What Is It?
Equipment financing provides capital to purchase business equipment, vehicles, or machinery. The equipment being purchased often serves as collateral for the loan, and the repayment term is typically matched to the expected useful life of the asset. Because the asset helps secure the financing, qualification can focus on the equipment and the business's ability to make the payments.
When It May Make Sense
- Purchasing equipment that will generate revenue or savings over time
- Replacing aging equipment to reduce downtime
- Acquiring vehicles or machinery for expansion
- Situations where the equipment's useful life aligns with the loan term
When It May Not Make Sense
- Equipment that won't generate enough return to cover the payment
- Assets with a very short useful life relative to the loan term
- Situations where the business can't support the additional payment
- Purchases better made with cash or a different structure
What Lenders Typically Evaluate
- Equipment type, age, and condition
- Purchase price and useful life
- Business revenue and cash flow
- Borrower credit and time in business
- Down payment or equity contribution
- Whether the equipment generates revenue to support repayment
Potential Benefits
- The equipment often secures the financing
- Term matched to the asset's useful life
- Preserves working capital for other needs
- Can support expansion, replacement, or upgrades
Risks & Considerations
- If the equipment doesn't earn its keep, the payment still is owed
- Older equipment may have shorter financing terms and higher costs
- The asset can depreciate faster than the loan is paid down
- Additional monthly payment adds to debt burden
What to Prepare
Common items lenders may request — requirements vary by program and lender.
- Equipment quote or invoice (type, age, price)
- Business financials and cash flow
- Borrower credit and time in business
- Down payment information
- How the equipment will be used to generate revenue
Frequently Asked Questions
Often yes. Equipment financing is frequently secured by the equipment being purchased, which can make qualification more focused on the asset and the business's ability to repay than on other collateral.
Terms are typically tied to the equipment's useful life. Newer, longer-lived equipment may qualify for longer terms; older or rapidly depreciating assets may have shorter terms.
Not necessarily. A loan finances ownership of the equipment, while a lease is a rental arrangement with purchase options. Both can be appropriate depending on the asset and the business's goals.
Explore Your Options
Submit your information and our team will review which available capital structures may be appropriate for your business or project.
Financing is subject to underwriting, eligibility, and approval. Products, terms, and availability vary by program and lender. Submitting information does not guarantee approval or funding. This page is educational and is not financial, legal, tax, or investment advice.