For water well contractors, staying productive means having the right gear such as rigs, support trucks, mud systems, compressors, and more. But with prices up and cash often earmarked for operating costs, buying equipment outright is not always practical. That is where financing comes in.

If you are thinking about upgrading, replacing, or expanding your equipment fleet in 2025, here is what you need to know about financing in today’s market.

The 2025 Rate Environment: Large rate drops since start of year

As of now, interest rates remain elevated compared to typical pre-COVID levels. However, key market indicators are showing signs of easing. For example, as of September 4, 2025, the 5-Year SOFR swap rate, a key benchmark for equipment financing, closed at approximately 3.29%, down 100 basis points from its peak of 4.29% on January 13, 2025. For those who have been waiting for rates to drop, they have, and the time to act is now!

Equipment Loans vs. Leases: Know Your Options

Listed below are some high-level points to help understand and differentiate between a loan and a lease. While most borrowers will benefit from a loan, or equipment finance agreement, there is still an occasional place for an operating lease structure. It is important to work with lenders that are comfortable and experienced writing both types of finance instruments.

Loan (Finance Agreement)

• You own the equipment from day one 
• Good for long-term use assets 
• Eligible for Section 179 and bonus depreciation 
• Streamlined paperwork and often easier to understand for the average borrower
   

Lease (FMV or TRAC)

• Lower monthly payments 
• Good for short-term use or tech-heavy gear 
• Good for project specific equipment, that might be returned upon completion of project 
• Options to buy or return at end of contract 
• More flexibility for seasonal or project-based businesses 
• Beneficial when trying to increase cash flow and replacing equipment every 2 or 3 years
   

What to Consider Before Financing

1. Know Your Numbers
   It is crucial when applying for credit to have updated financials, equipment specs, and a realistic monthly budget ready. This speeds up approvals and helps lenders structure a deal that works for you. A lender is trying to understand if there is historical evidence that shows you can make the monthly payment, even if revenue and profits do not increase in the near term.
    
2. Understand Total Cost
   Look beyond the sticker price and calculate the total cost of a piece of equipment including maintenance, downtime risk, fuel, and future resale value. Financing may allow you to upgrade before those costs increase significantly.
    
3. Structure It Right
   Depending on seasonal revenue trends, custom payment plans like deferred starts, seasonal skips, or step-up payments may help align costs with your income cycle.
    
4. Work With Industry-Savvy Lenders
   Not all lenders understand the unique strengths, challenges, and opportunities drilling contractors face. It is crucial you choose a partner who knows your equipment and understands how your business operates.

Final Word: Financing Is Not One-Size-Fits-All

Imagine a mid-sized well drilling company that needs to replace a 20-year-old rig that keeps breaking down. Paying cash would tie up too much working capital, but a structured financing arrangement with seasonal payment options, or even just a traditional loan, could get the new rig on site right away. 

For the contractor, that would mean fewer breakdowns, faster job completion, and more revenue. For the lender, it would mean a reliable customer with steady payments backed by stronger project pipelines. Both sides end up better positioned for growth. 

Whether you are replacing a worn-out rig or scaling up to handle more jobs, financing can give you the flexibility to move forward without tying up capital. The key is structuring the right deal at the right time. If you are planning ahead for equipment purchases in 2025, now is a good time to explore your options.

References 

¹ Barchart. (2025). *SOFR 5-Year Swap Rates – Year-to-Date Performance*. [https://www.barchart.com/stocks/quotes/SOFWAPY5.RT/performance]