What's mining equipment financing?
It's how you get your hands on the latest and greatest gear—without the old-time hassle of buying it outright.
Now, let’s break down the types of financing out there…
Loans: These are your straight shooters. You borrow the cash, buy the equipment, and pay back over time. Most loans come with a fixed payment.
Leases: You use the equipment for a set time, and when the lease is up, you can buy it, extend the lease, or hand back the keys. Some companies choose to lease for tax purposes, but mining equipment holds value well, so many companies do choose loans over leases.
Lines of Credit: Lines of credit can be used to purchase equipment. The pros – nobody can tell you what to use your credit line for (so you don’t have to deal with equipment lending restrictions)… but there are downsides. Lines of credit are usually better kept clear for working capital needs instead of for purchasing fixed assets.
How do you find the right lender?
First – how fast do you need the equipment, and how many hoops do you want to jump through?
If you have time to wait, and fill out paperwork, your bank may be the best place to go.
Why?
Banks will often have lower rates than you can get elsewhere.
If your highest priority is finding the lowest cost of financing, a bank may be your best source of financing.
But… banks do have drawbacks:
- Banks are slow. You may have to wait a long time for answers and do a lot of back-and-forth.
- Banks typically want a full financial package – which can be a challenge if your financials aren’t in the condition a bank would want to see…
- Many bank loans come with covenants that can restrict future borrowing ability and put a lien on your entire business.
- With all that work you’ll do to try to qualify… banks have dismal approval rates.
Your other option is an equipment financing company.
That’s what we do. Depending on your situation, we may or may not be your best choice.
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Let’s talk about the pros and cons of equipment financing companies versus your bank.
Equipment Financing: Pros and Cons
| Pros of Equipment Financing Companies | Cons of Equipment Financing Companies |
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If you choose an equipment finance company, there’s a lot to be careful of out there.
If you want to consider us – here’s where we would be a good fit:
- You value speed.
- We can usually secure an approval within 24 hours.
- We work with 25 different lenders and have 75 credit portfolios to choose from.
- Your credit is not terrible.
- We work with A-C portfolios and are not the best fit for “very challenged credit” scenarios.
- You are buying equipment valued from $10,000 to $1,000,000.
- Sometimes, we get requests for $10 million or more in financing. We are not the best fit for transactions like that. We mess them up.
The more you know about your company’s financial standing and the equipment you need, the better.
Understanding the market value of your equipment and your company’s budget constraints are key.
An important factor to consider is how much revenue the equipment will generate compared to what the payments on the equipment are.
One challenge you may encounter when shopping:
Which lenders are telling you the truth?
The equipment financing industry is rife with scams so it’s important to research any company you are considering.
Make sure to read any contracts carefully to avoid potential issues such as surprise balloon payments or evergreen clauses.
We are often asked how much information is needed to apply to finance mining equipment.
It depends.
The biggest consideration is the size of the transaction.
In many cases, a credit report is all that is needed – but for transactions over $250,000 or so, bank statements and/or financial statements and tax returns may be required.
This isn’t always true – but if you’re looking for $500,000 or more worth of equipment it’s extremely likely you’ll need more than just a credit check.
The actual credit requirements are also varied.
If you’re a newer business (under 2 years) you should have at least a 650 credit score unless you’re prepared to make a hefty (30%+) down payment.
Established businesses have more relaxed requirements – but there are dozens of programs in the marketplace.
In many cases, a large downpayment or collateral (machinery or titled vehicles) can overcome credit challenges.