Leaseback working capital on cranes you own outright
A paid-off crane is one of the best pieces of leaseback collateral in construction. Here is how the advance is calculated, and the tax consequence most people find out about too late.
Why cranes make unusually good leaseback collateral
Most construction equipment depreciates on a steep curve. A 2018 Cat 336 excavator with 10,220 hours lists around $97,500 against a new price near $345,000 to $399,000 — roughly a quarter to a third of new after seven years.
Crane iron does not behave that way. Machines built in the 1990s still trade in six figures: a 1997 Liebherr LTM 1160/2 and a 1997 Grove GMK5175 both carry asking prices in the $170,000 to $199,000 range, and a 2006 Grove GMK5165 asks around $359,000. A twenty-nine-year-old crane holding six figures is not an anomaly in this market. It is the pattern.
That matters for a leaseback because the advance is a function of what the machine is worth in a resale, not what you paid. A slow-depreciating asset simply supports more capital.
Illustrative asking prices observed in listed inventory, not appraisals or offers. Actual value depends on hours, configuration, boom and jib package, inspection history, and market conditions.
The number that matters is the value standard, not the percentage
You will see leaseback advance rates quoted as everything from 50% to 100%. Those quotes are not contradicting each other. They are quoting different value standards, and nobody bothers to say which one.
Lenders underwrite to the liquidation standards, because those are what they would actually recover. An advance of 80% of OLV and an advance of 50% of FMV can be the identical dollar amount. When you compare offers, make every lender quote the same way, or you are not comparing anything.
Ask two questions on every proposal: which standard, and who performs the appraisal. On cranes this matters more than on most equipment, because a large share of the used market lists at "price on request." Price discovery is opaque, so the appraisal effectively sets your advance.
The part that surprises people: it is a sale
A leaseback is a sale, and a sale of depreciated equipment can produce a taxable gain.
Say you bought a crane for $600,000 and have depreciated it down to a $240,000 adjusted basis, helped along by Section 179 or bonus depreciation in the year you placed it in service. You do a leaseback at an appraised $480,000. That $240,000 above basis is a gain — and under the depreciation recapture rules it is generally taxed as ordinary income, not capital gains.
That is not a reason to avoid a leaseback. It is a reason to model it before you sign, because it changes your net proceeds materially. The contractors who get hurt here are the ones who took aggressive depreciation years ago, forgot about it, and treated the appraisal figure as spendable cash.
General information only. Depreciation recapture, lease classification, and accounting treatment depend on the structure of the specific transaction. Confirm with your CPA before you sign.
What the process actually looks like
- Proof you own it free and clear. Title where the equipment is titled, plus a UCC lien search. Any existing filing has to be paid off and terminated.
- An appraisal. Third-party on most crane transactions, given the values involved and the thin public pricing.
- An equipment schedule. Make, model, year, serial, hours, boom and counterweight configuration, and condition.
- Three to six months of bank statements and a recent tax return. The collateral drives the advance, but the payment still has to be serviceable.
- Terms typically 24 to 84 months, with most crane transactions landing in the 36 to 60 month range.
- Funding in roughly one to three weeks from a complete file, with the appraisal usually the long pole.
When a leaseback is the right call
The strongest use is bridging a known gap with a known end. Crane and rigging work is lumpy: a large project can require mobilization, additional operators, and insurance ahead of any billing, and mobilization and demobilization on a single tower crane can run tens of thousands of dollars before you lift anything.
A leaseback on a paid-off machine funds that without giving up the machine. It also tends to price better than unsecured working capital or a merchant advance, because it is secured by an asset with a real resale market.
Where it goes wrong is when it becomes a substitute for profitability. If the underlying problem is that jobs are underpriced or utilization is too low, converting equity into cash buys time and adds a payment. Ownership economics on a crane generally need 60% to 70% utilization to work, with maintenance, insurance, and storage running $50,000 to $100,000 a year per machine. If you are well under that, the fleet is the problem and a leaseback will not fix it.
The bottom line
A paid-off crane is a large, slow-depreciating asset sitting idle on your balance sheet. A leaseback puts it to work twice — on the job and on the books — and cranes support better advances than almost anything else in construction.
Just get two things right before signing: know which value standard your advance is quoted against, and know your adjusted basis so the tax bill is not a surprise.
Frequently asked questions
What is an equipment sale-leaseback?
You sell equipment you already own to a finance company and immediately lease it back, so you receive a lump sum of cash while continuing to operate the machine without interruption. At the end of the term you take title again. It is a way to convert equity in owned equipment into working capital without losing the use of the asset.
How much can I borrow against a crane I own outright?
It depends on the appraised value and which value standard the lender uses. Advances are commonly quoted as a percentage of Orderly Liquidation Value or Fair Market Value, and because those standards produce very different numbers, the same dollar advance can be described as 80% of one or 50% of the other. Always ask which standard a quote is based on before comparing offers.
Do cranes hold their value better than other construction equipment?
Generally yes, and by a wide margin. Excavators commonly fall to roughly a quarter or a third of new price within seven years, while cranes built in the 1990s still carry asking prices in the six figures. That slower depreciation is why a paid-off crane typically supports a larger advance than most other construction assets of similar original cost.
Does a sale-leaseback create a tax bill?
It can. Because a leaseback is structured as a sale, any amount received above your adjusted tax basis is a gain, and gain attributable to prior depreciation is generally taxed as ordinary income rather than capital gains. If you took Section 179 or bonus depreciation on the equipment, your basis may be far lower than you remember. Model the tax consequence with your CPA before signing.
How long does a crane leaseback take to fund?
Roughly one to three weeks from a complete application in most cases, with the third-party appraisal usually the longest step. You will need proof of free and clear ownership, a UCC lien search, an equipment schedule with serial numbers and configuration, recent bank statements, and a tax return.
Curious what your fleet would appraise at?
Send us the equipment schedule and we will tell you what a leaseback would realistically produce. No obligation.
This article is general information about commercial equipment financing and is not tax, legal, or financial advice, nor a commitment to finance. All figures are illustrative examples, not offers or quotes. All financing is subject to credit approval and underwriting. Rates, terms, and approval depend on the complete business and credit profile.