Steps to Refinancing Equipment and Machinery
What is equipment refinancing?
Equipment refinancing involves leveraging your essential-use business equipment (owned outright, or with remaining debt) as collateral to secure a new loan, lease or EFA. The new financing replaces or restructures the old debt, often paying off existing loans or leases and potentially providing extra cash. It’s an asset-based strategy that uses the current market value of your equipment, machinery, work vehicles, or machine tools to unlock liquidity without selling your assets.
There are primarily two main scenarios where equipment refinancing commonly occurs:
- Scenario 1: Equipment with existing financing – The business has an outstanding loan or lease on the equipment. The new refinancing pays off the current lender (or lessor), replacing the old terms with potentially more favorable ones. This restructures the debt while keeping the equipment in use.
- Scenario 2: Equipment owned free and clear – The business owns the equipment outright (no liens or remaining debt). In this case, the equipment serves as collateral for a new loan or lease (often structured as an equipment sale-leaseback), allowing the business to access cash or liquidity while continuing to operate the asset.
Key Benefits of Equipment Refinancing:
Equipment refinancing is a powerful tool for businesses looking to optimize their finances, improve liquidity, and support growth.
By leveraging the current market value of owned equipment, companies can achieve several key advantages:
- Lower Monthly Payments on Current Debt
Refinancing often extends the repayment term or secures a more favorable interest rate (especially when market conditions improve), resulting in significantly reduced monthly payments. This immediate relief eases cash flow pressure and allows more funds to stay in the business. - Improve Cash Flow
Lower payments translate to more predictable and available monthly cash. This increased liquidity helps cover operating expenses, payroll, inventory purchases, or unexpected costs without straining reserves. - Unlock Working Capital
When equipment has built-up equity (its fair market value exceeds any remaining debt), refinancing can provide a lump-sum cash payout. This non-dilutive capital can be used for expansion, hiring, marketing, or other business investments. - Accounting or Tax Benefits
Consolidating multiple loans into one simplifies bookkeeping and financial reporting. Additionally, interest on the new financing is typically tax-deductible as a business expense. In some cases, refinancing may also allow for optimized depreciation or deduction timing – consult your tax advisor for specifics. - Cash-Out the Equity in Your Equipment
Similar to a home equity loan, refinancing lets you access the value you’ve built in your assets without selling them. This provides flexible, asset-backed capital while you continue using the equipment in daily operations. - Exit a Current Lending Relationship
If you’re dissatisfied with your existing lender – due to high rates, poor service, restrictive covenants, or an upcoming balloon payment – refinancing allows you to pay off the current debt and transition to a more suitable financing partner. - Restructure Current Debt
Extend loan terms to better align with the equipment’s useful life, eliminate end-of-lease balloon payments, or adjust repayment schedules to match your current cash flow patterns, making the debt more sustainable over the long term. - Consolidate Multiple Loans/Lenders into One
Combine several equipment loans (or even mix with other business debts) into a single payment. This reduces administrative burden, minimizes overall fees, and makes tracking and budgeting much simpler.
These benefits can frequently overlap…a single refinance can deliver lower payments, extra cash, and streamlined debt all at once. The result is greater financial flexibility, allowing your business to focus on growth rather than debt management.
Real-World Examples: How Refinancing Equipment Powers Business Growth
These anonymized case studies illustrate how companies across different industries have used equipment refinancing with Viking Equipment Finance to address specific challenges, unlock capital, and drive growth.
1. Appalachian Basin Oilfield Mechanic Services Company
A rapidly expanding oilfield services company in the Appalachian Basin took on several Merchant Cash Advance (MCA) loans to support growth. Those MCA loans carried effective interest rates exceeding 50%, severely impacting cash flow. By refinancing his free-and-clear service trucks, we provided a $235,000 cash-out refinance. This fully paid off the high-cost MCA loans and freed up approximately $10,000 per month in improved cash flow.
2. Multinational Mining Company (Kentucky Operations)
A large multinational mining operation had recently acquired an idled coal processing plant in Kentucky and required substantial capital to restart production and operations. Leveraging the equity in the plant’s machinery and infrastructure, we structured a refinancing that raised $12 million in working capital. The transaction closed in just 35 days, enabling the company to resume operations quickly and avoid costly delays.
3. Large Midwest Farmer
During peak harvest season, a substantial Midwest farming operation needed immediate working capital to cover labor, fuel, and other essential costs to harvest their crops. We completed a cash-out refinance on one of their many tractors, delivering $250,000 in funding within 7 days. This timely liquidity ensured a smooth and uninterrupted harvest without disrupting operations or turning to high-cost alternatives.
4. Mid-Sized Southeastern Construction Company
A growing construction firm in the Southeast had invested heavily in new yellow iron (excavators, loaders, bulldozers, dump trucks) over the past 3 – 4 years, financing purchases through multiple OEM lenders (Caterpillar, John Deere, Komatsu, etc.). They built substantial equity in the fleet, but the company was managing over 50 separate loans with high combined monthly payments. Through equipment refinancing, we consolidated all 50+ loans into a single new facility. We also provided $5 million in additional working capital while reducing the overall monthly payment by $50,000. The result: significantly improved cash flow, simplified financial management, and greater capacity to pursue larger projects…all while retaining full use of the equipment.
5. Colorado Directional Drilling Contractor
A directional drilling company in Colorado secured a major new contract for fiber optic cable installation but needed capital quickly to hire 10 additional employees and mobilize resources. By refinancing one of their directional drills, we provided $200,000 in working capital. This enabled them to start the project on schedule and position the business for continued expansion in a growing sector.
These examples demonstrate the versatility of equipment refinancing – whether consolidating multiple loans, cashing out equity, reducing payments, eliminating high-interest debt, or providing rapid capital – tailored to the unique needs of businesses in construction, energy services, mining, agriculture, and utilities.
Frequently Asked Questions About Equipment Refinancing:
1. What is equipment refinancing, and how is it different from regular equipment financing?
Equipment refinancing uses your existing business equipment (owned outright or with remaining debt) as collateral to secure new financing – often replacing old loans/leases with better terms or providing extra cash. Unlike standard equipment financing (used to buy new assets), refinancing focuses on unlocking equity in what you already own, without selling your equipment. Viking will consider used, older, or specialized equipment that banks often decline.
2. What are the main benefits of refinancing my equipment?
Businesses refinance to lower monthly payments, improve cash flow, unlock working capital, cash out equity, consolidate multiple loans into one, restructure debt, exit unfavorable lenders, or gain accounting/tax advantages (e.g., deductible interest). It helps preserve operations while funding growth, emergencies, or expansion.
3. What types of equipment can be refinanced?
We handle a wide range: construction (yellow iron), mining, agricultural, oil & gas, manufacturing, transportation (trucks/trailers), drilling, industrial machinery, machine tools, and more. Viking excels with used, older, or specialized assets that most lenders often pass on.
4. What are the requirements, and do they change based on the amount?
Yes – requirements scale with size for efficiency:
- Small-Ticket ($50,000–$300,000): 3 months bank statements; 550+ FICO
- Mid-Ticket ($300,000–$1 million): 2 years tax returns, 3 months bank statements; 600+ PayNet
- Big-Ticket ($1 million–$50 million): 3 years financial statements, current YTD
(*All need an Application and Equipment List (with full details) and 2+ years time in business.)
5. How long does the refinancing process take?
Timelines vary by size and complexity, but Viking’s expertise in used equipment allows quick decisions – often faster than banks. Small-ticket deals can close in days; mid-ticket and big-ticket may take a few weeks. We aim to expedite funding to meet your needs and timelines.
6. Can I refinance equipment that’s already financed or leased?
Yes – common scenarios include paying off existing lenders (banks, captives, leases) and restructuring terms and potentially pulling equity/working capital from your currently owned equipment.
7. Are there any fees or costs involved?
Costs/fees to close an equipment refinancing transaction largely depend on the size of the transaction. For example, our Small & Mid-Ticket program normally has a Documentation Fee and an Inspection Fee paid prior to or at closing. Our Big-Ticket program will require an equipment appraisal and due diligence fee to be paid upfront to perform the required underwriting process. We work to minimize surprises – terms are transparent upfront. Interest rates depend on credit, equipment, and market conditions; we aim for competitive options.
8. Is equipment refinancing right for my business?
If you have equity in your equipment, need better terms, cash for growth/expansion, or want to simplify your debt structure…refinancing your equipment can help. If you’re facing high payments, balloon payments, or limited bank options for used equipment, refinancing your equipment can be a smart financial decision.
9. Do all equipment lenders offer cash-out equipment refinancing?
No, far from it…While many equipment lenders provide refinancing options to restructure existing debt, lower monthly payments, extend terms, or pay off current loans/leases, true cash-out refinancing – where the business receives a significant lump-sum payout of additional working capital beyond simply paying off existing balances – is not offered by all lenders, and in fact is relatively uncommon.
Reasons this feature is limited:
- Many mainstream banks, captive finance companies (e.g., OEM lenders like Caterpillar Financial, John Deere Credit), and some independents focus primarily on purchase financing (funding new equipment) or rate-and-term refinancing (replacing old debt with new debt on similar or better terms without extra cash).
- Cash-out equipment refinancing involves advancing funds against equity in existing (often older or used) equipment, which carries higher perceived risk for the lender – depreciation, market value fluctuations, and the need for accurate appraisals or liquidation values make it less attractive to more conservative providers.
- Lenders that do offer meaningful cash-out equipment refinancing typically specialize in asset-based lending, have deep experience of valuing used equipment, and are willing to advance a percentage of the equipment’s current market value after paying off any existing liens. We focus on recent auction results to determine market value and advance rates.
In practice, businesses frequently discover that even lenders who advertise “equipment refinancing” may only allow minimal or no additional cash proceeds, restricting the transaction to a straight payoff and restructure. Viking Equipment Finance is one of a few equipment finance companies that can structure cash-out equipment refinances, enabling companies to unlock substantial equity for growth, operations, working capital, debt consolidation, or other business needs.
Next Steps: Unlock The Equity in Your Equipment Today
Equipment refinancing empowers businesses to lower payments, boost cash flow, restructure debt, and access real working capital – often through true cash-out options that many lenders limit or avoid. Viking Equipment Finance specializes in refinancing equipment, machinery, work trucks and machine tools maximizing your asset value so you can fuel growth without selling your machinery.
Ready to see how much equity is in your equipment? Call Viking Equipment Finance at 972-885-8899 or email your Application and Equipment List to info@vikingequipmentfinance.com for a fast, no-obligation review – we’ll contact you promptly to explore tailored solutions.