According to a trend report by IBIS World, the U.S. mining sector’s market size — based on revenue — is at $473.2 billion as of 2021 (from $421.3 billion in 2020). It is expected to grow further by 12.3% in the same year.
This optimistic forecast presents plenty of opportunities for those who are looking to expand their mining businesses or foray into the industry. There’s a catch, though. Mining is expensive, and the equipment investment alone could run into the hundreds of thousands to millions of dollars. With that said, how can small mining businesses and startups keep up?
Whether you’re mining metals, non-metals, coal, or other minerals, you might want to consider the mining equipment financing and mine financing options below.
Financing Mining Equipment: Three Options
Mining is a capital-intensive business that relies heavily on machinery and equipment, more than labor, to survive. According to IBIS World, equipment purchases account for 26.3% of startup costs compared to only 11% for labor and 1.8% for utilities and rent.
Mining equipment financing and mine financing options can help ease the initial investment challenges, so you can take advantage of the gains from this lucrative industry even if you’re a small to medium business owner.
1. Secured Term Loan
A secured term loan is a type of business loan where you borrow money for a fixed period, with your equipment as the collateral. It can also apply to other assets, like a house or a vehicle. The amount you can loan will depend on your mining equipment’s value and your credit history. For example, you loan $300,000 to buy a brand new industrial excavator that’s payable within 36 months. If you default on your payments, the bank or lender has the right to repossess your equipment.
2. Equipment Leasing
Equipment leasing is a popular option among those with short-term equipment needs. It’s similar to using mining equipment on a rental basis. It frees you from having to invest a large amount of capital in machines. If you’re a small to medium mining business with limited funds to start with, this can be a practical route. When your lease term is over, you can return the mining equipment to the lender or offer to purchase it for a much lower price.
3. Equipment Financing
Another way to get the funds for your machinery is through equipment financing. Unlike a lease, mining equipment financing gives you full ownership of your machines and vehicles after fully paying the loan. This is a great option for mining businesses that use their equipment frequently and foresee a long-term future with the machines. Mining equipment financing and mine financing lenders are also open to borrowers with little and bad credit history.
Step-by-Step Guide to Finance Your Mining Equipment
Having the right mining equipment allows your business to explore different mining projects that bring in revenue. To find the right mining equipment financing partner, you need to do the following:
- Get your business plan ready. This shows potential lenders that you have a clear and focused objective. The business plan typically contains the amount you need to borrow, the way your business will use the money, your repayment plan, and what happens in case you fail to pay.
- Research on mining equipment financing or leasing. Choosing one over the other depends on how often you intend to use your machinery and if you’d like to own them.
- Explore the different financing options in your area. You can start comparing the rates of the different loan providers in your location. Better yet, present all your paperwork to a trusted and reputable third-party financing provider, who will then look for the lender that will offer the best rates.
Power Up Your Mining Business With the Help of Charter Capital
Small to medium mining business owners can generate hefty returns and might even keep up with the bigger industry players with the right equipment. To ensure that your mining business is set to succeed, you need to partner with an equipment financing provider that understands your business’ needs and supports your goals.
Charter Capital offers a range of heavy and industrial equipment financing services to help you start or scale your mining business. Contact our team today to learn more about mining equipment financing and mining financing.