Usually, yes, but it depends on what you signed. An equipment note, and a lease with a nominal buyout, are loans in substance: a new lender pays the payoff, takes the lien and the equipment stays put. A fair-market-value lease is a rental. There is no principal balance to refinance, only the remaining rent and a purchase price the lessor sets, so it rarely refinances like a loan. Lenders value used equipment at orderly liquidation value, not what it cost. Rolling short-dated equipment debt into a longer senior facility can free real monthly cash when the business's earnings, not only the equipment, support the balance.
- Equipment note
- Refinances like any term loan; the new lender pays the payoff and takes the lien
- Dollar-buyout lease
- A loan in lease form; refinanced by paying the lessor's early payoff
- Fair-market-value lease
- A rental; usually bought out first, then financed, if the numbers work
- How lenders value it
- Orderly liquidation value from an appraisal, not cost or book value
- When rolling up helps
- Short notes on long-lived equipment, supported by earnings as well as collateral
What you signed decides what you can refinance
Equipment is financed in several forms that look alike on a bank statement, a fixed monthly debit to an equipment finance company, and behave very differently when you try to leave. The first job is to pull every agreement and read the title of the document, the ownership clause and the end-of-term clause. The equipment lease vs loan page covers the choice at purchase; this page is about getting out afterwards.
| Agreement | Who owns the equipment | What ends it early | Refinances like a loan? |
|---|---|---|---|
| Equipment note or loan | The business, subject to the lender's lien | A payoff of principal and accrued interest, plus any prepayment charge | Yes |
| Dollar-buyout lease | The lessor on paper; the business in substance | The lessor's early payoff quote, often the remaining payments with some discount | Yes, once the payoff is quoted |
| Fixed purchase-option lease | The lessor until the option is exercised | Remaining payments plus the set purchase price, or a negotiated buyout | Usually, at the cost of the buyout |
| Fair-market-value lease | The lessor | Often the full remaining rent, plus a purchase price the lessor sets | Rarely; it has to be bought out first |
| Titled vehicles and trucks | The business, with the lender named on the title | Payoff and a recorded title release | Yes, with the title work done at closing |
The notes and nominal-buyout leases are the easy cases. A refinancing lender gets a written payoff from each equipment lender, pays it at closing, takes a first lien on the equipment and has the old lender file its UCC-3 termination. Check each note for prepayment terms first. Some equipment lenders charge a prepayment premium, and some calculate the payoff as all remaining payments with little or no interest rebate, which can make an early exit expensive. See prepayment penalty structures.
Why a fair-market-value lease is not a loan
A fair-market-value lease is a rental agreement. The business pays for the use of the equipment for a term, and at the end it can return the equipment, renew the lease or buy the equipment at what the lessor calls its fair market value. There is no principal balance amortizing underneath the payments, so there is nothing for a new lender to pay off in the ordinary sense.
Most of these leases are non-cancelable. Ending one early usually means paying all or most of the remaining rent plus the lessor's estimate of the end-of-term value, or negotiating a buyout the lessor is free to refuse. The lessor priced the lease on getting the equipment back or selling it to you at a price it controls, and it has no reason to give that up for less. The FMV lease vs dollar-buyout lease page explains why the two are priced so differently.
So refinancing a fair-market-value lease is really two transactions: buy the equipment from the lessor, then finance what you now own. It works when three things line up. The lessor's buyout quote, in writing, is reasonable against the equipment's appraised value. The business wants to keep the equipment for years, not replace it. And a lender will lend enough against the equipment and the business's cash flow to fund the buyout. Where the lessor's number is well above what an appraiser would call the equipment's value, the better answer is usually to run the lease to term and decide then.
Ask every lessor for a written early buyout quote before deciding anything. The quote, not the monthly payment, is what a refinancing lender has to fund.
How lenders value used equipment
A lender refinancing equipment does not lend against what the equipment cost or what it is carried at on the balance sheet. It lends against what the equipment would fetch if the lender had to sell it, which is why an appraisal comes early in any refinance of meaningful size. See orderly liquidation value vs fair market value.
| Measure | What it assumes | Who uses it |
|---|---|---|
| Fair market value | A willing buyer and seller, no pressure, equipment in place and in use | Leases, insurance, purchase prices; rarely the lending base |
| Orderly liquidation value (OLV) | A sale by the owner over a reasonable marketing period, buyer removes the equipment | The usual base for equipment lenders and term loans |
| Net orderly liquidation value | OLV less the costs of selling: removal, transport, auction and commissions | Asset-based lenders; see NOLV |
| Forced liquidation value | A quick sale, usually at auction | Workout and downside cases |
What moves the value is mostly the secondary market. General-purpose equipment with many buyers, trucks, forklifts, standard machine tools, holds its liquidation value well. Specialized, custom or installed equipment, a production line built for one product, equipment bolted into a building, does not, because the buyer pool is small and removal is costly. Age, hours or cycles, maintenance records and condition all matter, and the appraiser will want serial numbers and a site visit for anything significant. A desktop appraisal may do for a small fleet of common equipment; a large or specialized list gets a field appraisal.
The result is often a gap: equipment financed at cost a few years ago may owe more than its orderly liquidation value today. A pure equipment lender lends against the collateral and will not fund that gap. A lender underwriting the whole business on cash flow can, because it is lending against earnings as well as the machines.
When rolling equipment debt into a senior facility frees cash
Equipment notes are usually written over a term shorter than the equipment's useful life, so a business that has bought equipment steadily ends up with several notes amortizing quickly at once. Rolled into one senior term loan with a longer amortization, the same debt costs much less each month.
In plain numbers: a business owes 600,000 across three equipment notes with about three years left, paying roughly 19,000 a month. At the same interest rate, re-amortized over seven years, the payment falls to roughly 9,650 a month, freeing more than 100,000 a year of cash flow. If the equipment appraises at an orderly liquidation value of 450,000, the other 150,000 has to be carried by the business's earnings, so the lender will test debt service coverage on the whole business; conventional banks commonly look for at least 1.25x.
Rolling up makes sense when the equipment will outlast the new amortization, when earnings comfortably cover the new payment, and when the business is refinancing its senior debt anyway, so the equipment notes can be paid off in the same closing. It makes less sense when the equipment is near the end of its life, when the notes are nearly paid, or when a senior lender's covenants would cost more flexibility than the monthly savings are worth. Plenty of businesses keep equipment financing alongside a senior facility on purpose, with the senior lender's consent to purchase-money liens; see equipment loans alongside senior debt. Where the business has several kinds of debt to combine, consolidating business debt walks through the full picture.
Other ways to refinance equipment
- SBA 7(a). A 7(a) loan can refinance equipment debt over up to 10 years, or 15 where the equipment's useful life supports it. The new payment must be at least 10% lower than the payment being replaced, and the debt must have been current for the last 12 months. See equipment financing vs SBA 7(a) and refinancing existing debt with a 7(a).
- SBA 504. For long-life equipment, often alongside owner-occupied real estate; see SBA 504 refinancing.
- Asset-based line. An asset-based lender can include machinery and equipment in the borrowing base, usually as a term piece that amortizes beside the revolving line; see machinery and equipment in an ABL.
- Sale-leaseback. Where equipment is owned free and clear, a lessor can buy it and lease it back, turning equity in the equipment into cash. Many are written as fair-market-value leases, so the business can end up renting back equipment it owned and paying the lessor's price to own it again; read the end-of-term terms before signing.
- Another equipment lender. The simplest route when the goal is a lower rate or a longer term on a single piece of equipment, and the existing note allows prepayment.
What the lender needs to see
An equipment refinance file starts with an equipment list: each asset's make, model, year, serial number, hours or mileage, location and condition, and which lender or lessor it is pledged to. Beside it go the agreements themselves, current payoff or buyout quotes from each lender and lessor, and titles for any vehicles. A debt schedule ties the equipment debt to the rest of the balance sheet.
If the refinance rests on the business's cash flow as well as the equipment, the lender will want the conventional term-loan documents: the P&L, a year-to-date P&L through last month-end, the balance sheet, the debt schedule and, if available, an AP aging. In Transparent's book, 244 lenders write equipment and 1,148 write term and private credit, which matters because an equipment-only lender and a cash-flow lender will size the same fleet very differently. Transparent builds the lender package in a day once the documents are in, and charges nothing before a loan closes.
Common questions
- Can I refinance a fair-market-value lease?
- Not like a loan. There is no principal balance, only remaining rent and a purchase price the lessor sets. The usual route is to get a written buyout quote, buy the equipment and finance the purchase, which works only if the quote is reasonable against the equipment's appraised value.
- What is a dollar-buyout lease, and can it be refinanced?
- It is a lease in which the business buys the equipment for a nominal sum at the end, so in substance it is a loan. A new lender pays the lessor's early payoff quote and takes the lien, much as it would with an equipment note.
- How do lenders value used equipment for a refinance?
- At orderly liquidation value: what the equipment would bring in a sale over a reasonable period, with the buyer removing it. General-purpose equipment holds that value better than specialized or installed equipment. An appraisal sets the figure.
- What if I owe more on the equipment than it is worth?
- An equipment-only lender will generally lend only up to the collateral value. A lender underwriting the whole business on its cash flow can fund the difference if earnings cover the new payment comfortably.
- Will rolling my equipment notes into a bank loan lower my payment?
- Usually, if the notes are amortizing over a shorter term than the new loan. The total interest paid over the longer term may be higher, and the new loan will usually carry covenants the equipment notes did not.