Used Heavy Equipment Finance & Loans for Machinery Purchases

By 2024, the value of heavy industrial, mining, construction, and agricultural equipment worldwide is set to exceed $77 billion. That is, if suppliers can keep up with demand. Since the pandemic, new machinery shortages have resulted in used machinery increasing in value. This unexpected increase in value allows businesses to obtain financing and loans for used machinery purchases (notably earthmoving and construction). Many financial institutions now see the benefits of used equipment and are acknowledging their growing value.

As equity on machinery loans increases, opportunities arise for business owners to:

• Use their equity to expand their business or buy other machinery.
• Refinance to reduce the loan period, repayments and interest.

By 2024, the value of the global industrial, mining, construction, and agricultural equipment market is set to exceed $77 billion(*1)

Leveraging Equity: How to Use Heavy Equipment Loans for Further Financing

What is Equity?

Equity is the value of owned goods(*2,3). As a simple example, consider a landscaping and earthmoving business that:

• Rents an office to work out of.
• Owns a truck valued at $35,0000, which is fully paid.
• Owns one excavator that is financed for $49,000. Of the $49,000, $12,000 has been repaid.

In addition to the $35,000, the $12,000 of the loan that has been repaid is positive equity. Due to recent market changes, the value of the excavator has increased to $56,000. In addition to the $12,000, the business now has an added $7,000 in equity. They could also potentially use the $35,000 truck as collateral as well. From the perspective of a financial institution, this business has $44,000 in value that could be used elsewhere in the business to generate further income.

Depending on your business circumstances, equity can be used in a multitude of ways including obtaining:

• Working capital loans.
• Other equipment or machinery finance.
• Refinancing.
• Decrease the loan length while still keeping repayments low.
• Increasing cash flow.

How Can Refinancing Help Your Business?

Refinancing allows you to void the existing loan and replace it with another with different terms. For example, the loan length, minimum repayments, loan amount, early payout fees, interest and many other things could change to benefit your business needs.

Is an Equipment Loan for You? Is it Worth Refinancing or Drawing on Your Equity?

As the value of used machinery and equipment rises, so does the equity on machinery loans. Just as equity can help reduce home mortgage repayments and provide room to draw on excess equity to make further improvements, the same can be done with machinery loans. Additionally, refinancing equipment loans can dramatically cut down the loan period, repayments and interest paid.

Do you have outstanding loans on equipment or machinery in your business? Ready to find out if refinancing or drawing on the equity to expand the business would be beneficial?

Contact the commercial financial advisors at Trans Pacific Finance Group in Sydney for a confidential discussion over the phone or in person.

References

*1. BizVibe. Global Machinery Industry Factsheet 2020: Top 10 Largest Machinery Manufacturers in the World. 2020. • Finance for rubbish.com.au Trucks
*2. Carlson, R. What is Equity? 2020.
*3. Market Business News. What is equity? Definition and Examples. 2022.