Equipment-Backed Lending
Borrow Against What You Already Own
Access the liquidation value from your machinery, vehicles, and commercial equipment at up to 100% LTV as a term loan or revolving line. 2-7 year terms.
Looking to purchase new equipment instead? See Equipment Financing →
How It Works
How Equipment-Backed Lending Works
Four steps from equipment valuation to funded — with your machines still running throughout.
Equipment Valuation
The lender assesses your equipment using orderly liquidation value (OLV) — what it could realistically sell for, not what you paid or its accounting book value.
Loan Structured
LTV is set at 85–100% for new equipment and 70–85% for used. Term is matched to the equipment's remaining useful life — typically 2–7 years.
Lien Filed, Funds Released
A UCC-1 lien is placed on the equipment. You receive the funds and continue operating the equipment normally — no disruption to your business.
Repay Over Term
Fixed monthly payments over the agreed term. The lien is released upon full payoff and ownership remains with you throughout.
Compare Options
Equipment-Backed Lending vs. Other ABL Products
How equipment-secured financing compares to A/R financing, inventory financing, and a general ABL revolving line.
| Feature | Equipment-Backed | A/R Financing | Inventory Financing | General ABL |
|---|---|---|---|---|
| Collateral | Equipment you own | Outstanding invoices | Inventory stock | Mixed assets |
| LTV / Advance Rate | 70–100% of OLV | 70–95% of invoices | 40–80% of value | Blended by asset type |
| Structure | Term loan or revolving line | Revolving line | Revolving line | Revolving line |
| Collateral Liquidity | Moderate | High | Moderate | Varies by mix |
| Reporting Required | Periodic inspections | Monthly/weekly BBC | Monthly/weekly BBC | Monthly BBC |
| Typical APR | 8–25% | 15–35% | 8–25% | 8–20% |
| Scales With Business | No — fixed to asset value | Yes — with A/R balance | Yes — with stock levels | Yes — with asset base |
| Best For | Equipment-heavy businesses | B2B slow payers | Stock-heavy businesses | Diversified asset base |
Structures
Types of Equipment-Backed Financing
Three structures — each suited to a different capital need and risk tolerance.
Equipment-Backed Term Loan
A fixed-amount loan secured by your existing equipment. Lump sum upfront, fixed monthly payments, fixed rate over 2–7 years. Most common structure for accessing the equity in owned assets.
Best for: Businesses needing a one-time capital injection — raw materials for a contract, expansion costs, or debt consolidation — while keeping equipment in operation.
Equipment Line of Credit
A revolving credit facility secured by your equipment. Draw funds as needed up to your approved limit; pay interest only on what you draw. Slightly higher rates than a term loan; draw fees may apply per withdrawal.
Best for: Businesses with fluctuating or seasonal capital needs that want ongoing access to equipment equity without a fixed repayment schedule.
Sale-Leaseback
Sell your owned equipment to a financing company at its liquidation value, then lease it back. Ownership transfers; physical possession stays with you. Effective LTV is only 40–50% — lenders use liquidation pricing, not what you paid.
Best for: Businesses needing maximum immediate liquidity from owned assets and willing to give up ownership in exchange for an operating lease structure.
Weigh Your Options
Benefits & Considerations
Understanding both sides helps you decide if equipment-backed lending fits your capital strategy.
Benefits
- Unlocks capital tied up in equipment without selling it or disrupting operations
- Lower rates than unsecured alternatives — secured collateral drives cost down significantly
- 68% full approval rate — highest of any business loan type (Federal Reserve 2024)
- Equipment quality can offset weaker borrower credit in underwriting decisions
- Keep using the equipment throughout the full loan term
- Can combine with A/R or inventory financing for a full ABL revolving facility
Considerations
- Lenders use orderly liquidation value — not what you paid or your accounting book value
- Risk of equipment repossession on default — assess cash flow carefully before borrowing
- Insurance with lender named as loss payee required for the full loan term
- Independent appraisal required for used equipment above ~$50K ($300–$1,500+ cost)
- Highly specialized equipment with no secondary market gets low LTV or may not qualify
- UCC-1 lien on the equipment appears in business credit records until the loan is paid off
Real-World Example
Manufacturer Leverages Equipment to Fund a New Contract
$500K in owned production equipment · 70% LTV · 10% APR · 36-month term
Without Equipment-Backed Lending
- • Must decline or scale back the $750K contract
- • No working capital to purchase raw materials
- • Only option: high-cost unsecured financing
- • $500K equipment sits as idle equity
With Equipment-Backed Lending
- • $350K available at 70% LTV on OLV basis
- • Borrows $300K for raw materials
- • Equipment stays in production throughout
- • Contract funded, delivered, profitable
| Item | Amount |
|---|---|
| Equipment value (OLV basis) | $500,000 |
| Loan amount (70% LTV) | $300,000 |
| Contract revenue | $750,000 |
| Raw materials (financed) | $300,000 |
| Other production costs | $150,000 |
| Total financing cost (10% APR / 36 mo.) | −$48,500 |
| Net profit after financing | $251,500 |
The $48,500 in financing cost unlocks $251,500 in net profit from a contract the business would otherwise have to decline. The equipment continues running in production throughout — no downtime, no disruption.
Who It Serves
Industry Applications
Industries with capital-intensive equipment are the strongest candidates for equipment-backed lending.
Manufacturing
Production lines, CNC machines, industrial presses, and packaging equipment carry substantial liquidation value — making them strong collateral for working capital or contract funding.
Construction
Excavators, bulldozers, cranes, and loaders have active secondary markets and predictable useful lives, making them some of the most lender-favorable equipment categories.
Transportation & Logistics
Commercial trucks, trailers, and fleet vehicles hold value well and have established resale markets — enabling high LTV advances with terms matched to vehicle useful life.
Healthcare
Diagnostic imaging systems, surgical tools, and dental equipment retain significant market value and qualify for extended terms reflecting their long operational life.
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FAQ
Frequently Asked Questions
Everything you need to know about borrowing against equipment you already own.
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