In many equipment loans the machine is the collateral, but a partner may ask for more when the unit is old, specialized or hard to resell, or when the down payment is small. A Williston, ND owner can plan for that before applying.
A Willowpeak Capital Group article on when an equipment loan in Williston, North Dakota needs collateral beyond the machine, with a hot-oil truck example.
Collateral for Commercial Loans: Excavators and Materials
Collateral for commercial loans is any asset the partner can claim if payments stop: equipment, receivables, inventory, real estate. An excavator secures its own loan. Materials bought for a job do not, because once used they have no resale value.
The Bank of North Dakota's Bank Participation Loan Program page, for example, lists accounts receivable and inventory for short-term loans, equipment with an established market and a first mortgage on commercial real property among acceptable collateral.
Inventory and receivables secure short-term loans; equipment and real estate secure longer ones. A partner matches the collateral to the length of the loan, so a machine financed over five years is backed by the machine, not by stock that turns over in weeks.
UCC Lien Collateral: Vacuum Trucks and Rig-Up Costs
A UCC lien is the public filing that records a partner's claim on the collateral. On an equipment loan it names the unit, a vacuum truck for example. A blanket lien names all business assets. Rig-up costs have no asset of their own, so a request that includes them may come with a broader lien.
Ask each offer whether the lien covers only the unit or everything the business owns.
A blanket lien can affect the next request. A later partner checking the filing record will see the earlier claim on all assets and may ask for it to be subordinated or released.
Business Line of Credit with Collateral: What Williston, ND Contractors Should Know
A business line of credit with collateral is secured by receivables, inventory or equipment. Contractors with steady receivables can often secure a line with them, which leaves equipment available to secure its own loans.
The line of credit page and the construction page go further.
A contractor whose receivables are already pledged to a line may need the equipment itself, or a larger down payment, to secure the next machine.
What Is Collateral for a Business Loan? An Example With Hot-Oil Trucks
Collateral for a business loan is what stands behind the promise to pay. For a hot-oil truck, it is the truck: the chassis, the burner, the tank, all titled and valued together.
Illustration only, invented figures: a $185,000 hot-oil truck with $18,500 down leaves $166,500 to finance. Over 60 months at an annual rate of 11%: about $3,620 a month, $217,207 in total payments and $50,707 in interest. With a larger down payment the truck covers more of the loan and extra collateral is less likely to be asked for.
Titles matter. A truck whose title shows an old lien that was paid off but never released can hold up a new loan until the release is recorded, so check the title before applying. For a used unit bought from another operator, the partner will want the seller's lien released at closing.
Equipment Collateral by Trade in Williams County, ND
For an oilfield service company the collateral is usually the unit: a pulling unit, a vacuum truck, a hot-oil truck. For a contractor, a skid steer, an excavator or a work truck. For a repair shop, the lift or the tire machine. For a restaurant, ranges, fryers and coolers, with installed equipment such as hoods counting for less.
Williams County, ND had 47 commercial and industrial machinery and equipment rental and leasing establishments in 2023 (County Business Patterns), which is one reason a partner can find a resale or rental market for many of these units.
Down Payment, Age of the Unit and Resale: What Moves the Collateral Question
Three things move the collateral question: the down payment, the age and hours of the unit, and how easily it resells. A new skid steer with a large down payment rarely needs more. An older, specialized oilfield unit with little down may.
- A larger down payment
- Maintenance records and a recent inspection
- An appraisal from a dealer who trades that unit
- Receivables or other equipment offered as added security
The equipment financing page, the oilfield services page, the term loan page and the Williston, ND page go further.
An appraisal or a dealer's written opinion of value helps most on specialized oilfield units, where a partner has fewer sales to compare against. Maintenance logs that show regular service and recent major work support a higher value and a longer term. Without them, a partner may assume the worst about condition and set the term short.
By Willowpeak Capital Group · Updated
