Leaseback working capital on cranes you own outright
A paid-off crane is some of the best leaseback collateral in construction. Here’s how the advance gets calculated, and the tax hit most people find out about too late.
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Why are cranes such good leaseback collateral?
Most construction equipment loses value fast. A 2018 Cat 336 excavator with 10,220 hours lists around $97,500, against a new price near $345,000 to $399,000. That’s about a quarter of new after seven years.
Cranes don’t follow that curve. 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.
In this market, a twenty-nine-year-old crane still asking six figures is normal.
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.
That matters for a leaseback, because the advance is based on what the machine would bring in a resale, not what you paid for it. Equipment that holds its value supports a bigger advance.
Why does the value standard matter more than the percentage?
Advance rates get quoted against different yardsticks. That’s why you’ll hear anything from 50% to 100%. None of it lines up. An advance of 80% of Orderly Liquidation Value and one of 50% of Fair Market Value can be the same dollar amount. Get every quote on the same standard, or you aren’t really comparing multiple lenders.
Ask two questions on every proposal: which standard, and who does the appraisal? On cranes that matters more than on most equipment. A big share of the used market lists at “price on request,” so the appraisal basically sets your advance.
Why can a leaseback create a tax bill?
Because a leaseback is a sale. Say you bought a crane for $600,000 and have depreciated it down to a $240,000 adjusted basis, with help from Section 179 or bonus depreciation. You do a leaseback at an appraised $480,000. That $240,000 above basis is a gain, and under the recapture rules it’s generally taxed as ordinary income, not capital gains.
That shouldn’t scare you off a leaseback, but I’d model it before you sign. The contractors who get hurt took aggressive depreciation years ago, forgot about it, and treated the appraisal figure as spendable cash.
General information only, not tax advice. Recapture and lease classification depend on the specific structure. Confirm with your CPA before signing.
What does the process look like?
- Proof you own it free and clear, plus a UCC lien search. Any existing filing has to be paid off and terminated.
- An appraisal, done by a third party on most larger deals.
- An equipment schedule: make, model, year, serial, hours, configuration, and condition.
- Three to six months of bank statements and a recent tax return. The collateral drives the advance, but you still have to be able to make the payment.
- Terms typically 24 to 60 months, with most landing in the 36 to 60 month range.
- Funding in 2 to 5 business days once the documents are signed. The appraisal usually takes the longest.
When does a leaseback make sense?
It works best for a cash gap you can see coming, with a clear end date. Crane and rigging work is lumpy. A big project can mean paying for mobilization, extra operators, and insurance before you bill anything, and mobilizing and demobilizing a single tower crane can run tens of thousands of dollars before you lift a thing. A leaseback on a paid-off machine covers that without giving up the machine, and it usually prices better than unsecured working capital or a merchant cash advance.
Where it goes wrong is when it stands in for profit. Owning a crane generally pays off only at 60% to 70% utilization, with maintenance, insurance, and storage running $50,000 to $100,000 a year per machine. If you’re well under that, the fleet is the problem, and a leaseback won’t fix it.
What should you check before signing?
Two things. Know which value standard your advance is quoted against, and know your adjusted basis so the tax bill isn’t a surprise. Get those right and a paid-off crane is about the best leaseback collateral in construction. You keep running it on jobs, and the equity you’ve built up in it becomes working capital. Buying another crane instead? Start with our crane equipment financing guide.
Frequently asked questions
What is an equipment sale-leaseback?
You sell equipment you already own to a finance company and lease it right back. You get a lump sum of cash and keep running the machine without a break. At the end of the term, you take title again. It turns the equity in your equipment into working capital without losing the use of it.
How much can I borrow against a crane I own outright?
It depends on the appraised value and which value standard is used. Advances are usually quoted as a percentage of Orderly Liquidation Value or Fair Market Value. Those produce very different numbers, so the same dollar advance can be called 80% of one or 50% of the other. Always ask which standard a quote uses before you compare offers.
Do cranes hold their value better than other construction equipment?
Generally yes, and by a wide margin. Excavators commonly drop to roughly a quarter or a third of their new price within seven years, while cranes built in the 1990s still ask six figures. That slower depreciation is why a paid-off crane usually supports a bigger advance than most other construction equipment that cost about the same new.
Does a sale-leaseback create a tax bill?
It can. A leaseback is structured as a sale, so anything you receive above your adjusted tax basis is a gain, and gain from past depreciation is generally taxed as ordinary income, not capital gains. If you took Section 179 or bonus depreciation on the equipment, your basis may be far lower than you remember. Run the numbers with your CPA before you sign.
How long does a crane leaseback take to fund?
Usually 2 to 5 business days once the documents are signed, and the third-party appraisal tends to be the longest step. You’ll need proof you own it free and clear, 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’ll tell you what a leaseback would realistically bring in. Or run the numbers yourself first in the Quote Builder. No credit pull, 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.