Top 3 financing mistakes we see demolition contractors make
Demolition has good margins and a lot of expensive iron. The three mistakes below have to do with how you pay for that equipment and how you manage cash. You can fix every one of them in a single conversation before you sign.
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Should you pay cash for demolition equipment?
Usually not, at least not while your cash is tied up in jobs. And in demolition, that happens fast. You front the mobilization and make payroll every week. Then you wait on progress payments, and on the retention the general contractor holds until the whole project closes. You can’t borrow against any of that money. The machine is different. It’s collateral that holds its value, so it’s easy to finance.
That’s why paying cash for the machine is the first mistake on this list. If you pay cash for a $300,000 excavator, you’ve just used the cash that carries you between progress payments to buy the one thing you could have financed without trouble. Then a GC pays slow, or payroll lands in a gap between jobs, and you’re short because the cash went to the equipment dealer. I’d finance the machine and keep the cash. That excavator earns money while you’re paying it off. Want the actual math? Our guide to paying cash versus financing runs the numbers.
Your cash is what gets you through slow-paying jobs, so keep it for the costs you can’t finance.
Should you finance attachments separately from the machine?
Yes, on a shorter term than the machine. Say you buy a $340,000 excavator plus $180,000 in a shear, a pulverizer, and a breaker, all on one invoice. That invoice becomes one loan: $520,000 over 60 months. And that’s the second mistake, because the machine and the attachments don’t wear out at the same time. An excavator like that commonly lasts 12 to 15 years, while the attachments work in abrasive material and are worn out in about 3.
So around year three, the shear is finished and you still owe two more years on it. You’re making payments on a tool that’s already scrap. And when you replace it, you’ll be paying for the new one and the old one at the same time.
Splitting the terms does mean a higher payment for the first three years, then a lower one after that. But when an attachment wears out, it’s paid for and ready to replace. That matters, because running a worn one costs you money too: slower cycles, more downtime and extra wear on the machine.
Finance each tool over about as long as it lasts, so you’re never still paying for one you’ve already scrapped.
Can equipment payments drop during slow months?
They can, if the deal is set up for it from the start. Demolition money doesn’t come in evenly. You spend cash to mobilize, progress payments lag, the GC holds retention until the project closes, and weather can shut you down for weeks. A flat payment sized to a good month is fine right up until the first gap between jobs. Taking a payment your slow months can’t cover is mistake number three.
There are two fixes. First, size the payment to your steady work. Don’t base it on your best month, or on a big contract you’re counting on but don’t have yet. Second, use a structure that flexes. A deferred first payment, usually up to 90 days, covers the mobilization gap. Seasonal or step payments follow how your money actually comes in. Ask for this before you sign, not after you’ve fallen behind.
In demolition, the money never comes in evenly. Size the payment to your steady work, and set it up so it can flex.
Why do demolition contractors run short on cash?
It’s usually timing. All three mistakes come down to not protecting your cash flow, and in demolition you spend money on a job well before you get paid for it. Each one leaves you with less cash to cover that gap.
How should you finance demolition equipment?
Put the machine on its own term and the attachments on a shorter one, and keep your cash in the business. Then size the payment to your steady work, with a deferral or seasonal schedule if your cash flow needs one.
If you only change one thing this year, I’d change how you finance demolition equipment. It’s the part that’s fully in your control, and it pays off every time you buy another machine or attachment.
Buying used? Our guide to private party demolition equipment purchases covers how to value and finance the machine and the attachments separately.
Frequently asked questions
Should demolition contractors pay cash or finance their equipment?
In most cases, finance the equipment and keep your cash. In demolition, your cash is tied up in mobilization, weekly payroll, slow-paying general contractors, and retention held until a project closes, and you can’t borrow against any of that. The machine is easy to finance because it’s collateral that holds its value.
Why should attachments be financed on a shorter term than the machine?
Because they wear out much faster. An excavator commonly lasts 12 to 15 years, while a shear, pulverizer, or breaker works in abrasive material and is worn out in about 3. Put both on the same long loan and you’ll spend years paying for tooling that’s already scrap. On a shorter term, each attachment is paid off about when it wears out.
How do you finance equipment when demolition cash flow is seasonal?
Match the payment to how your money actually comes in. Size it to your steady work, not to a big contract you’re counting on but don’t have yet. Then ask for a structure that flexes: a deferred first payment, usually up to 90 days, to cover the mobilization gap, or seasonal or step payments that rise and fall with your busy and slow periods. Get it set up before you sign.
How much does demolition equipment cost?
It depends a lot on the type of equipment. High-reach demolition excavators commonly run from several hundred thousand dollars into seven figures. Standard carriers in the 36-ton class go from under $100,000 used to roughly $400,000 new. Attachments run from around $15,000 for a breaker to well over $250,000 for a large multiprocessor. Condition and rebuild history explain most of the difference in price, especially on attachments.
What is the most common financing mistake demolition contractors make?
Not protecting cash flow. The three that come up most are paying cash for a machine when your cash is already tied up in jobs, financing fast-wearing attachments on the same long term as the machine, and taking a flat payment a slow month can’t cover. All three get locked in the day you sign the financing.
Financing your next machine?
We’ll put the machine and the attachments on terms that match how long each one actually lasts, and set the payment up around your cash flow. An application starts with a soft credit pull and doesn’t commit you to anything. Or run the numbers yourself first in the Quote Builder, with no credit pull and 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.