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Equipment and vehicle financing

Equipment finance is sized against the asset rather than the income statement, which is why it often raises more than a cash flow facility at the same revenue.

Typical size
Driven by asset value, commonly $25,000 to $5,000,000
Typical time
Days to three weeks on standard assets. Longer on specialised or used equipment.
Security
A charge on the financed asset

When it fits.

  • Adding capacity to take a contract already in hand.
  • Replacing an asset before failure rather than after it.
  • Fleet growth in transport, construction or field services.
  • Releasing cash from equipment you already own, without selling it.

When it does not.

  • Assets with no resale market. If a lessor cannot picture the recovery, they will not advance against it.
  • Software and installation costs on their own, which most equipment lenders exclude.
  • A business that needs the payment to be smaller than the asset can support.

The detail, if you want it.

Open only what applies to you. Nothing here is required reading before a first call.

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How it actually works

A loan puts the asset on your balance sheet from day one and you claim capital cost allowance and interest. A capital lease keeps the monthly payment lower and typically ends with a dollar buyout. An operating lease keeps the asset off the balance sheet and suits equipment you intend to replace on a cycle.

Sale and leaseback is the structure owners ask about least. You own a fleet or a production line outright. A lessor buys it at an appraised value, pays you the cash, and leases it back to you on a schedule. The equipment stays where it is, keeps earning, and the proceeds are usually unrestricted. On an asset heavy business it commonly releases more than a cash flow facility would at the same revenue, because it is priced off appraised value rather than off income.

Used equipment finances too. Expect a shorter amortisation, a larger down payment, and an appraisal.

What a lender will ask for6
  • The vendor quote or invoice, or an appraisal on a leaseback
  • Two years of financial statements and the current interim
  • Two years of T2 returns
  • A schedule of existing equipment debt and lease obligations
  • Photo identification and articles of incorporation
  • For used assets: age, hours or mileage, serial numbers and condition
And what they will ask you4
  • What does this asset do for revenue or for cost, in numbers?
  • What is it worth in an orderly liquidation two years from now?
  • What is already financed against the existing fleet?
  • Who maintains it, and what is the service record?
Questions we get about this one3
Do I need a down payment?
On new equipment from a recognised vendor, often nothing. On used equipment, commonly ten to twenty percent. On a leaseback, none, because you already own the asset.
How much can I release through a sale and leaseback?
It follows the appraised value and the age of the fleet, less anything already registered against it. On unencumbered equipment in good condition, a meaningful proportion of appraised value is normal. The appraisal decides it, not the revenue.
What happens if the equipment becomes obsolete?
On a loan or a capital lease, you still owe the balance. That is the argument for an operating lease on anything with a short technology cycle.
Read about this3

Is equipment finance the right instrument for your deal?

Tell us the amount and the timing, and we will say which instrument we would reach for.

No lender hears your name until you say so.

A request emailed to twenty lenders leaves twenty records. The next one to see it reads the declines before they read the deal, and a file that looks shopped is priced as one. So the list is built with you, approved by you in writing, and nothing leaves this office before that.

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