BLUE COLLAR CFOsBoots before spreadsheetsEquipment debt that fits the machine and the business.
Truck, trailer and heavy equipment financing, from yellow iron to plant equipment, for trucking, construction, excavation, oil & gas and manufacturing companies: the right lender for the equipment, a term that matches its working life, and a payment the business can carry in a bad month.
How a lender looks at your equipment
An equipment lender is lending against the machine as much as the company. Before it looks hard at your financials, it wants to know what the equipment is, how old it is, how many miles or hours are on it, and what it would bring if the lender ever had to take it back and sell it. That last number drives the deal, and it is usually well below what you paid.
When we value a fleet, we value it the way a liquidator would, because that is the number the lender is already using.
The wrong lender makes good equipment look risky.
Equipment lenders are not interchangeable. Some finance over-the-road tractors and trailers every day. Some know excavators, dozers and loaders. Some understand oilfield and plant equipment. The same rule applies as with a bank line: the lender has to fit the risk.
A lender that knows your equipment knows its resale market and how long it lasts in work like yours. A lender that does not will protect itself with a bigger down payment, a shorter term or a structure that squeezes your cash.
Match the equipment to the lender before you match the payment to the budget.
What kills equipment deals
- A blanket lien from a factor, a bank line or a merchant cash advance
- Titles that are missing, wrong or still show an old lender
- Equipment past the age or hours a lender will touch
- A payment the business cannot cover in a slow month
- Financials that do not tie to the tax returns
- Buying first and asking about financing after
Match the paper to the machine.
Fit the term to the working life
A note that outlasts the equipment means you are still paying on a machine you have already replaced. A term that is too short puts a payment on the business it does not need to carry.
Loan, lease or balloon
Equipment finance agreements, leases and balloon structures all move cash differently, and each hits the balance sheet and taxes differently. The right one depends on how long you will run the equipment and what happens to it at the end. Your CPA should weigh in on the tax side.
Lease vs loan »Keep the liens clean
Before you apply, find out what liens are already filed against the business. A blanket lien from a factor or another lender can block a new equipment note entirely, and clearing it takes time you may not have when the equipment is needed now.
What sets your rate.
Equipment finance comes down to two questions: can the company pay, and what is the equipment worth if it cannot. Everything a lender looks at answers one of them.
The company
- Time in business, and how you paid on past equipment loans
- Business and personal credit
- Financials that tie to the tax returns
- Your industry's loss history with that lender
The equipment
- New or used, and its age, miles or hours
- How deep its resale market is
- How much you put down
- A term that matches its working life
Turn every quote into an annual rate before you compare them. A low payment can hide a high rate. The full breakdown »
What we do on equipment debt.
- Match the equipment to a lender that knows it, in your industry and at your size
- Value the equipment the way the lender will, before the lender does
- Check every filed lien and every title before an application goes in
- Test the payment the way we test a deal: coverage on conservative numbers, and what happens if revenue drops 20%
- Underwrite the file ourselves and take it straight to the lender's portfolio team, credit committee or final underwriting
Straight answers.
Should I buy new or used equipment?
It depends on the equipment and how you will run it. Lenders are generally more comfortable with newer equipment and will often lend on longer terms against it. Used equipment can make more sense for the business, as long as it is inside the age and hours a lender will finance and the payment still works in a slow month.
How much will I need to put down?
There is no single answer. It depends on the equipment, its age and resale market, your financials and the lender. Lenders lend against what the equipment would bring if they had to sell it, so the gap between that number and what you are paying for it is often what you are asked to cover.
Can I refinance equipment I already own?
Often, yes. Equipment with clean title can be refinanced to free up cash. It only makes sense if the new payment still leaves the business covered in a bad month, and if it does not collide with liens you already have.
Should I lease or take a loan?
It depends on how long you will keep the equipment, what you want to own at the end, and how each option treats your taxes and balance sheet. There is a side-by-side on bestequipmentrates.com, and your CPA should weigh in on the tax side.
My factor has a lien on everything. Can I still finance equipment?
Sometimes, with the factor's cooperation, and sometimes not at all until the lien is narrowed or released. Find out before you commit to buying anything. It is also one of the reasons owners move from factoring to a bank ABL.
Buying equipment, or refinancing what you have?
Send us the equipment list and your last two years of financials. We will tell you which lenders fit and what the payment does to the business in a bad month.