Equipment Refinance for Canadian Manufacturers

Equipment refinance starts with the equity in the machine today

For example, a machine may have cost $500,000 five years ago, but the lender is interested in what it is worth now and how much debt remains against it.

That difference determines whether there is meaningful equity to refinance.

Why manufacturers refinance equipment

Common reasons include restructuring existing equipment debt, creating working capital, supporting expansion, consolidating several equipment obligations or replacing a short-term facility with a structure better matched to the asset.

The purpose of the refinance should be clear. A lender wants to understand what the new facility solves.

Current value matters more than original cost

Manufacturing equipment depreciates at different rates. Some machines maintain strong resale markets. Others become highly specialized or technologically outdated.

The lender may use market data, dealer opinions or an appraisal to support value.

Existing liens must be mapped

A lender cannot structure a clean refinance without knowing who already has security over the equipment.

Provide payout statements for existing equipment loans or leases. If a broader lender has a general security interest, the new lender may need consent, subordination or another solution.

What equipment information is useful?

• Make and model
• Year
• Serial number
• Original purchase price
• Current condition
• Photos
• Current lender
• Outstanding balance
• Service history where relevant

Refinance is different from a sale-leaseback

An equipment refinance can be structured in different ways. In some facilities the business continues to own the equipment subject to the lender’s security. In a sale-leaseback, the business sells the asset to a financing company and leases it back.

Those structures can have different legal, accounting and tax consequences, so the choice should be reviewed carefully.

What can reduce available proceeds?

Existing debt, lender advance limits, fees, appraisal values and lien payouts can all reduce the amount of cash that reaches the business.

Do not calculate proceeds by simply subtracting the current loan balance from the original purchase price.

Can recently purchased equipment be refinanced?

Potentially, but timing can affect structure. Some lenders distinguish between a recent purchase reimbursement, a refinance and a sale-leaseback.

Keep the original invoice and proof of payment.

Frequently asked questions

Does the equipment need to be paid off?

No. Existing secured debt can sometimes be paid out as part of the new transaction, subject to value and lender approval.

Can multiple machines be refinanced together?

Potentially. The lender will need an equipment list and value support for the pool.

Will I need an appraisal?

Possibly, especially for specialized or higher-value machinery.

Can refinance proceeds be used for working capital?

Depending on the lender and structure, eligible proceeds may be available for broader business purposes. The use of funds should be disclosed.

Start with an equipment schedule and payout picture

If you want to explore refinance, build a simple list of the machines, estimated values, current balances and existing lenders.

You can send that information to Raymond Leigh for an initial review.

How lenders size a refinance request

The lender typically works backwards from eligible equipment value, then considers its advance policy, the borrower’s credit profile and existing payouts.

That means a company with $1 million of machinery does not automatically have $1 million of refinance capacity.

Prepare an equipment schedule before asking for proceeds

A useful schedule lists each asset, year, make, model, serial number, location, estimated value and current balance. It should also identify whether any asset is leased rather than owned.

This allows the lender to determine which equipment is actually available as collateral.

What if one lender has a blanket security interest?

A general security agreement can affect equipment even when the specific machine has no standalone loan. The new lender may need consent or another priority arrangement.

This is why a refinance should begin with a complete debt picture, not only the obvious equipment loans.

Refinancing to create working capital should have a purpose

A lender is more comfortable when the company can explain what the released cash will do. Funding inventory for a contracted production ramp is different from covering an unexplained recurring cash deficit.

The use of proceeds does not have to be complicated, but it should be credible.

Compare the new structure with what you are giving up

Refinancing can extend term or release cash, but it can also add fees, reset amortization or change security. Compare the full economics and not only the immediate proceeds.

How refinance can affect future borrowing flexibility

A refinance may improve liquidity today while tying more equipment into a lender’s security package. Before closing, understand whether the new facility takes security only over listed equipment or more broadly across business assets.

That can matter when the company wants to finance another machine later.

What if the equipment pool includes leased assets?

Leased equipment is not automatically available for refinance because the business may not own it. Separate owned assets from leased assets before estimating collateral value.

If a lease has a purchase option, the timing and cost of exercising it may affect what can be refinanced.