Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

How equipment financing works and where to get it

If you don’t have the cash to buy pricey equipment, financing or leasing could be an option.

Equipment loans help your business cover the cost of expensive machinery when you want to boost production or update your current operating systems. 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 business equipment financing works

Equipment financing is a type of business loan specifically for purchasing equipment. It’s very similar to how to finance a car or home — the asset secures the loan, the loan amount is based on the asset’s value, and you typically repay the loan in monthly installments.

Most lenders allow you to finance around 80% to 100% of the equipment’s value. The loan term is based on how long the equipment functions, usually starting at five years. Once you’ve repaid the loan in full, you own the equipment.

This type of financing is especially useful for startups or newer businesses that don’t quite have the revenue to buy complex machinery outright. Equipment financing can help in purchasing restaurant ovens, tractors, commercial refrigerators, construction equipment, office furniture, company vehicles and so on.

Equipment loans vs. equipment leasing

Equipment loans are great if you have a long-term need for equipment that doesn’t become outdated after five or 10 years. But leasing may be better suited for businesses that need equipment for a short-term project, need to replace equipment every few years, or if your business’s equipment becomes outdated quickly (like technology or machinery).

Equipment leasing often comes with lower monthly payments than equipment loans, and there’s usually no down payment requirement. At the end of the lease, you usually have the option to return the asset or buy it outright for the remainder of the equipment’s value.

How much does equipment financing cost?

Equipment financing is one of the least expensive types of business financing because it’s secured by the asset you’re buying.

The standard rate for equipment financing is 5% APR, according to Anna Serio, a former certified commercial loan officer. But if you apply through an online lender, that rate could be a little bit higher.

Business loan marketplaces like Fundera and Lendio, offer equipment financing at rates ranging anywhere from 4% to 40% APR. And that often includes an origination fee of 1% to 5%. You may also have to plan for a down payment requirement between 10% to 20% of the equipment’s manufacturing price, depending on the lender.

The monthly and total cost of equipment financing also depends on your loan term. The loan could be anywhere from one to 25 years long, which is determined by the longevity of the equipment you’re buying. But if your loan allows prepayment without penalty, you have the option to repay your loan early and save money in interest.

Equipment financing calculator

Use this calculator to estimate the cost of financing equipment for your business.

Equipment financing calculator

See how much an equipment loan might cost you each month and overall.
Your loan
Loan amount
Loan terms (in years)
Interest rate

Fill out the form and click on “Calculate” to see your estimated monthly payment.


Compare more lenders
You can expect to pay back $ per month
Based on your loan terms
Principal $
Interest $
Total Cost $

Equipment purchases can be tax-deductible

US companies can deduct equipment purchases up to the limit of $1,160,000, as stated in Section 179. You may be able to deduct the full amount of the equipment — even if you haven’t paid off your loan. This deduction can also apply to equipment leasing.

Speak with a tax professional to see if your business and purchased equipment qualifies for the deduction.

How to qualify for equipment financing

Typical requirements for business equipment loans include:

  • Good credit score of at least 670
  • Annual revenue of at least $50,000
  • At least 12 months in business
  • Down payment, 20% of loan amount

Some good news for you: Equipment financing has very high approval rates compared to other business loans. In 2019, 86% of applicants were approved and 87% of applicants were approved in 2020, according to the Federal Reserve’s Small Business Credit Survey.

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 quickly approved or denied, often the same day you apply.

Pros and cons of equipment financing

Equipment loans have great perks, but there are disadvantages compared to equipment leasing.


  • Self-collateralized loan. Equipment financing typically doesn’t require an appraisal, and the loan amount is determined by the asset’s value — so it’s a simple process.
  • High approval rate. Equipment loans have a high approval rate around 85%.
  • Lower APRs. Secured loans tend to come with lower rates, and equipment financing often comes with APRs around 5%.
  • Grow your business. Instead of waiting to have enough cash to buy equipment outright, financing can help you more quickly increase your business’s productivity and boost your profits.
  • Build credit. Taking on an equipment loan can help you improve your business credit.


  • Down payment. Equipment financing often comes with a down payment requirement, typically up to 20%.
  • You own it. This could be a positive or negative, but after you pay off the equipment loan, you own the equipment.
  • Leasing may be better. For equipment with quick depreciation, leasing could make more sense — especially if you need to replace it frequently.
  • Negative equity risk. There is a possibility that the equipment you finance depreciates faster than anticipated, putting you in a negative equity position.

Equipment financing collateral requirements

When you take out an equipment loan, the lender often puts a lien on the equipment you purchase and may require a personal guarantee from business owners with a 20% stake in the company or more.

If your business defaults on the loan and the equipment can’t sell at a price that repays your loan balance, you’re personally responsible for paying off the remaining balance.

Where to get equipment financing

You’ve got a wide range of lending options to check out before you finance any equipment.

Manufacturer or dealer financing

Some manufacturers or dealers will have equipment financing or leasing options available, often through third-party lenders. Rates may be very favorable, and dealers often advertise promotional rates sometimes as low as 2%.

But the most notable downside with manufacturer financing is that rates, amounts and terms will vary greatly, and you may have to contact the manufacturer or dealer directly to get hard details. Great credit is often required, and down payment requirements are common.

Banks and credit unions

A more traditional lending option, banks and credit unions are known for competitive rates in business financing. And if you have good credit and a relationship with the institution, it’s more likely that the lender will have more flexible requirements than online lenders or direct financing.

Online lenders

Online lenders can include direct lenders, financial technology (fintech) companies, peer-to-peer lending platforms and lending marketplaces. These lenders are known for convenience, since most of the lending process is done entirely online: from applying and submitting documents to underwriting and funding.

If you want a hassle-free loan process, these lenders are worth looking into. However, they may not have the lowest rates, especially compared to dealerships or banks.

Compare online loans

Most of these providers offer equipment financing — narrow down business loans by requirements and loan details to find the lender for your business.

1 - 5 of 5
Name Product Filter Values Min. Amount Max. Amount APR Requirements
Lendio business loans
Finder Rating: 4.75 / 5: ★★★★★
Lendio business loans
Starting at 3%
Operate business in US or Canada for 6 months or more, have a business bank account, 500 personal credit score, at least $8,000 in monthly revenue
Submit one simple application to potentially get offers from a network of over 300 legit business lenders.
National Business Capital business loans
Finder Rating: 4.3 / 5: ★★★★★
National Business Capital business loans
Starting at 1.5%
1+ Year in Business, $500,000 in Annual Revenue
Get high loan amounts at competitive rates. Plus, advisors are on standby to help you through the process.
Finder Rating: 4.74 / 5: ★★★★★
Starting from 3.9%
525+ credit score, one year in business, at least $50,000 annual revenue
Compare lending options and get funded fast.
Finder Rating: 4.38 / 5: ★★★★★
Varies by loan type and lender
Must have been in business between 1 to 2 years, have a minimum revenue of $75,000 to $250,000 and have a minimum credit score of 500 to 650.
Complete a three-minute form to see loans that fit your business’s needs. Compare offers without a hard credit check.
Finder Rating: 4.6 / 5: ★★★★★
Starting at 1%
600+ personal credit score, 1+ years time in business, $500,000 minimum annual revenue, active business checking account required
Prequalify with this lending marketplace using an easy application process. Plus, work with real loan experts to make the best decisions on loan programs for ERC, SBA, e-commerce, cannabis and other loan categories.

SBA lenders

The Small Business Administration (SBA) loan program offers government-backed business loans. Many of these loan programs offer equipment financing, including SBA 7(a), 504 loans, express loans and even microloans.

The SBA sets limits on interest rates, loan amounts and terms. And if you can’t repay the loan, the government will repay up to 85% of the loan amount, so they’re a very popular choice for business financing. However, SBA loans are known to be a hassle, often taking weeks or months to apply and get funded.

Equipment financing by industry

Many equipment loans are used for expensive, heavy machinery but there are many industries that use equipment financing, such as:

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

Equipment financing for bad credit and startups

For some lenders, enough positive factors in your financial portfolio may make up for a low credit score, or less than a year in business when it comes to approving equipment loans.

Since the loan is secured, credit score requirements are often more flexible, and lenders may be more willing to focus on cash flow and overall revenue, according to Lendio.

With the collateral backing the loan, many lenders focus less on the profitability, revenue and overall cash flow of the business, and time in business. Online lenders or lenders specializing in startup financing may be good places to start — but watch out for high rates and carefully compare providers.

Looking for more guidance?

Learn more about business financing and lending options with our comprehensive business loan guide or check out other quick cash flow loans.

More guides on Finder

Ask an Expert provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site