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Equipment financing: How it works and top lenders to consider

Compare equipment loans from these 4 top lenders.

Best equipment financing options Compare options

Equipment financing can help your business cover the cost of expensive machinery when you want to expand or just need an update. You can often finance business equipment directly through the manufacturer or seller — but you might find a better deal through a bank or alternative lender.

How equipment financing works

Equipment financing is a type of business loan specifically for purchasing equipment that a business needs. This can include things like restaurant ovens, farming equipment, commercial refrigerators, construction equipment, office furniture, company vehicles and so on.

With this type of financing, the lender bases your loan amount and term on the equipment itself.

Usually you can finance between 80% to 100% of the equipment’s value and receive a loan term based on how long your lender thinks the equipment will be useful — often around five years. You’ll likely repay the loan with monthly payments, and when the term is up, your business owns the equipment outright.

How much does equipment financing cost?

Equipment financing rates typically start at around 4% and can reach 40% APR, according to online business loan marketplaces like Fundera, Lendio and Lending Tree. That often includes an origination fee of 1% to 5%.

In many cases, you may also need a down payment of around 10% to 20% of the equipment’s manufacturing price.

The monthly and total cost of equipment financing also depends on your loan term. This is based on the useful life of the equipment you’re purchasing — usually around five years. However, depending on the cost of the equipment you’re purchasing and the lender, the loan could be anywhere from one to 25 years long.

Equipment financing calculator

Use our calculator to estimate how much an equipment financing loan may cost your business.

Equipment financing calculator

See how much an equipment loan might cost you each month and overall.
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How to qualify for equipment financing

Lenders vary, but typical requirements and documents for business equipment financing include:

  • Good credit; both personal and business credit scores considered.
  • Business plan with projected growth.
  • Annual revenue of at least $50,000.
  • At least one to two years in business, but this varies.
  • Balance sheet and cash flow statements.
  • Personal information, such as tax returns, bank statements, etc.
  • Optional: Personal resume.

Plan on needing a good credit score to qualify — often defined as 670 and up. Lenders may be hesitant to approve you for equipment financing if your personal credit history is littered with negative marks, such as late payments, defaulted loans, repossessions or recent bankruptcies.

For some lenders, having enough regular cash flow over the past six months may make up for a low credit score or less than a year in business.

Equipment financing collateral requirements

When you take out an equipment loan, the lender often puts a UCC lien on the equipment you purchase and may require a personal guarantee from business owners with a 20% stake in the company or more. This means that if your business defaults on the loan and you can’t sell the equipment at a price that covers the full balance, you’re personally responsible for paying off the remaining balance.

How quickly can you get funding?

Many lenders advertise a turnaround time of one to two business days. Oftentimes, equipment financing and business loans are approved or denied very quickly, often the day you apply.

Can I get equipment financing with bad credit?

It may be difficult to qualify for equipment financing with poor credit. Lenders typically prefer good to excellent credit for this type of financing — but there are some lenders willing to work with fair credit. Lendio, for example, can accept personal credit scores as low as 580.

However, just know that major negative marks, such as bankruptcies, can negatively affect your approval odds. The cleaner your credit reports and the higher your credit score, the more lending opportunities you may have.

Where can I find equipment financing?

You have a number of options as to how to get equipment financing.

  • Manufacturer. Financing directly through the manufacturer or seller.
  • Online lenders. You can apply for financing with an online lender or marketplace, and there are plenty such as Lendio, Bluevine or Funding Circle.
  • Direct lender. These can include banks, credit unions or some online lenders.

Types of equipment financing

The main type of equipment financing is a secured business term loan. These are available through banks and alternative lenders that lend to small businesses. You can use a term loan for purchasing equipment for varying industries, such as:

Some lenders might specialize in funding specific industries, such as, Bankers Healthcare Group, which specializes in medical practice financing.

Best equipment financing companies

After reviewing over 200 lenders, we’ve narrowed down to four of the best lenders that offer equipment financing and other business loans.

Best overall

National Funding business loans

Finder rating 4.65 / 5 ★★★★★

National Funding is an online lender that specializes in equipment financing. It offers low-cost direct loans with rates from from APR to APR. This includes a relatively low origination fee compared to other business lenders of 1% to 3%. There's no down payment and you can use the funds to purchase new and used equipment. National Funding also works with high-risk industries, including cannabis companies. While it can connect you with another provider if you don't meet its requirements, its partners will likely offer different rates and terms.

Best SBA loans

SmartBiz business loans

Finder rating 4.5 / 5 ★★★★★

SmartBiz is an online service that can help your small business connect with an SBA 7(a) lender that offers government-backed loans you can use to finance equipment. It's best for first-time SBA borrowers who don't have a lot of time to spend on the application. It's also better for equipment with a big price tag, since loans start at $30,000. It can cut down the time you spend on an application too. But these services aren't free — you'll pay a referral and packaging fee. If you've struggled to qualify for low-cost equipment financing elsewhere, it could be worth the extra cost.

Best marketplace for equipment financing

Lendio business loans

Finder rating 4.75 / 5 ★★★★★

Lendio is one of the largest online business loan marketplaces out there. Compare multiple equipment financing offers from its network of over 300 partner lenders by filling out one simple online form. Its partners offer equipment financing ranging from $5,000 to $5 million with terms from one to five years. Rates start at 7.5% APR — a little higher than your typical equipment financing loan from a bank. But you could also get your funds as soon as 24 hours after approval.

Best line of credit

BlueVine business lines of credit

Finder rating 4.5 / 5 ★★★★★

BlueVine offers fast, unsecured lines of credit that can be useful if you plan on growing your team over the next year or so. There's no origination or monthly maintenance fee, and it offers relatively low rates for a lender that accepts fair credit scores of 600. BlueVine's starting APR of 4.8% is low for an online lender — and comparable to what you might find at a bank. But most borrowers won't qualify for that rate, and the weekly payments can be inflexible for businesses with irregular cash flow.

How we picked the best lenders

Our team reviewed over 220 lenders that offer business loans before selecting the best equipment financing options. We focused on lenders that specialize in equipment loans, before comparing interest rates, fees, terms and requirements. We were also careful to include providers that don’t require a down payment and those that allow you to purchase equipment directly.

Pros and cons of equipment financing

Pros

  • Loan has collateral. Compared to unsecured business loans, equipment financing has collateral, making it a little easier to qualify for.
  • Lower APRs. Since equipment financing has collateral, it’s likely the loan will come with a lower rate compared to unsecured business loans.
  • Equipment to grow. Instead of waiting to have enough cash to buy equipment outright, financing can help you increase your business’s profitability and productivity faster.
  • Build credit. Taking on an equipment loan can help you improve your business credit.

Cons

  • Down payment. Equipment financing typically comes with a down payment requirement, typically 10% to 20%.
  • You own it. This could be a positive or negative, but after you pay off the equipment loan, you own it. After the loan term, you may have paid for something that didn’t hold its value or you no longer need.

Equipment financing loan alternatives

If you’re not sure if financing is the right route, look into equipment leasing.

With equipment leasing, you agree to pay for the equipment over a period of time, and at the end of the term, you typically have the option of purchasing the equipment or giving it back. This can be a great option for a start-up, or if you run a business where the equipment becomes obsolete quickly.

Other alternatives include:

Compare business loans

1 - 6 of 6
Name Product Filter Values Min. Amount Max. Amount APR Requirements
Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★
Lendio business loans
$500
$5,000,000
Starting at 6%
Operate business in US or Canada, have a business bank account, 560+ personal credit score
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.
OnDeck short-term loans
Finder Rating: 4.6 / 5: ★★★★★
OnDeck short-term loans
$5,000
$250,000
29.9% to 99.9%
625+ personal credit score, 1 year in business, $100,000+ annual revenue, active business checking account
A leading online business lender offering flexible financing at competitive fixed rates.
ROK Financial business loans
Finder Rating: 4.7 / 5: ★★★★★
ROK Financial business loans
$10,000
$5,000,000
Starting at 6%
Eligibility criteria 3+ months in business, $15,000+ in monthly gross sales or $180,000+ in annual sales
A connection service for all types of businesses — even startups.
Fundera business loans
Finder Rating: 4.9 / 5: ★★★★★
Fundera business loans
$2,500
$5,000,000
7% to 30%
$50,000+ of annual revenue, 620+ personal credit score, in business for 6+ months
Get connected with short-term funding, SBA loans, lines of credit and more.
Biz2Credit business loans
Finder Rating: 4.7 / 5: ★★★★★
Biz2Credit business loans
$25,000
$6,000,000
Starting at 6.50%
6+ months in business; $100,000+ annual revenue; 500+ credit score
Get only the capital you need through secure, prescreened lenders with this highly rated company offering SBA, expansion, working capital and other loans.
Fora Financial business loans
Finder Rating: 4.1 / 5: ★★★★★
Fora Financial business loans
$5,000
$750,000
Varies
12+ months in business, $15,000+ monthly revenue, no open bankruptcies
Get qualified for funding in minutes for up to $750,000 without affecting your credit score. Best for companies with at least six figures in annual revenue.
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