EDL is providing the following information regarding the financing of Concrete Pumping equipment as a guideline for our customers and others in the industry.
Collateral Considerations:
The Concrete Pump market is composed of two 1st tier manufacturers whom dominate the market. The demand for 1st tier equipment is high at the present time with two to three month delivery times. High demand for the new equipment has also caused a shortage of good used equipment. This is reflected by the fact that you never see this 1st tier equipment in auction results. The 1st tier manufacturers are comparable to CAT & KOMATSU in service and parts availability and share the reputation as being the superior manufacturers of this type of equipment.
2nd tier manufacturers have taken some market share, but at the present time they lack the resale history that the two 1st tier manufacturers bring to the table. Useful life of the 1st tier equipment is routinely acknowledged to be 25 years with a depreciation curve similar to Cranes i.e. steep initial depreciation, and then nearly flat after five years. 1st tier manufacturer’s pumps can bring as high as 35% of their original purchase price after 20 years of service.
In used equipment the actual mileage is usually not accurate as the unit runs a PTO that clicks off miles while the unit is pumping and sitting still.
Therefore a unit with 400,000 miles on the speedometer may only have 80,000 or less actual road miles as the machines spend around 75-80% of their time off road pumping.
The MR Mack has been the preferred carrier for the last twenty years, and this is the carrier that brings back the best resale value. Other units that are mounted as carriers are Freightliner, Volvo, Sterling, etc…..
Credit Considerations:
Customer credit quality is similar to our standard credit profiles. The factors that are considered when evaluating a companies credit capabilities are time in business, payment history, and comparable credit. In addition you should present a reviewed or audited year end financial statement, and an interim statement showing your position at the quarter or six month level.
Pumping Companies are capable of having debt services that are very high compared to other type of businesses. The average pump payment in most companies runs about 25-40% of their revenue.
Present a work on hand consolidation to your credit company which would include large contractors and large projects. This type of work usually has some type of agreement with it, however the lender must understand that your business is like a Ready Mix Service business where very little of the work is contractual. An hourly price is established along with a per yard price, and this represents a majority of the work most pumping companies do.
Terms:
Financing terms are dependent on age, manufacturer and Boom size as follows:
1st Tier Truck Mounted: Down Payments:
SIZE NEW USED
Large 52+ 7-10 year amort / 4-7 year amort
Med. 32-39 5-7 year amort / 3-5 year amort
Small 17-28 3-5 year amort / 2-5 year amort
First Tier Trailer Mounted: 3-5 year amort / 2-5 year amort
Second Tier - All Types: 3-5 Year amort / 2-4 Year amort
This is an area that basically relies on the comfort level the Lender has with your financial information. New companies that are not heavily capitalized
will normally be required to put somewhere between 10-20% down on the purchase of a new or used pump. The length of the debt service will also be related to the credit history that the company has with the Lender. The above tables are a pretty accurate indication of what you can expect.
Rates:
Rates are often tied to your credit history and the term you would like to get on the financing of the unit. I would recommend that you always get more then one financial company to look at your needs. It is not uncommon for one to be much more aggressive then another depending on their strategy at the time you want the money.
TRAC Leasing:
This is an area that requires you the borrower to determine if leasing is for you. Leasing has several advantages depending on your financial condition at the time of the deal. Leasing advantages are. The sales tax can be paid as you go based on the term of the lease. In addition leasing allows you better cash flow as the Lender usually allows a better rate on the deal as they get to keep the depreciation. The borrower gets to write off the entire amount of the lease payments for the year which is close to the depreciation in the long haul. In addition the payments are usually lower as the lease must have a fair market residual at the end which helps keep the monthly payments down as you are not paying off the whole debt on the machine.
Titling:
Many States now look at Concrete Pumps as “ Off Road” equipment and therefore they are not required to be registered or tagged. This gets a little confusing when you want to sell the unit to a State that requires Titles, but you should be able to transfer ownership by signing off on the MSO and giving the next owner a Bill of Sale. In time all States will look upon pumps as Off Road Equipment and then the issue will not be as annoying as it is now. The manufacturer issues the MSO to the owner that buys a new pump, and this becomes the paper trail you need to accomplish a sale of this unit.
On used equipment, the State that you bring the equipment to will probably do research and then allow the transfer with the MSO even though you are not a Dealer.
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