Plow Financing Options for Snow Removal Businesses: A Complete Guide

The snow removal business is a naturally cyclical one, and business owners often have to deal with large gaps between their income-generation season. But that short season means it’s a high-stakes time to work as efficiently and reliably as possible. Success often hinges on your equipment, from snow plows and snow pushers to backhoes, heavy-duty loaders, salt spreaders, and more.

Investing in essential machinery can strain your business’s cash flow, especially in the offseason. That’s where snow removal equipment financing, like plow financing, can come in handy. There are several plow financing options available to snow removal business owners, from traditional small business loans to specialized snowplow financing.

In this article:

• Understand the benefits and eligibility requirements for different types of plow financing.
• Learn what you need to do to qualify for plow financing.
• How to decide between a buying and leasing financing plan.

Understanding Your Financing Needs

Before you start looking around for specific financing options, you need to have a clear picture of what your business needs. Some things to keep in mind include:

• Type of equipment: Do you need specific truck equipment, a whole new plow, a skid steer, a bulk salt spreader, a dump truck snow removal businesses use a lot of equipment to effectively remove snow, so it’s imperative to understand what you need to do the job well in your specific area.
• Business stage: Startups tend to have fewer financing options than established companies looking to expand or upgrade their fleet.
• Financial health: Seasonal businesses may have a more difficult time qualifying for financing due to long periods where they aren’t generating much (if any) income. Nonetheless, if you have strong personal credit and a demonstrated earning history, you can still pass the credit approval process.
• Ownership goals: Do you want to own the equipment at the end of the financing term, or are you comfortable with a more flexible lease arrangement?

Having a clear understanding of these factors will help you navigate the various plow financing options and choose the one that best aligns with your business goals.

Types of Plow Financing Options

Whether you’re shopping for a v-plow, sprayer, classic plow, or something else, there are several snowplow financing options available to you. We explore them here.

Traditional Equipment Loans

With an equipment loan, a lender provides you a lump sum of money to purchase the equipment outright, with the equipment itself serving as collateral for the loan. If you’re unable to repay, they can seize the equipment and sell it to recoup their money. Generally, you make monthly payments over a set loan term, which usually runs between one and five years.

At the end of snow plow loans, you’ll own the equipment outright, giving you a major piece of equipment to support your business for the long term, and potentially serve as collateral for future business financing needs. Once you’ve paid off the loan, the equipment is yours to use, modify, or sell as you see fit.

Eligibility:

Since the equipment itself serves as collateral, equipment loans tend to have relatively lenient eligibility requirements. Lenders will assess your business's creditworthiness, time in business, and financial history. A solid credit score and proven track record of seasonal revenue can improve your chances of securing favorable plow financing terms.

Equipment Leasing

Equipment leasing can be an attractive alternative to loans for some snow removal business owners. In a lease, you essentially rent the snow plow or other equipment for a specified period. Like a loan, you enter into an agreement for a predetermined term, during which you make monthly payments. But unlike a loan, in which you build equity, at the end of the lease term, you can either return the equipment, renew the lease for another term, or buy the equipment for its fair market value.

Leasing can be a useful financing option for those who always want the most up-to-date and cutting-edge equipment. There tends to be lower upfront costs, potentially with no down payment, which can preserve your business’s cash flow. Leases can be structured to fit seasonal business models, too, with payment options tailored to your peak and off-peak months, so you can better predict when you’ll have to make payments. Plus, you can typically treat those lease payments as an operating expense on your tax return, allowing you a deduction.

Eligibility:

Leasing companies generally have more flexible eligibility requirements than traditional banks. You’ll still have to undergo a credit check, but the qualification requirement is less strict, and you should still be able to get a reasonable interest rate with less-than-perfect credit. Lease agreements primarily focus on the equipment’s value and the business’s ability to make payments.

Specialized Plow Financing and Dealer Options

Many snow plow manufacturers and dealers offer their own specialized plow financing programs. These programs are designed specifically for the snow removal industry and can be a convenient option, especially if you’re going in person to shop at a dealer.

Dealer financing works just like an auto loan. When you purchase a plow or other piece of snow removal equipment from a dealer, they may have an in-house financing program or a partnership with a third-party lender. This allows them to set up a financing plan quickly — often on the same day.

Dealers often run promotions like low interest rates, deferred payment periods, or no down payment offers, which can make plow financing more accessible for new business owners. Plus, since dealers are usually familiar with the snow removal industry and its seasonal nature, they may be able to offer more flexible terms or tailored lending features, like a bundled maintenance plan or extended warranty.

Eligibility:

Eligibility criteria will vary between dealers and their partners, but usually, you’ll need to have similar qualification requirements as you would for a lease. They aren’t strict, but you’ll likely get better terms with a stronger credit score and more stable business history.

SBA Loans

The U.S. Small Business Administration (SBA) offers loan programs that partially guarantee a portion of the loan, reducing the risk for both borrowers and lenders.

The most relevant SBA loan programs for equipment financing are the SBA 7(a) and SBA 504 loan programs.

The SBA 7(a) loan program is the SBA’s most popular and versatile. You can use the funds for a wide range of business purchases, including working capital and the purchase of equipment, making it suitable for plow financing.

SBA 504 loans are specifically designed for major fixed asset purchases, such as large-scale machinery or real estate. They can work for plow financing needs, if you want to acquire a fleet of vehicles or highly specialized equipment.

SBA loans tend to have the most competitive interest rates and long repayment terms, making them highly desirable for many small business owners. SBA 504 loans also tend to have low down payments, which helps conserve capital.

Eligibility:

To qualify for SBA loans, your business must be a for-profit entity operating in the U.S. and meet specific business size standards. After that, eligibility requirements vary slightly by lender, but they tend to be strict and have a long application process.

For SBA 504 loans, businesses must have a tangible net worth of less than $15 million and an average net income of less than $5 million after federal taxes for the two years preceding the application.

Loans vs. Leasing

Choosing between a loan and a lease can be a difficult decision. Fortunately, there’s really no wrong answer. The right plow financing option just depends on your business’s goals and financial situation.

A loan may make more sense for your business if:

• You plan to use the equipment for its full life expectancy.
• You want to add an asset to your business.
• You can afford a down payment.

A lease may make more sense for your business if:

• You want to upgrade equipment frequently.
• You want to preserve cash flow with lower upfront costs and payments.
• You’re unsure if you want to buy or not at the end of the lease term.

In either case, it’s essential that you do your research, compare offers from multiple lenders, and read all contracts thoroughly to make sure you’re making the right agreement for your business.

Final Thoughts

Equipment is the lifeblood of any snow removal business. By taking a well-planned approach to plow financing, you can find the right financing arrangements that suit your business’s needs and get you the equipment it needs to be successful. Growing your snow removal business is all about having the right equipment in place, and these plow financing options can help you secure a loan or lease to optimize cash flow and keep your business operating smoothly.

FAQs About Plow Financing

What is the typical repayment term for plow financing?

Repayment terms vary between lenders and financing type. Equipment loans may have slightly longer terms than leases, but the exact term will depend on the cost of the equipment, the lender, and your business’s financial health.

Can new businesses get plow financing?

Established businesses may have more loan options and access to better rates, but that doesn’t mean new businesses can’t get plow financing. You may have to provide a personal guarantee for the funds or put down a larger down payment, but you can still qualify for financing.

Can I finance used snow removal equipment?

Many lenders offer plow financing for both new and used equipment. Financing used equipment can be a great way to save money, and the eligibility criteria are often similar.

What financial documents will I need to apply for plow financing?

During the application process, you’ll typically need to provide a business plan, bank statements, financial statements, personal and business tax returns, and a detailed quote or invoice for the equipment you plan to purchase.

How does the seasonal nature of a snow removal business impact financing?

Lenders that specialize in plow financing understand the seasonal fluctuations of the snow removal business. Some may offer flexible payment structures that allow for lower payments in the off-season and higher payments during the winter months, helping to align your loan payments with your cash flow.

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