Financing mining and oilfield equipment: what lenders weigh

Haul trucks, drills, crushers, service rigs and pumps are among the most expensive and hardest-working equipment in any industry. Financing them well means accounting for heavy use, specialized resale markets and commodity price cycles that can change a business’s revenue quickly.

What lenders weigh

• Residual value: how the equipment holds value after years of hard use
• Contracts: who the customer is and how long the work runs
• Cash flow across the commodity cycle, not just the current year
• Maintenance records, hours and component rebuild history
• Where the equipment operates and how easily it could be recovered

Structures

Equipment finance agreements and leases are both common. Larger transactions may be underwritten with full financial statements and customer contracts, and may use terms that match the contract length so the equipment is paid for by the work it was bought to do.

Used and rebuilt equipment

Rebuilt components and used equipment are common in mining and oilfield service. Lenders finance them with inspection reports and documented rebuild histories. A major component rebuild can sometimes be financed on its own when it extends the machine’s life.

Managing the cycle

When commodity prices fall, activity slows and equipment can sit. Businesses that plan for this keep payments within what the business can carry in a slow year, avoid stretching on the newest equipment at the top of a cycle, and keep working capital in reserve.

Taxes

Mining and oilfield equipment generally qualifies for Section 179 and bonus depreciation. Large purchases may exceed the Section 179 limit, where bonus depreciation can apply to the rest. Talk to your tax advisor.

LenderCloud provides structured financing for heavy, serialized equipment from $10K to $10M, with application-only decisions on requests up to $1M. All financing is subject to credit approval.