Equipment financing is one of the smartest ways for small businesses to purchase or lease expensive tools, vehicles, or machinery without draining cash flow. Whether you're launching a startup or scaling operations, this financing method helps you access essential gear while preserving working capital.
In this guide, we’ll break down everything you need to know about equipment financing—how it works, the pros and cons, the types available, and how to get approved.
Equipment financing refers to a loan or lease used to purchase business-related equipment. This can include:
Construction machinery
Commercial vehicles
Medical or dental devices
Office technology (computers, printers)
Restaurant appliances
Manufacturing tools
Instead of paying the full price upfront, you spread the cost over time, typically through fixed monthly payments.
For many businesses, equipment is a necessity—not a luxury. But purchasing it outright can cost tens of thousands of dollars. Equipment financing offers a sustainable solution, allowing you to:
Maintain cash reserves
Start or expand operations faster
Keep up with technological changes
Get tax benefits through Section 179 deductions
Learn more about Section 179 from the IRS.
Here's a basic overview of how equipment financing typically works:
Apply for financing through a lender or leasing company.
Get approved based on your credit score, business history, and equipment value.
Receive funds or equipment directly.
Make fixed monthly payments over a defined term.
Own the equipment at the end of the loan—or return it if leased.
These are traditional loans where the equipment serves as collateral. Once fully paid, you own the equipment.
Best for: Businesses wanting to build assets long-term.
You rent equipment for a period, typically with lower monthly payments.
Best for: Businesses with short-term needs or who want to upgrade frequently.
Payments are lower, and the item is returned at lease-end. This lease is considered an expense, not a debt.
Higher payments, but you own the equipment after the lease. Treated like a loan for accounting purposes.
✅ Preserves working capital
✅ Fast approval and funding
✅ Flexible terms (1–7 years)
✅ Equipment acts as collateral
✅ Potential tax write-offs
| Feature | Equipment Financing | Business Line of Credit | SBA Loan |
|---|---|---|---|
| Purpose | Buy specific assets | Flexible, any use | Long-term growth |
| Speed | Fast | Moderate | Slower |
| Collateral | Equipment-based | May require collateral | Yes |
| Repayment Term | 1–7 years | Revolving | Up to 25 years |
Equipment financing is ideal for:
Startups with limited cash
Growing companies upgrading tech or machinery
Seasonal businesses needing temporary gear
Industries like manufacturing, logistics, healthcare, or construction
Most lenders consider:
Personal and business credit score
Time in business (usually 6+ months)
Annual revenue (commonly $50K–$100K minimum)
Value and type of equipment
Down payment (some lenders require 5–20%)
💡 Tip: Boost your approval odds by preparing financial statements and getting vendor quotes ahead of time.
Doesn’t require large upfront payment
Protects cash flow
Easier approval than unsecured loans
You build equity in equipment
Interest adds to total cost
Depreciating assets may lose value
Defaults can lead to repossession
Leasing doesn't build equity
Identify equipment needs
Get a vendor quote
Compare lenders or leasing firms
Prepare documents
Apply and get approved
Sign agreement
Receive equipment
Here are a few reliable and well-established lenders known for offering equipment financing:
Bank of America – Commercial equipment loans
Balboa Capital – Flexible lease and loan options for SMBs
Crest Capital – Competitive rates and fast approvals
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Typically, lenders ask for:
Government-issued ID
Business license
Recent bank statements
Tax returns (1–2 years)
Profit & Loss statements
Equipment quote or invoice
Thanks to IRS Section 179, businesses may deduct the full purchase price of qualified equipment in the year it's placed in service. This can significantly reduce your taxable income.
Use the Section 179 Calculator here. (opens in new tab)
| Question | Lease | Buy |
|---|---|---|
| Want to own it? | ❌ No | ✅ Yes |
| Need latest tech? | ✅ Upgrade easily | ❌ Harder to upgrade |
| Budget-friendly? | ✅ Lower monthly payments | ❌ Higher upfront or loan cost |
| Good for short term? | ✅ Yes | ❌ Not ideal |
Most lenders require a 600–650 credit score, but some work with lower scores if revenue is strong.
Yes, many lenders allow used equipment financing, though terms might vary.
Yes. Expect origination fees (1–5%), documentation fees, and possibly early repayment penalties.
Often, especially for new businesses or lower credit scores.
These industries commonly use equipment financing:
Construction & Contracting
Transportation & Logistics
Manufacturing
Healthcare
Food & Beverage
Farming & Agriculture
Each has high equipment needs and benefits from spreading costs over time.
Equipment financing helps business owners afford essential tools without emptying their cash reserves. With flexible loan or lease options, tax benefits, and fast approval times, it’s one of the best funding strategies for growth-focused companies. Whether you're scaling up or just starting out, equipment financing could be the key to unlocking new opportunities.
Ready to finance your next piece of equipment?
Compare quotes from top lenders, explore leasing options, and find the best fit for your business goals today. Don’t let a lack of equipment hold your business back—start growing smarter.