Common Questions Businesses Ask About Equipment Financing

Navigating equipment financing can feel overwhelming—especially for small and growing businesses. To help, we’ve compiled answers to the most common questions business owners ask about equipment loans, leases, and everything in between.

✅ Featured Snippet Answer:

What is equipment financing?
Equipment financing is a loan or lease used to purchase business equipment. It lets companies acquire tools, vehicles, or machinery while preserving capital.

1. What is the difference between equipment financing and equipment leasing?

• Equipment financing typically refers to a loan where you eventually own the equipment.

• Leasing allows you to use the equipment for a set period with the option to buy, upgrade, or return it.

Related: Lease vs. Loan: Choosing the Right Option for Your Equipment

2. What types of equipment can be financed?

Most physical, tangible equipment qualifies for financing, including:

• Construction and industrial machinery

• Medical and diagnostic devices

• Commercial vehicles and delivery trucks

• Restaurant and kitchen equipment

• IT and office technology

• Manufacturing tools and robotics

Related: What Equipment Can Be Financed or Leased?

3. Do I need good credit to qualify for equipment financing?

While a strong credit score helps, many lenders offer options for:

• Startups with no credit history

• Businesses with fair credit (600–650)

• Financing based on cash flow or collateral value

Pro tip: Consistent payments can help build your business credit over time.

4. What are the typical terms for equipment loans and leases?

• Loan terms: Usually 2 to 7 years

• Lease terms: Commonly 24 to 60 months

• Interest rates: 5%–15% depending on credit and lender

• Buyout options: $1 buyout, fair market value (FMV), or fixed purchase price

5. Are equipment lease payments tax-deductible?

Yes—lease payments are typically fully deductible as an operating expense. For financed purchases, businesses can often use Section 179 depreciation to write off the equipment value.

Related: Tax Advantages of Equipment Leasing Explained

6. Can I get financing for used equipment?

Yes, many lenders offer financing for pre-owned equipment, especially in construction, transportation, and manufacturing. Used equipment often results in:

• Lower monthly payments

• Reduced overall cost

• Faster ROI

7. What documents do I need to apply for equipment financing?

Requirements vary by lender, but generally include:

• Business license or formation documents

• Recent bank statements (3–6 months)

• Equipment quote or invoice

• Credit score or report

• Proof of income or tax returns (for higher-value loans)

8. What happens at the end of an equipment lease?

At lease-end, you typically have 3 options:

1. Buy the equipment (often for $1 or FMV)

2. Renew the lease

3. Return the equipment

Choose based on performance, technology updates, and business needs.

9. Can startups qualify for equipment financing?

Yes—many lenders work with startups by evaluating:

• Personal credit score

• Business plan and projections

• Collateral or down payment

• Industry-specific risk

Tip: Consider equipment leasing if you want to conserve capital while launching.

10. Is a down payment required for equipment financing?

In many cases, no down payment is required, especially for leasing. However, larger equipment loans may require:

• 5%–20% down

• Security deposits

• First month’s payment upfront

Summary: Equipment Financing FAQs at a Glance

• Leasing and financing differ in structure, ownership, and tax benefits

• Most equipment types qualify, including used gear

• Flexible terms exist for startups and low-credit businesses

• Tax deductions and payment flexibility make equipment financing an attractive option

Final Thoughts: Get Clear Answers Before You Commit

Understanding your options is the first step to making a smart financial decision. Whether you're upgrading tools, scaling locations, or outfitting a new business, equipment financing offers flexibility, speed, and stability.

Take Action: Talk to an Equipment Financing Expert Today

Still have questions?
Connect with a trusted equipment finance provider to explore personalized options and unlock your business’s next stage of growth—without the financial strain.