Buying a business in the heavy equipment space doesn’t always mean you need millions in the bank. In fact, most deals I support are done using a mix of bank loans and investor capital. The key is knowing how to put it all together, so it makes sense for everyone involved.
One of my go-to tools is something called preferred participating equity. It sounds technical, but it’s actually a simple way to bring in investors who help fund the deal without my client having to give up too much control or ownership.
Here’s how it works, using a real-world example.
Let’s say my client finds a solid heavy equipment business listed at $2.5 million. It’s profitable, has valuable machinery, and a motivated seller. We go to a lender, and they like the numbers enough to fund 90% of the purchase price. That means we get $2.25 million in financing, but we still need $250,000 to close.
That’s where the investor comes in.
Instead of my client using their own money, I raise the $250,000 from an outside investor. But we don’t just ask for a loan. We offer them a fair structure:
- A preferred return of 10–12% annually, paid from the business’s profits.
- A small piece of equity so they continue sharing in the upside after they’ve been paid back.
Here’s what that looks like month to month:
- The business makes money.
- After paying the lender and covering expenses, profits go to the investor.
- First, they get their preferred return.
- Then, they get back the $250,000 they put in.
- After that, they still get a cut of future profits, but it’s smaller, because now my client, as the operator, takes the majority.
It’s called “first money in, first money out.” They put up the risk early, so they get paid first. But unlike a loan, they don’t disappear once they’re paid back. They stay in the deal and share in the growth.
Why do I like this model for my clients? Because it works for both sides.
For the investor:
- They get paid before anyone else.
- Their return is predictable.
- They get a piece of the upside without running the business.
For my client:
- They don’t have to drain their own capital.
- They keep control of the business.
- They build wealth by operating and growing the company.
It also makes raising capital easier. When I pitch this to investors, I’m not just asking for money, I’m showing them a clear path to returns, with limited downside and long-term participation.
In the heavy equipment world, this kind of structure makes sense. There are tons of great businesses out there with aging owners, strong cash flow, and no clear exit plan. Many of them are undervalued simply because no one knows how to structure the financing to take them over.
Preferred participating equity lets me fill the final piece of the puzzle. It’s clean. It’s fair. And it’s helped my clients close deals that others walked away from.
So no, you don’t need to be rich to buy a heavy equipment company. But you do need someone on your team who understands how to structure a deal that protects your partners and still sets you up to win.
This is how I do it for my clients.
Gustavo Lopez Partner | Strategic Structuring & Capital Operations Focused on aviation, heavy equipment, and asset-backed growth models.
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