When to Refinance Equipment Loans (2025 Guide)

If you're making monthly payments on a truck, trailer, machine, or commercial asset—and your business has grown or market rates have shifted—it may be time to ask:

Can I refinance this loan and get better terms?

The answer is often yes. Equipment loan refinancing is a powerful tool for business owners to:

• Lower monthly payments
• Improve cash flow
• Consolidate multiple debts
• Free up capital for expansion

In this post, we’ll walk through when refinancing makes sense, what to watch for, and a step-by-step guide on how to do it properly—whether you're working with Mehmi Financial Group or comparing your options.

What Is Equipment Loan Refinancing?

Refinancing simply means replacing your current equipment loan or lease with a new one—ideally with better terms.

You can refinance:

• A current loan with a lower-interest loan
• A lease by buying out the remaining balance and financing ownership
• A fully owned asset via a sale-leaseback to inject cash into your business

When Does It Make Sense to Refinance?

Here are the top reasons business owners choose to refinance their equipment loans:

1. Interest Rates Have Dropped

If you locked in a loan at 12–16% during a high-rate period and rates have since declined (or you now qualify for better rates), refinancing could save thousands.

2. Your Credit Score Has Improved

If your personal or business credit has increased by 30–100 points since your original loan, you may qualify for significantly better rates or terms.

3. Your Business Revenue or Cash Flow Has Grown

Stronger revenue and a clean payment history can make you eligible for longer terms, lower payments, or no-money-down refinancing.

4. You Want to Free Up Working Capital

By extending your term or lowering payments, you can redirect cash to staffing, fuel, repairs, or expansion.

5. You Own the Equipment Outright

With a sale-leaseback, you can turn your paid-off equipment into working capital while keeping it in service.

Pros and Cons of Equipment Loan Refinancing

Real Case Study: Construction Company Refinances for Cash Flow Relief

Business: Excavation contractor in Mississauga
Original Loan: $160,000 on 3-year term at 14.5% interest
Monthly Payment: $5,488
Challenge: Struggled with cash flow after a slow winter; had $90K remaining and a better credit score than when first approved

What They Did:

• Replaced the existing loan with a new 48-month term at 10.3% interest
• Monthly payment dropped to $2,274
• Gained $30K in freed-up working capital over the next 12 months
• Kept the same excavator in service, no operational changes

Outcome:
The business avoided a cash crunch, covered payroll and insurance premiums, and booked two new municipal contracts thanks to the breathing room refinancing provided.

How to Refinance Your Equipment Loan: Step-by-Step

Step 1: Check Your Existing Loan Terms

• What’s the remaining balance?
• Are there any prepayment penalties?
• What’s your current interest rate and term?

If you’re unclear, request a payout statement from your current lender—it’s a standard step before any refinance.

Step 2: Assess Your Credit Profile and Revenue

Lenders will want to see:

• Updated credit score (ideally 650+)
• 3–6 months of bank statements
• Proof of business registration
• Photo ID and proof of income

If your revenue or credit has improved since the original loan, you’re in a strong position to refinance.

Step 3: Request a Quote from a Credit Analyst

An experienced credit analyst can:

• Shop multiple lenders on your behalf
• Compare term options (e.g. 36 vs 48 months)
• Advise whether to refinance, extend, or restructure
• Help you avoid resetting terms on assets near end-of-life

Speak to a credit analyst who understands your equipment, industry, and cash flow cycle.

Step 4: Submit Your Documents

You’ll need:

• Business license or incorporation docs
• Void cheque or banking details
• Equipment info (make, model, serial number)
• Current loan or lease agreement
• Payout statement (for replacement refinance)

Turnaround time is typically 24–72 hours if paperwork is complete.

Step 5: Review Your Refinance Offer Carefully

Ask about:

• Total interest cost (not just the new monthly payment)
• Any admin or origination fees
• Payment flexibility (e.g. seasonal skip months)
• Term length and buyout (if a lease)

Make sure the refinance aligns with your growth timeline and asset lifespan.

Step 6: Close the New Loan and Retire the Old One

Once approved, the new lender will typically:

• Pay off your old lender directly
• Replace the previous loan with the new agreement
• Begin your first payment cycle after a short deferral (e.g. 30–60 days)

Your equipment remains in your possession and in use.

FAQs: Equipment Refinancing in Canada

Can I refinance a lease as a loan?
Yes. You can buy out a lease and finance the purchase. This is common near the end of lease terms or when you want to reduce the total cost.

Can I refinance if I’ve missed a few payments?
Possibly. Some lenders offer refinancing to stabilize your cash flow if your current payments are too high. A recent history of on-time payments helps.

Is used equipment eligible for refinancing?
Yes—especially if it’s still in good condition and has strong resale value (e.g. trailers, machines, trucks, medical gear).

Can I do a sale-leaseback on equipment I own?
Absolutely. Sale-leasebacks are a great way to unlock cash while continuing to use your gear. Learn more on our Refinancing & Sale-Leaseback page.

How much does refinancing cost?
Some lenders charge small setup or transfer fees. But if you’re saving on interest or improving cash flow, the long-term benefit usually outweighs the upfront cost.

Curious if refinancing your equipment loan could help your business grow?
Speak to a credit analyst or use our calculator to estimate your new payment.

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