Equipment Financing Options for Small Businesses
Equipment financing provides capital for the equipment your business needs to thrive and grow.
Prequalify Now
Complete our online form or speak with a small business specialist at (888) 991-3954.
What is Equipment Financing?
Equipment financing is the use of a loan or lease to make equipment purchases or borrow hard assets like machinery for your business. Rather than paying for the assets in full upfront, equipment financing works by allowing you to receive the equipment you need now while allowing you to pay for the asset over its lifetime. Because of this, equipment financing is perfect for purchasing many types of equipment. Some examples include healthcare equipment, construction equipment and vehicles, kitchen equipment, and other large hard asset purchases that allow you to increase production and grow your business.
Equipment Leasing vs. Equipment Loans
Although the terms are used interchangeably, there is a difference between equipment leasing and equipment loans. An equipment lease permits you to rent business equipment from your vendor for a monthly payment, but you don’t own the equipment during the lease term. Equipment loans are collateralized, allowing you to fully own the piece of equipment once you’ve repaid your loan according to terms.
Equipment Leasing
With equipment leasing, instead of borrowing money to purchase the equipment outright, you are paying a fee to borrow the equipment from the lessor (leasing company) who maintains ownership of the equipment while you use it.
Equipment leasing is a great option for businesses that exchange or upgrade equipment frequently or ones that do not have the capital to pay the down payment required for a loan. It’s also more likely to cover additional soft costs associated with shipping and installing the equipment.
Lease arrangements can vary depending upon your company’s needs and if you want to own the equipment, some lessors will offer the option of purchasing the equipment at the end of the lease.
Equipment Loans
An equipment loan is a loan taken out with the intended purpose of purchasing equipment. Typically, the equipment secures the loan — if you can no longer afford to pay the loan, the equipment gets collected as collateral.
Equipment financing companies typically agree to deploy the majority of the capital so borrowers can pay in periodic increments. This loan option is perfect for small business owners that need a piece of equipment long-term but can’t afford to make the purchase outright. While the arrangement to finance equipment will ultimately cost more than if you had bought the equipment outright, equipment loans allow you to receive the equipment you need and leave you with ample working capital.
How to Get Equipment Financing
1. Prequalify Online
To get prequalified, follow the “Get Started” button and enter some basic business information.
2. Approval Status
After your submission has been processed, a Business Consultant will reach out with the status and timeframe for approval.
3. Receive Equipment Funding
Upon approval and accepting the offer, funds are deposited directly into your bank account so you can use the money immediately.
Advantages
- Equipment financing allows you to access equipment you could otherwise not afford, and it generally carries lower monthly payments than many other flexible financing options.
- The equipment is often collateralized, making it easier to qualify for than most unsecured financing options from traditional banks. In other words, you do not need to meet as strong of a minimum credit score or annual revenue to qualify.
- The interest rate, repayment terms, and total loan terms are often more favorable than many alternative financing options.
- Some business owners list equipment financing under the Section 179 tax deduction to save money.
Disadvantages
- Buying the equipment outright will always be less expensive than financing it
- Equipment that needs to be replaced frequently may cause large amounts of debt.
FAQs About Equipment Financing
What types of business equipment can you finance?
The need for equipment stretches across many different industries. From restaurants or food trucks to construction companies and anything in between, here are just some of the types of equipment that is considered financeable:
- Construction or industrial equipment
- Carpentry workbenches and tools
- Commercial grade kitchen appliances
- Office furniture
- Computer software for operations use
- Appliances for office or business use
- Company vehicles used for transporting goods or employees
- Food trucks
Can you finance used equipment?
Yes. In general, you can finance used equipment but not every lender will allow it. After all, if you default on an equipment loan the lender repossesses the machinery. Newer assets are often easier to liquidate and have less depreciation, so lenders often prefer financing new equipment.
What is considered business equipment?
Business equipment is a long-lasting hard asset that is fundamental to your business. Considered more permanent than supplies that are used up quickly, equipment includes machinery, vehicles, computers, fixtures, furniture, electronic devices, and other office machines.
What is the difference between financing and leasing?
Equipment leasing and equipment financing both allow you to access the equipment you need while paying for the asset over its lifetime. Equipment leasing permits you to rent business equipment from your vendor for a monthly payment while equipment loans allow you to fully own the asset once you have repaid your loan.
What should I prepare for the equipment financing application process?
Online lenders and equipment financing companies often look for the following when assessing loan eligibility and loan amount:
- business credit score / credit history
- personal credit score
- financial statements
- business plan
- tax history
- information about the equipment to be financed (new/used, age, type, lifetime value)
Other Financing Options
Merchant Cash Advance
Flexible financing and repayment based on what you can afford
Line of credit*
Draw as you need from lines of credit and only pay for what you use.
Working capital loan
Always have enough cash flow to seize opportunity.
See All Financing Options
Still looking for the right fit? Check out all of Credibly’s business financing options.
Simple Ways to Get Started
When you are faced with an unexpected growth opportunity, access to fast, affordable financing is essential to reaching your goals. To get started, fill out our simple online prequalification form or call our Customer Success Team at (888) 991-3954.
Subject to approval.
* $15K+ avg. deposits for a three-month average and the most recent month.
Certain products may not be available in all states.
Certain business loan products are made available through Retail Capital LLC, a licensed California Finance Lender.
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