Equipment Financing

With equipment financing, the lender will front you cash to help purchase the equipment outright. You then pay back the total amount lent, plus fees, for a set period of time.

Maximum Loan Amount

Up to 100% of equipment value

 

Term

Expected life of equipment

 

Interest Rates

8-30%

 

Speed

As quick as 2 days

 

Learn More

What is Equipment Financing?

Equipment financing helps you finance up to 100% of the new or used equipment you need for your business. Applying for an equipment loan is typically a fast and easy way to finance the purchase of most types of equipment—computers, machinery, vehicles, or whatever else you need for your business.

Pros

  • Quick access to cash
  • Limited paperwork
  • Equipment serves as collateral

Cons

  • Equipment could be obsolete by the time the loan is fully repaid
  • Might need to depreciate equipment, so you can’t deduct full cost each year

 

Who Qualifies for Equipment Financing?

Most businesses can qualify for equipment financing loans.

How much you qualify for—and the interest rate you’ll pay—depends on the value of that equipment, your business’s financial history, and your credit score.

Equipment financing can be a great option if your credit rating is less than perfect, too, as the equipment acts as collateral.

Equipment lenders are just as concerned with what’s securing their loan as with your borrowing history. So, if you’re planning on investing in a high-value (and value-retaining) piece of equipment with your small business equipment loan, then equipment lenders might be willing to work with you, even if your finances aren’t pristine.

 

Most Customers Who Were Approved Had

Annual Revenue

Over $130k

Credit Score

630

Time in Business

Over 2 years

 

How to Apply

A business equipment loan application can be a simple process, depending on the equipment lender you’re working with. You’ll need to provide your credit score and prove the financial health of your business, most likely with tax returns and bank statements.

Equipment lenders will typically ask for information about the equipment you’re purchasing with the financing. This is why most equipment financing applications will require an equipment quote, or equivalent documentation of the equipment cost.

You Will Need These Documents

  • Driver’s License
  • Voided Business Check
  • Bank Statements
  • Credit Score
  • Business Tax Returns
  • Equipment Quote

 

How Does Equipment Financing Work?

Every small business owner knows that It takes money to make money.

Sometimes you just need a new piece of equipment or machinery to kick up your business growth and start bringing in more revenue. But how do you afford it?

This is a problem that we’ve been able to help a lot of small businesses solve.

Here’s how equipment financing loans can get you on track to grow your business.

 

The Fundamentals

When your business needs a certain piece of equipment to get started or reach the next level, a small business equipment loan could be the right choice. This is especially true when you don’t have cash on hand to purchase the piece of equipment upfront.

You can use the proceeds of business equipment financing loans to purchase almost any kind of business equipment, from computers to cars and anything else your business may need.

How much you can borrow through a business equipment loan depends on the type of equipment you’re buying and whether that equipment is new or used, since this very piece of equipment ultimately serves as collateral to secure your loan.

If you’ve ever had a car loan, you’re already familiar with the basic structure of a business equipment loan:

The price of that equipment dictates the amount and terms of your equipment financing, and you won’t need to put up any extra collateral.

This is because a business equipment loan is a self-secured loan, which means that the piece of equipment itself acts as collateral for the loan. The self-collateralized nature of equipment financing can make these loans slightly easier for some business owners to qualify for.

Why? Because the equipment provides security for the lender. If you can’t afford to pay back your business equipment loan, the lender can simply seize the piece of equipment and liquidize it for cash to recoup their losses.

Here’s something good to know:

Most small business equipment loans are made at fixed interest rates—usually between 8% and 30%—with set term lengths, so you can expect the same payment each and every month.

 

How Long Does Equipment Financing Last?

How long you can extend the term of your equipment loan depends on the type of equipment you’re financing, as well as this equipment’s anticipated lifetime.

It makes sense that not too many lenders want to extend their equipment loan repayment terms beyond the life expectancy of that piece of equipment.

Basically this is because the point is that they’re financing a tangible asset—your equipment—on the basis that it will be worth something should they have to liquidate.

Some equipment lenders will set terms for the expected lifetime of the equipment. But most lenders will set a maximum repayment term of 10 years on a business equipment loan.

 

What’s the Difference Between Equipment Financing and Equipment Leasing?

Some business owners choose to lease instead of getting an equipment loan. There are definite advantages to leasing, but with a small business equipment loan, you’ll own that equipment after your loan gets paid off.

However, with a lease, your business will only be able to use that equipment while you’re paying for it.

So, if you know you’ll need that equipment for an extended period of time, equipment financing could be the right choice. But if you’re looking for a more temporary solution, leasing equipment might make more sense.

 

What Will Equipment Financing Cost?

With equipment financing, the thing to keep in mind is that it stops you from needing to pay the entire cost of that equipment upfront.

Instead, you’ll pay it off in regular installments, the same as any other term loan.

However, because of the interest that equipment financing loans inevitably come with, you’ll be paying more total money with an equipment loan than you’d pay if you purchased the equipment outright without financing. The tradeoff is worth it for businesses that can’t afford a large, upfront expense or don’t want to deplete their cash with such a huge one-off purchase but need the equipment to move up to the next level.

Pricing on Equipment Financing Example

Imagine you have a piece of equipment you’d like to purchase that costs $10K.

An equipment financing lender offers to front you the cash to purchase that equipment, but they’ll charge you 12% interest over a 3-year (or 36-month) term.

With a 12% APR, your business equipment loans will make it so that your $10K piece of equipment will actually cost you $11,957.15, with a monthly payment of $332.14

 

Cost Related Questions to Ask Yourself

Can you save some money by paying $10K right this minute and avoiding interest payments, or will that huge expense hurt your cash flow too much?

If you can’t afford it now, will saving up to buy it later mean lost profits, since you could have used that equipment in the meantime by financing it with a business equipment loan?

Essentially, you need to figure out whether the opportunity cost of waiting and saving outweighs the interest payments you’d make to have that equipment right now with equipment financing.

There’s no right or wrong answer—but if you plan your finances well, the right piece of equipment should bring in more than those equipment financing loan interest payments are costing you.