Business equipment financing helps companies acquire machinery, technology, and vehicles without large upfront costs. This guide covers equipment loans vs leasing, best lenders, interest rates, and how to choose the right financing option.
Equipment Financing Quick Facts 2025
- Financing amount: $5,000 - $5 million+
- Interest rates: 4% - 30% (depends on credit)
- Terms: 1 - 7 years typical
- Down payment: 0% - 20%
- Approval time: Same day - 2 weeks
Equipment Loan vs Lease
| Factor | Equipment Loan | Equipment Lease |
|---|---|---|
| Ownership | You own after payoff | Return or purchase at end |
| Down Payment | Usually 10-20% | Often $0-first payment only |
| Monthly Payment | Higher | Lower |
| Tax Benefits | Depreciation + interest | Deduct full payment |
| Technology Updates | Harder to upgrade | Easy to upgrade |
| Total Cost | Lower overall | Higher if not purchased |
| Best For | Long-term equipment | Tech that needs updating |
Types of Equipment Financing
MOST COMMON
Equipment Loan
- How it works: Borrow money to buy equipment outright
- Ownership: You own the equipment from day one
- Collateral: Equipment serves as collateral
- Terms: 2-7 years depending on equipment life
- Best for: Equipment you'll use long-term
FLEXIBILITY
Equipment Lease
- Operating lease: Rent equipment, return at end
- Capital lease: Rent to own, purchase option at end
- $1 buyout lease: Own for $1 after payments
- Fair market value: Buy at market price at end
- Best for: Technology, vehicles, equipment that depreciates quickly
Top Equipment Financing Companies
| Lender | Min Amount | Max Amount | Best For |
|---|---|---|---|
| National Funding | $10,000 | $500,000 | Fast approval |
| Balboa Capital | $10,000 | $500,000 | Startups |
| Currency Capital | $5,000 | $2 million | Low rates |
| Crest Capital | $5,000 | $500,000 | Quick funding |
| Bank of America | $25,000 | $5 million+ | Established businesses |
| Wells Fargo | $10,000 | $5 million+ | Large purchases |
Equipment Financing Rates
| Credit Profile | Rate Range | Typical Terms |
|---|---|---|
| Excellent (720+) | 4% - 10% | 0-10% down, longest terms |
| Good (680-719) | 8% - 15% | 10% down typical |
| Fair (620-679) | 12% - 22% | 10-20% down |
| Poor (below 620) | 18% - 30% | Higher down, shorter terms |
| Startup (limited history) | 10% - 25% | May require personal guarantee |
What Equipment Can Be Financed?
- Manufacturing: CNC machines, presses, assembly equipment
- Construction: Excavators, bulldozers, cranes
- Medical: Imaging equipment, diagnostic tools
- Technology: Servers, computers, software
- Restaurant: Ovens, refrigeration, POS systems
- Transportation: Trucks, trailers, forklifts
- Office: Furniture, phone systems, copiers
- Agriculture: Tractors, combines, irrigation
Application Requirements
Documentation Needed
- Business information: EIN, years in business, industry
- Financial statements: Balance sheet, income statement
- Bank statements: 3-6 months typically
- Tax returns: 1-2 years business and personal
- Equipment quote: Invoice from dealer/vendor
- Personal guarantee: Often required for small businesses
Tax Benefits
Section 179 Deduction
- 2024 limit: $1,220,000 deduction
- What qualifies: New or used equipment for business
- Bonus depreciation: 60% (2024), phasing down
- Benefit: Deduct full purchase price in year one
- Leasing: Operating leases fully deductible as expense
How to Apply
- Determine needs: What equipment, how much, new or used
- Get quotes: Equipment price from vendors
- Check credit: Business and personal credit scores
- Compare lenders: Rates, terms, speed of funding
- Gather documents: Financial statements, tax returns
- Submit application: Online or through broker
- Review terms: Interest rate, fees, prepayment penalties
- Close and fund: Sign documents, receive equipment
Equipment Financing vs SBA Loan
| Factor | Equipment Financing | SBA 7(a) Loan |
|---|---|---|
| Speed | 1-7 days | 30-90 days |
| Rates | 4-30% | Prime + 2.25-4.75% |
| Down Payment | 0-20% | 10-20% |
| Paperwork | Minimal | Extensive |
| Credit Needed | More flexible | 650+ typically |
| Best For | Quick needs, specific equipment | Lower rates, larger amounts |
FAQ
Can startups get equipment financing?
Yes, but options are more limited. Many lenders work with startups but may require personal guarantee, higher down payment, or higher rates.
Is used equipment eligible for financing?
Yes. Most lenders finance used equipment, though terms may differ from new equipment financing.
What happens if I can't make payments?
The lender can repossess the equipment since it serves as collateral. This can also impact your credit score and business reputation.