Can a business line of credit be used to finance construction equipment?

SBA 7(a) CAPLines can be used to buy costly supplies and equipment, and the program also offers express and export lines of credit (td.com).

Understanding credit options

A business line of credit provides revolving access to working capital, making it suitable for recurring or unpredictable expenses that arise throughout a construction project (lyftcapital.com).

A business line of credit is a revolving pool of funds you can draw from and repay as needed, while an equipment loan is a lump‑sum loan used to purchase a specific piece of machinery with fixed monthly payments (nationallegacy.com).

• Ask the lender to explain how a revolving line of credit works for equipment purchases.

• Request a comparison of loan structure versus line of credit repayment schedules.

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Evaluating collateral and underwriting

Construction equipment financing typically carries APRs of 6% to 22% over terms of 2 to 7 years, with the equipment itself used as collateral (baystreetlending.com).

Equipment financing lenders underwrite the asset rather than just the borrower, allowing larger loan amounts and longer terms because the machine serves as collateral (providecapital.com).

• Ask the lender what assets they will consider as collateral for a line of credit versus an equipment loan.

• Write down the documentation needed to prove equipment value and ownership.

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Project cash‑flow considerations

Construction businesses can use a line of credit for payroll and material costs between draws, and separate equipment financing for purchasing machines and trucks (merc.financial).

A construction line of credit may be secured or unsecured, and once approved the borrower can draw up to the credit limit as needed for project expenses (nav.com).

SBA and special programs

SBA 7(a) loans can be used to purchase machinery, equipment, and supplies, with maturities of up to 10 years for equipment and up to 25 years for real estate (sba.gov).

• Contact your SBA lender to confirm eligibility for a CAPLine that can cover equipment costs.

• Record the required paperwork and submission deadlines for the SBA program.

Disclosures

This content is for educational purposes only and is not financial advice. constructionequipmentfinancing.finance may receive compensation from partner lenders, which may influence which products are featured.

Sources

• td.com
• lyftcapital.com
• nationallegacy.com
• baystreetlending.com
• providecapital.com
• merc.financial
• nav.com
• sba.gov