Tower crane financing

05 October 2015

Tower crane finance is an area that is attracting more attention as manufacturers and operators alik

Tower crane finance is an area that is attracting more attention as manufacturers and operators alike recognise that barriers to obtaining finance can have a negative impact on the overall industry

Alex Dahm talked to Dan Main and Harry Fry about the challenges surrounding financing tower cranes and the reticence of lenders to consider them a viable proposition.

Even though the cyclical tower crane industry closely follows the global construction industry it is a different story when it comes to financing the equipment. More traditional construction machinery is relatively straightforward to finance but tower crane operators and rental companies often struggle to fund single unit or fleet purchases.

Asset finance is a method of raising money using the assets belonging to a company as collateral. The precise method takes various forms and can include finance or operating leases, hire purchase and various others, depending on the lender. While this can be an effective way of raising finance and is employed across a range of industries, there are some features of tower cranes that can cause issues as outlined below.

Life versus loan term
Tower cranes have a long useful life of 25 years, or more in some cases, while the finance methods outlined above tend to have a loan term of around five to seven years. This relies either on a relatively predictable future value of the assets at five years or, alternatively, the user must pay a sizeable balloon payment to own the asset at this time. Given what we have already said about the cyclical nature of this industry, these future values can be hard to reliably forecast and place excessively high levels of risk either on the lessor or the lessee.

Mixing components
In addition, there is a requirement to be able to identify and track assets subject to these forms of finance. The “tool kit” or “Meccano set” nature of tower cranes in that they have a varying number of jib sections and tower sections for any given project can cause discomfort to a lender. This is especially an issue in tower crane fleets where the asset (i.e. a single crane in the eyes of the lender) is on site with tower sections and-or jib sections that effectively are the property of someone else. This would be unacceptable for any other equipment type, and can be a major barrier to many lenders.

Exit process
In any finance agreement the bank or lender has to consider the worst case scenario, namely what would happen if the borrower were to go out of business. For tower cranes this means assets located at third party premises that are out of their control. The negative view of this is the exposure of the bank to an angry contractor who refuses to allow access to the crane whereas, in fact, this can be employed to the benefit of the lender who effectively has the upper hand. If an agreement is made to keep the crane in place for the remainder of a contract and the bank can secure the revenue stream, then with a sufficient contract length this can go some way to paying off the outstanding balance of the crane. We are aware of situations where the bank has actually received a greater amount back from this route than was originally owed.

The reality
Having said all this, the reality of obtaining finance can come down to the attitude of your lender, often to a specific decision-maker, based on their own individual experience. It is a fact that banks have had their fingers burned financing tower cranes in the past. They have not anticipated the scale of a construction downturn and the impact on asset values or they have not had a clear picture of the exit process and struggled to gain access to their assets. There are individuals with memories of these experiences who will not lend money against tower cranes simply because they deem the industry to be too high risk, regardless of the specifics. Equally, however, there are lenders who take an open mind to this sector and those that we work with day to day will find a way to overcome the above issues or accept the risk associated with them.

The first step should be to approach your existing bank. Many banks are focused on relationships or, more appropriately, on control. If you already have your business banking, an overdraft and even some other asset backed finance with a lender, they are given the extra comfort of knowing they have more influence than if it were simply a new asset finance agreement.

If you find that your bank is unreceptive, then the next steps are to take advice in your region about who to approach next. While the market is certainly more difficult than it used to be, we are aware of a range of lenders across the UK, Europe and the USA who will be open to financing existing tower crane fleets or new purchases. The successful finance of cranes still relies on working with the lender to help develop their understanding of the industry and get a realistic picture of the risks.

The unthinkable
Although it seems an unlikely priority, it is in the interests of the person seeking the finance to make sure that the banks are protecting themselves by following the right processes and collecting information on what is financed. A detailed schedule of assets of each crane should be contained in their documentation, including details of all the crane components. They should also explore the options to keep cranes on site and generating revenue wherever possible. This not only helps to support a positive experience for banks financing tower cranes but, in the extreme event of the company becoming insolvent, it could help to ensure a positive resolution to the insolvency process.

The outlook
Tower crane finance is an area that is attracting more attention as manufacturers and operators alike recognise that barriers to obtaining finance can have a negative impact on the overall industry. The Committee for European Construction Equipment has published a brochure ( covering the financing and insurance of tower cranes with the specific purposes of helping to develop understanding of the nature of tower cranes and how to overcome many of the issues surrounding their funding. It is with the co-operation of all stakeholders in the industry with the major lenders that will help to improve the outlook for tower crane finance and the industry overall.


Dan Main: UK-based Dan Main works in the consultancy division of Liquidity Services, providing valuation and risk analysis for lenders and equipment operators across a range of industrial assets.

Harry Fry: After attending college at C.W. Post College, Long Island University in the USA, Harry Fry began his career in finance. Fry developed and honed his knowledge in the corporate world of finance with GMAC and Mercedes-Benz Credit Corporation. In 1995 he started Harry Fry & Associates and decided to concentrate his finance and lease expertise efforts in the crane and lifting industry. In its 20 years the company has funded nearly $1 billion in crane and lifting equipment acquisitions for many companies throughout North America.

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