When your business needs liquidity to fund a new project, bridge payroll during growth, or cover seasonal dips, tapping your existing assets is often the smartest move. However, most business owners assume their only options are taking out expensive online working capital loans or selling off hard-earned machinery in a sale-leaseback.
There is a better alternative: An Equipment Equity Loan (Cash-Out Refinancing).
This financial structure allows you to borrow directly against the unencumbered value of equipment you already own—unlocking up to 60% to 80% of its Orderly Liquidation Value (OLV) in cash while maintaining 100% ownership, title, and tax benefits.
Equipment Equity Loan vs. Sale-Leaseback: Why Keeping Ownership Matters
Many business owners confuse cash-out refinancing with a sale-leaseback. While both provide working capital using equipment as security, their legal structures and operational impacts differ significantly:
| Feature | Equipment Equity Loan (EFA) | Sale-Leaseback |
| Asset Ownership | You retain full title & legal ownership | Title transfers to the leasing company |
| Lien Structure | Lender files a specific UCC-1 lien | Ownership deed/title is surrendered |
| Tax Benefits | You claim Section 179 & depreciation | Payments are written off as lease expenses |
| End of Term | Lien is removed; asset remains 100% yours | You must buy back asset or return it |
Key Takeaway: An Equipment Finance Agreement (EFA) cash-out loan acts like a home equity loan for your business. The lender registers a lien against the specific machine, but you keep full title, control, and operational use.
How Much Cash Can You Pull Out? (Understanding LTV & OLV)
Lenders evaluate equipment equity based on its resale or liquidation value rather than its original purchase price. Underwriters look at two primary metrics:
- Orderly Liquidation Value (OLV): The estimated dollar amount the asset would net at a professional, orderly auction given 60–90 days of marketing time.
- Loan-to-Value (LTV) Cap: Lenders typically advance 60% to 80% of the OLV.
Example: If your construction firm owns two excavators with a combined OLV of $250,000, an equipment equity loan can yield $150,000 to $200,000 in immediate cash.
Eligible Equipment Across Key Industries
Lenders look for durable, high-demand assets with clear secondary market values and serial numbers.
- Construction & Heavy Machinery: Excavators, wheel loaders, bulldozers, dump trucks, and cranes.
- Healthcare & Medical Practices: CBCT scanners, digital X-ray suites, optical diagnostic devices, and surgical tables.
- Manufacturing & Industrial: CNC mills, lathes, stamping presses, and automated packaging lines.
- Transportation & Logistics: Vocational trucks, semi-tractors, and specialized trailers.
Key Advantages over Traditional Bank Lines & MCAs
- No Blanket Bank Liens: Standard commercial banks often demand a blanket UCC-1 lien over all company receivables and accounts. An equipment cash-out loan places a lien strictly on the specific hardware pledged, leaving your main bank lines intact.
- Faster Approval Speeds: Because the loan is secured by tangible machinery, underwriters process application-only files (typically up to $250,000) within 24 to 48 hours using 6 months of bank statements and equipment photos.
- Fixed, Predictable Terms: Unlike high-cost daily/weekly Merchant Cash Advances (MCAs), equipment equity loans offer 3- to 5-year fixed monthly repayment schedules.