Loan types
Equipment cash-out, and why the funder values your truck at half of retail
Borrowing against equipment you already own. What liquidation value means, why $250,000 net usually needs $350,000 of iron, and the risk nobody spells out.
Equipment cash-out turns machines you already own into cash in your operating account. A funder appraises the equipment, lends against it, records itself as lienholder, and you use the money for anything the business needs. It is the cheapest way to raise general working capital for a business whose value sits in iron rather than in receivables or card volume.
The catch is in the valuation, and it surprises almost everybody. A funder does not lend against what you paid, what the dealer would sell it for, or what you think it is worth. It lends against what the asset would fetch if it had to be sold in a hurry by somebody who is not you. That number is much lower than retail, and it is the number the whole deal is built on.
Four different values, one machine
Say you own a 2021 sleeper tractor, paid off, clean title. Four people can look at that truck and produce four different numbers, and only one of them decides your advance.
| Basis | Illustrative number | Who uses it |
|---|---|---|
| Dealer retail | $95,000 | The dealer, when selling one to you |
| Fair market value | $80,000 | Your insurer and your balance sheet |
| Orderly liquidation value | $62,000 | Most funders, as the advance base |
| Forced liquidation value | $48,000 | Conservative funders and auction reality |
| Advance at 70 percent of OLV | $43,400 | What actually hits your account |
That is a truck an owner would describe as a $95,000 asset producing a $43,400 advance. Nothing improper happened. The funder simply priced the outcome it would live with if it ended up owning the truck. Read orderly liquidation value and forced liquidation value so the term sheet stops being a surprise.
What it takes to net $250,000
Work backward from the cash you want. Advance rates on equipment cash-out generally run 50 to 75 percent of liquidation value, with the top of that range reserved for late model, titled, deep market assets like tractors, trailers, excavators, and common production machinery.
At a 75 percent advance you need about $333,000 of liquidation value. At 60 percent you need about $417,000. Since liquidation value tends to run well under fair market value, the practical answer is that raising $250,000 usually means putting a fleet or a floor of equipment on the table, not one machine.
The gross advance is also not the money you receive. If any unit still carries a lien, the payoff comes out first. Fees come out next. On a $250,000 gross advance with a $60,000 existing payoff and 2.5 percent in origination and documentation costs, the wire is $183,750.
What it costs, on the same $250,000
Cash-out prices above purchase money equipment financing and well below anything that funds in 48 hours. A realistic structure is $250,000 over 48 months at 16 percent: $7,085 a month, $340,083 in total payments, $90,083 in finance cost.
Compare that to raising the same $250,000 on a twelve month short term loan at a 1.24 factor. Total payback is $310,000, so the cost is $60,000 rather than $90,083. But the payments are $5,962 every week, which is roughly $25,800 a month against the cash-out's $7,085. One of those numbers your business can absorb during a slow quarter and one of them it cannot. The short term loan is cheaper in raw dollars because you hold it for a quarter of the time, not because the money is cheaper per year.
What underwriting needs from you
The file is short but unforgiving. Ownership and lien position have to be provable on paper, because the funder is buying a security interest, not a story.
- Proof of ownership. Title in the business name for titled assets, or the original invoice and bill of sale for untitled equipment. A machine bought in your personal name creates a problem worth solving before you apply.
- Clean lien position. A title and lien search on every unit. Existing liens are not automatically fatal, they just get paid off from proceeds and shrink your net. See title and lien search.
- An equipment schedule. Year, make, model, serial or VIN, hours or mileage, and condition on every unit. Vague lists get conservative values.
- Photos or an inspection. Most funders want current photos. Larger deals get a third party inspection or a desktop appraisal, which adds three to ten days.
- Insurance. Physical damage coverage naming the funder as loss payee, in place before funding.
- Three to six months of business bank statements. The collateral supports the advance, but the payment still has to come from operations.
Two ownership problems come up constantly and both are fixable if you catch them early. The first is equipment titled in an owner's personal name rather than the operating entity, which most funders will not lend against until the title is transferred. The second is a stale UCC filing from a paid off loan that nobody ever terminated, which reads as an open lien until the prior lender files the release. Neither takes long to fix, but each adds a week if you discover it after the term sheet instead of before.
When it is genuinely the right move
- 01Refinancing expensive daily payment debt
This is the strongest use. Trading two daily debits for one monthly payment at a fraction of the rate can rescue a month of cash flow. Work through consolidating business debt before you sign anything new.
- 02Funding a contract you already won
You need crews, materials, and fuel to start a job that pays in 90 days. The iron is idle equity sitting in the yard.
- 03Buying inventory or equipment at a real discount
The math works when the return on the purchase lands inside the term and clears the finance cost with room to spare.
- 04Bridging a known seasonal trough
Only when you can point to the month the revenue returns, and only once. A cash-out you refinance every year is a permanent hole with paperwork.
Watch the collateral scope while you are at it. Some funders want a lien on every unit you own rather than the specific ones supporting the advance. That is cross-collateralization, and it can block a future equipment purchase or a second facility entirely. Ask for the lien to be limited to a named schedule and get the answer in writing.
What Exp Capital does with this
Exp Capital Solutions is a broker. We do not appraise equipment, hold liens, or decide advance rates. We build the equipment schedule properly, put it in front of funding partners who actually understand your asset class, and come back with the advance, the payoff amounts, the monthly payment, the term, and the exact scope of the lien laid out side by side. When a sale leaseback or plain line of credit raises the same cash on better terms, we will say so, even though it pays us less.