 to 72 hours for a decision. They work with a wider range of credit profiles and business histories. The tradeoff is higher rates, often 9-16% depending on the risk level. But speed and flexibility have real value when you need to close a deal quickly. For a detailed comparison of how banks and private lenders differ, see our banks vs. private lenders guide.
Brokers do not lend their own money. They shop your deal to multiple lenders and find the best fit for your situation. A good broker has relationships with 20 to 40 lenders and knows which ones will approve your specific deal at the best rate. At IronFinance, this is exactly how we work — one application, multiple lenders, best available terms.
What Lenders Look At
Your credit score gets the most attention, but it is just one piece of the puzzle. Understanding what lenders actually evaluate helps you prepare a stronger application.
Credit score and credit history. Yes, your score matters. A 750 opens every door. A 620 closes the bank doors but leaves plenty of private lenders available. Below 550, your options narrow but do not disappear. More importantly, lenders read your full credit report. They look at whether you have missed payments on secured debt (equipment loans, truck payments, mortgages) versus unsecured debt (credit cards). Missed equipment payments are a much bigger red flag than a late credit card payment from three years ago. Read our detailed credit score guide for a full breakdown of every tier. If your score is below 620, our bad credit financing guide covers strategies that work for challenged credit.
Time in business. Two years is the magic number for most lenders. Under two years, you are considered a startup and your options narrow to private lenders who will want more down payment. Over five years, your track record becomes a real asset. Ten years or more, and lenders view you as low risk regardless of the odd blemish on your credit.
Revenue and cash flow. If your business deposits $80,000 a month and you want to finance a $120,000 John Deere 333G track loader, the math is obviously comfortable. Lenders look at your bank statements — typically the last three to six months — to verify consistent income. Seasonal businesses need to show that the off-season does not create payment problems. If you are a snow removal contractor, your December bank statement looks very different from your August one, and a smart lender understands that.
Existing debt obligations. Lenders calculate your total debt service ratio — the percentage of your income that goes to existing debt payments. If you already have three equipment loans, two truck payments, and a maxed-out line of credit, adding another $2,800 monthly payment might push your ratio past what the lender is comfortable with, even if your credit score is strong.
The equipment itself. Because the machine is the collateral, its brand, model, age, hours, and condition all matter. A 2023 Komatsu PC210 with 2,000 hours is excellent collateral — strong brand, proven model, high resale demand. A 2011 off-brand excavator with 14,000 hours and no maintenance records is risky collateral that most lenders will not touch.
Down payment. The more cash you bring to the table, the less the lender cares about everything else. A 25% down payment on a well-maintained Volvo EC220 tells the lender they are protected even in a worst-case scenario. Down payment is one of the strongest levers you have to offset weaker areas in your application. Our down payment guide covers this in full detail.
The Application Process Step by Step
Here is what actually happens from start to finish when you apply for equipment financing in Canada.
Step 1: Define the total cost. Not just the sticker price on the machine. Include delivery charges, any attachments you need (a thumb, a coupler, a set of buckets), immediate maintenance or repairs, and taxes. If you are buying a used Volvo A30 rock truck for $95,000 but it needs $8,000 in tires and a new tailgate cylinder, your real financing number is $103,000 plus tax. Be honest about the total so you do not end up short.
Step 2: Get a written quote or bill of sale. Lenders require documentation on the equipment. From a dealer, this is a formal quote. From a private seller, you need the year, make, model, serial number, hours, price, and seller contact information in writing. A screenshot of a Kijiji ad is not enough — get something signed or at minimum an email from the seller confirming the details.
Step 3: Gather your financial documents. For established businesses, this means two years of financial statements or tax returns (T2s for corporations, T1 Generals for sole proprietorships), recent bank statements showing three to six months of cash flow, your business number and articles of incorporation, and a void cheque. For newer businesses, add a personal financial statement, proof of industry experience, and be prepared for a larger down payment conversation.
Step 4: Submit your application. You can go directly to a bank, credit union, or private lender. Or you can work with a broker who submits to multiple lenders simultaneously. Through IronFinance, we typically need about 15 minutes of your time to gather what we need, and then we do the legwork of matching you to the right lender.
Step 5: Lender review and underwriting. The lender pulls your credit, reviews your financials, and evaluates the equipment. Banks run everything through an underwriting committee, which takes one to three weeks. Private lenders have streamlined processes and usually come back in one to three business days. During this phase, the lender may ask follow-up questions — respond quickly, because delays here slow everything down.
Step 6: Review your offer carefully. When the approval comes through, read every line. Look at the interest rate, the term length, whether there is a buyout at the end, any documentation fees, administration fees, or early payout penalties. If you have multiple offers, compare the total cost over the full term — not just the monthly payment. A lower monthly payment on a longer term can cost you tens of thousands more in total interest. Our rate comparison guide walks through how to evaluate offers side by side. Use our payment calculator to model different scenarios.
Step 7: Sign, fund, and get to work. Once you accept the terms, the lender prepares the loan or lease documents. You sign, they pay the seller directly (or reimburse you if you have already paid), and the machine is yours to put on a trailer and start billing hours.
Common Equipment Financing Structures
There are three main ways to structure equipment financing in Canada, and each one fits different situations.
Equipment loan (conditional sale). This is the most straightforward structure. You borrow money, you make monthly payments, and at the end of the term, you own the machine outright. The lender registers a lien against the equipment until the loan is paid off. This makes sense if you plan to keep the machine long-term, if it holds its value well, or if you want to build equity you can leverage later. Most contractors financing a Cat 320 or a Komatsu PC210 they plan to run for eight to ten years choose a loan.
Equipment lease. With a lease, the finance company technically owns the equipment during the term. You make monthly payments for the use of the machine, and at the end, you have a buyout option — typically 10% to 15% of the original value, or sometimes a dollar buyout on a capital lease. Monthly payments are often lower than a loan because you are not paying down the full value. Leases can have tax advantages since payments may be fully deductible as a business expense. A lease makes sense for equipment you plan to cycle every three to five years, like a Bobcat S650 skid steer you will run hard and then trade up. Our lease vs. finance guide breaks down when each structure makes more sense.
Rent-to-own. This hybrid structure works like a rental agreement where payments build toward ownership. The total cost is higher than a loan or lease, but the approval requirements are typically lower. Rent-to-own is most common for smaller equipment or for contractors with challenged credit who need to get working while building their payment history. Some dealers offer rent-to-own on machines like mini excavators, compact track loaders, and light-duty attachments.
Key takeaway: A loan builds equity and makes sense for long-term holds. A lease keeps payments lower and works well for equipment you plan to upgrade regularly. Rent-to-own is easier to qualify for but costs more over the life of the agreement.
Typical Rates and Terms
Rates vary based on your credit profile, the equipment, and the lender. Here is what the market looks like in practical terms.
| Credit Tier | Score Range | Typical Rate | Typical Down Payment | Typical Term |
|---|---|---|---|---|
| Excellent | 750+ | 5-8% | 0-10% | 48-84 months |
| Good | 680-749 | 7-10% | 10% | 48-72 months |
| Fair | 620-679 | 10-14% | 10-15% | 36-60 months |
| Challenged | 550-619 | 13-18% | 15-25% | 36-48 months |
| Poor | Below 550 | 16-22% | 20-30% | 24-48 months |
These are ranges, not guarantees. A contractor with a 660 credit score financing a brand new Cat machine through a dealer program might get better terms than these ranges suggest. A contractor with a 700 score but heavy existing debt financing a high-hour used machine from a private seller might get worse terms. Every deal is individual.
On terms specifically, newer equipment gets longer terms. A brand new Komatsu PC210 can qualify for 72 to 84 month financing. A 10-year-old version of the same machine might be capped at 48 months because the lender does not want the machine to be 15 years old before the loan is paid off.
Common Mistakes That Kill Deals
These are the errors that slow down approvals, cost you money, or blow up deals entirely. Every one of them is avoidable.
Shotgunning applications to every lender you can find. Every hard credit pull dings your score by a few points. If you submit applications to six different banks and three private lenders in the same month, that is nine hard pulls, and your score drops 20 to 40 points — which can actually push you into a worse rate tier. Use a broker who does a single pull and shops it to multiple lenders, or be very strategic about where you apply.
Fixating on monthly payment and ignoring total cost. A seven-year term at 12% on a $150,000 machine means you are paying over $75,000 in interest — more than half the value of the equipment. Sometimes a shorter term with a higher monthly payment saves you a fortune. Always calculate the total cost of financing, not just what comes out of your account each month.
Skipping the equipment inspection on used machines. Lenders care about the condition of used equipment because the machine is their collateral. If you buy a Hitachi ZX350 with a cracked boom and the lender finds out during their appraisal, your deal is dead. Spend $300 to $500 on an independent inspection before you commit to buying.
Waiting until you are desperate. The worst time to apply for financing is when you absolutely need the machine yesterday for a job that starts Monday. You have no negotiating power, you will accept bad terms, and you will skip due diligence on the equipment. Start the financing conversation before you find the exact machine. Get pre-qualified so you know your budget and can move quickly when the right deal appears.
Not reading the fine print on fees. Some lenders charge documentation fees ($500 to $1,500), administration fees, appraisal fees, or early payout penalties that amount to several months of interest. Ask about every fee upfront. A rate that looks great can turn expensive once you add $2,000 to $3,000 in hidden charges.
Providing incomplete documentation. Nothing slows down an approval like a lender having to chase you for missing bank statements or unsigned documents. Get everything together before you apply. A complete application signals to the lender that you are organized and serious, and it gets you to a decision faster.
When to Use a Broker
You do not always need a broker. If you have excellent credit, a long relationship with your bank, and you are buying a new machine from a dealer with a captive finance program, you can probably handle the financing directly and get a competitive rate.
But a broker adds real value in several common situations. If your credit is below 680 and you are not sure which lenders will work with you, a broker knows exactly who approves what. If you are buying used equipment from a private seller and the deal is more complex, a broker coordinates between you, the seller, and the lender. If you want to compare multiple offers without submitting multiple applications, a broker shops your deal on a single credit pull. If you are a newer business with less than two years of history, a broker knows which lenders specialize in startup-friendly programs.
The cost of a broker is usually built into the financing — you do not pay a separate fee in most cases. The lender pays the broker a commission for bringing them the deal. So the question is not whether you can afford to use a broker. It is whether you can afford not to, especially if your situation is anything other than straightforward.
Key takeaway: A broker saves you time, protects your credit score from multiple hard pulls, and often finds better terms than you would find on your own — especially if your credit, business history, or the equipment makes the deal anything less than perfectly straightforward.
Sources: Mehmi Group, BDC, MachineryTrader. Information current as of March 2026.
Ready to Get Started?
If you are looking at a piece of equipment and want to know what your financing options realistically look like, we can help you figure that out without any pressure. Start with our financeability checker for a quick assessment, or explore our equipment-specific guides for excavators, dozers, and skid steers. Whether it is a brand new Cat 320 from the dealer or a ten-year-old Komatsu off Kijiji, the process starts the same way — tell us about the machine and your situation, and we come back with real numbers. The application takes about 15 minutes, and there is no cost and no obligation to move forward. Start your application here and see what you qualify for.
Frequently Asked Questions
What credit score do I need to finance heavy equipment in Canada?
Most traditional lenders want a credit score of 650 or higher, but equipment financing is available at every credit level. Private lenders and specialized brokers work with scores as low as 500, though you should expect higher rates and larger down payments below 620.
How long does it take to get approved for equipment financing?
Approval timelines range from 24 hours with private lenders to 2-3 weeks with banks. Most equipment finance companies and brokers can give you a conditional approval within 1-3 business days if your documentation is complete.
Can I finance used equipment in Canada?
Yes, most lenders finance used equipment up to 12-15 years old with reasonable hours. Machines older than 15 years or with very high hours typically require specialist lenders, higher down payments, or shorter terms.
Ready to see what you qualify for?