Top Forestry Equipment Financing Solutions for Small Logging Businesses

Small logging businesses need to have an array of equipment to do their jobs. While the equipment can help make it easier and safer to perform certain tasks, there’s one major hurdle: cost. Oftentimes, forestry equipment can be incredibly expensive and a barrier, especially for small business owners. However, forestry equipment financing can provide solutions while helping you get the equipment you need. Learn more about different financing options if you have a small logging business.

A Look at Forestry Equipment

Logging companies face sky-high costs when looking to purchase heavy equipment like:

• Skidders
• Harvesters
• Log loaders
• Feller buncher
• Forwarders
• Chippers
• Sawmills
• Logging trucks
• Mulchers

This equipment can cost thousands of dollars, with some options clocking in above the six-figure mark.

Buying a single item can be challenging. If you need to buy several pieces of equipment, the costs really start to add up. Forestry equipment financing breaks down those costs into more affordable monthly payments.

How Forestry Equipment Financing Can Help

Purchasing forestry equipment can be out of reach, given the steep price tag. Forestry equipment financing provides various benefits, including:

• Improve cash flow: You don’t have to drain your resources to pay for what you need. Thanks to the financing, you can improve cash flow.
• Make equipment purchases now: Time is money and getting the right equipment to do your job now can help your bottom line by boosting productivity.
• Invest in the latest technology: Using forestry equipment financing helps you invest in the latest tools. That can improve efficiency, ease, and safety.
• Deal with seasonal slowdowns: You may see a dip in business during certain periods. Using forestry equipment financing frees things up, so you have the working capital you need to keep operations moving.

Types of Forestry Equipment Financing

If you need forestry equipment financing, you have multiple options to consider. Each of these financial solutions can help you access the capital you need. But they all work differently and have specific pros and cons for each option. Here we break down different types of forestry equipment financing and what borrowers should know.

Forestry Equipment Loans

Lenders that offer forestry equipment loans will approve you for a specific loan amount to purchase equipment. The lender may even have flexible terms and allow you to make seasonal payments.

The benefit of this type of forestry equipment financing is that it breaks down costs and leads to full ownership.

Pros:

• Manageable payments
• Full ownership
• May qualify for tax deductions under Section 179

Cons:

• May require a down payment
• Higher monthly payments than equipment leases
• Must meet underwriting criteria

Forestry equipment loans are a good option for established small business owners with an excellent credit score. This could be seen as an investment in your business and aligns with your long-term goals.

Forestry Equipment Leases

If you want less commitment, an equipment lease is a type of forestry equipment financing you should consider. Instead of taking out a loan to buy equipment outright, an equipment lease has a more flexible arrangement and is similar to renting.

Some lenders have various buy-out options. So, you may have the option to continue leasing, buy out the equipment, or return it.

Pros:

• No down payment
• Lower monthly payments
• Various buy-out options

Cons:

• No ownership
• Could have higher long-term costs
• May have an early termination fee

Business owners looking for more flexibility and options may be a good fit for forestry equipment leases.

Vendor Financing

Through vendor financing, you basically cut out the middleman and get financing directly from the vendor. This may be a forestry manufacturer or dealer. Borrowers may be able to customize their loan based on their needs.

Pros:

• Streamlined application process
• May have competitive interest rates
• Potential loan customization

Cons:

• Default risk
• Equipment may be more expensive
• Some lenders may have higher interest rates

This type of forestry equipment financing may be a good fit for business owners who want the latest and greatest equipment and want a simple application process.

Business Line of Credit

A business line of credit often acts as a type of working capital loan. While it can help manage cash flow for your operations, a business line of credit may also be used for some lower-cost equipment. As a type of forestry equipment financing, a line of credit is a tappable credit limit that you can draw from and repay like a credit card.

Pros:

• Provides flexibility instead of a lump sum
• Can establish or improve business credit
• Improve cash flow

Cons:

• Variable interest rates and not fixed rates
• Typically comes with a lower loan amount
• Can lead to over-borrowing and spending

A business line of credit can help those in the forestry industry who need flexibility and continual access to funds. Also, if you don’t need a huge loan amount, this option may also be preferable. To stay on top of your balance, continue to make payments and have a plan to pay off what you owe.

What to Consider with Forestry Equipment Financing

As you can see, there are many different types of forestry equipment financing that you can take advantage of to help your business. When reviewing various options, here are some things to consider:

• Desired loan amount
• Repayment term that works best for you
• How long you plan on using the forestry equipment
• Budget for monthly payments
• Credit score
• 100% ownership or flexibility
• Time in business
• Annual revenue
• Lump sum vs. ongoing financing
• Equipment depreciation
• Potential tax benefits
• Maintenance and repairs

Knowing your needs and where you’re at in business can help inform your decision. That way, you can choose the right forestry equipment financing for your situation. You also want to understand how adding monthly payments will affect your budget in the short term and long term.

What to Expect with the Application Process

Before you start the application process, select the type of forestry equipment financing you want to go with. If you need a significant amount, turning to forestry loans to buy what you need can make sense. If you need flexibility and are figuring things out, an equipment lease or a business line of credit may make more sense.

Once you know the type of financing, you’ll need to check out lenders who offer what you’re looking for. Be sure to check a minimum of three options, so you don’t just jump into the first option. First, you’ll need to review the eligibility requirements to see if you qualify. If you do, then look deeper at the repayment terms and interest rates. Check any down payment requirements and potential fees.

After you choose a lender, you’ll go through the application process. At this point, you need to get your financial documentation in order. For example, tax returns, cash flow statements, etc. Lenders want to make sure that they’re investing in borrowers who can repay the loan.

When you have everything ready, go through the application form and provide all the requested details and information. Give supporting documentation when asked. Submit and then wait for a response.

If you’re approved for your specific type of forest equipment financing, you’ll have access to the funds. Funding timeframes vary by lender. Once you have the capital, you can make equipment purchases and focus on your business.

The next part is also key, though. You’re going to enter repayment. Per your loan agreement, start making payments on your loan or lease. Remaining in good standing with your loan may help your business credit. On the other hand, if you fail to make payments, you could put your equipment at risk.

With an equipment loan, what you purchase acts as collateral. The term collateral refers to an asset that essentially backs the loan. So, if you don’t deliver your monthly payments on schedule and end up in default, the lender has the legal right to take the equipment you purchased. The repayment stage can either help or hurt your credit, so managing your loan payments is essential.

Final Thoughts

Working in timber and logging businesses can mean steep equipment costs. Given the duties of the job, the equipment is essential. You don’t have to lag behind or use out-of-date equipment. Using forest equipment financing, you can get the money to pay for equipment on terms that work for you.

FAQs About Forestry Equipment Financing

For more information about forestry equipment financing, check out answers to these frequently asked questions.

Can You Get Used Logging Equipment Financing?

Forestry equipment financing may be available for used items through banks, credit unions, online lenders, manufacturers, and dealers. Payment terms can vary by lender and the type of used equipment.

What Logging Equipment Financing Options Are Available?

Multiple forestry equipment financing options are available, including loans, leases, and vendor financing. Which option is the best fit depends on various factors like your equipment needs and goals.

Can You Get Business Loans for the Forestry Industry?

You can get various types of business loans if you’re in the forestry and logging business. Forestry equipment financing, like loans and leases, is available, as are bank loans and government-backed loans.

Do You Need a Down Payment on Startup Forestry Equipment Loans?

Some lenders may require a 10% to 20% down payment on forestry equipment loans. However, not all do. It can depend on your business finances, credit history, and the financing company.

What’s the Difference Between Logging Equipment Leasing vs. Equipment Loans?

A logging equipment lease may be similar to a rental agreement or have a rent-to-own structure. Logging equipment loans give you the funds to purchase what you need upfront. The main difference is ownership.

Frequent searches leading to this page