Equipment financing lets you acquire a truck, oven, excavator, CNC machine, dental chair or server rack without paying for it all at once. The equipment itself typically secures the transaction, which is why this is usually the cheapest capital an established small business can get.
The core idea is matching: a machine that earns revenue for six years should be paid for over something close to six years, not out of this quarter's cash. Paying for long-lived assets with short-term money is one of the most common and most expensive mistakes we see.
How equipment financing works
You identify the equipment and the vendor, then apply with basic business details, bank statements and the invoice or quote. Because the asset is collateral, approvals often come faster and price better than unsecured funding. Funds are typically paid directly to the vendor.
You'll choose between a finance agreement, where you own the equipment outright at the end, and a lease, where you rent it with an option to buy — commonly for $1, or for 10% of the original value. Leases suit technology that goes obsolete; financing suits assets that hold value.
- Amounts from $10,000 to $5,000,000 depending on the asset.
- Terms of 24 to 72 months, matched to expected useful life.
- New and used equipment, including private-party and auction purchases.
- Soft costs like delivery, installation and training can often be rolled in.
What equipment financing costs
Equipment deals are quoted as an annual interest rate or a monthly payment factor rather than a short-term factor rate. Rates commonly run from around 8% to 30% annually, driven by your credit profile, time in business, the age and resale value of the equipment, and whether a down payment is involved.
Expect a documentation fee of a few hundred dollars and, on some transactions, a first-and-last payment or a 10-20% down payment. Titled assets like trucks and trailers carry a lien; general equipment carries a UCC filing against the specific asset rather than a blanket filing on the business.
One tax note worth raising with your accountant: Section 179 and bonus depreciation may allow you to deduct a large portion of the equipment cost in the year it is placed in service, even when it was financed. That can materially change the after-tax cost.
Who equipment financing fits
- Contractors, truckers, manufacturers, restaurants, medical and dental practices buying revenue-producing assets.
- Businesses that want to preserve cash and credit lines for operations.
- Owners replacing equipment that is causing downtime or repair bills.
- Companies expanding capacity against a known contract or route.
Who it doesn't fit
Equipment financing cannot be used for payroll, inventory or general operating costs — the funds go to a vendor for a specific asset. If you need flexible cash, working capital or a line of credit is the right tool.
It also doesn't fit when the equipment won't reliably produce more than its payment. Run the math on added capacity or reduced downtime before signing; if the asset only pays for itself in your best month, wait.
What you need to qualify
- Six or more months in business (established businesses get the best pricing).
- $15,000+ in monthly revenue.
- 525+ personal FICO score.
- A vendor quote or invoice for the equipment.
Financing versus leasing
Finance the asset when it holds value and you'll use it well past the term — trucks, trailers, ovens, heavy machinery. Lease when the asset depreciates fast or must be refreshed on a cycle, like computers, POS hardware and some medical technology.
Your advisor will price both structures on the same equipment so you can compare total cost of ownership, not just monthly payment.
Frequently asked questions
- Can I finance used equipment?
- Yes. Used equipment is financed regularly, including private-party and auction purchases. Age and resale value affect the rate and the maximum term available.
- Do I need a down payment for equipment financing?
- Many transactions are funded with no money down. Down payments of 10-20% or a first-and-last payment are typically requested for newer businesses, weaker credit or specialized equipment.
- How long are equipment financing terms?
- Terms usually run 24 to 72 months and are matched to the expected useful life of the asset, so payments stay in line with the revenue the equipment produces.
- Should I lease or finance my equipment?
- Finance assets that hold value and stay in service past the term. Lease assets that go obsolete quickly or need regular refreshing. We price both on the same equipment so you can compare total cost.
Related guides
Equipment Financing: How to Fund Machinery, Vehicles and Technology
Equipment financing is one of the few products where the asset itself does most of the qualifying work. That usually means better terms.
Funding ProductsEquipment Leasing vs Buying: Running the Numbers
Leasing is not automatically cheaper. It is cheaper for equipment you will not want in three years.
IndustriesTrucking and Transportation Funding: Keeping Trucks Moving
In freight, the money is already earned — it is just sitting in a broker's payment queue. The right structure closes that gap.
IndustriesManufacturing Business Funding: Machines, Materials and Big Orders
In manufacturing, the largest order you win is often the one most likely to break your cash flow.