Equipment financing is money used to buy business equipment — vehicles, machinery, kitchen or medical equipment, computers, and more — where the equipment itself serves as collateral. Because the lender can repossess the equipment if the loan isn’t repaid, this financing is often easier to qualify for than an unsecured loan.
How it works
- You finance a specific piece of equipment, often a large share of its cost.
- The equipment secures the financing, so a separate personal guarantee or collateral may be lighter than with other loans (though many lenders still ask for one).
- You repay over a term that’s usually matched to the useful life of the equipment.
Because the asset is built into the deal, approval leans heavily on the equipment’s value and your ability to repay.
Financing vs. leasing
There are two common structures:
- Equipment loan (financing): you borrow to buy it and own it at the end. Best for equipment you’ll keep and use for years.
- Equipment lease: you pay to use it, often with lower payments and an option to upgrade or buy later. Best for equipment that becomes outdated quickly.
Ask your accountant about taxes
How equipment purchases and leases are treated for taxes — including potential deductions like Section 179 — depends on your situation. Confirm the current rules and what applies to you with a qualified tax professional. We link the IRS publication in our sources, but we don’t give tax advice.
What it’s good for
- Buying revenue-generating equipment without draining your cash reserves.
- Matching the cost of a long-lived asset to a repayment schedule over its useful life.
- Preserving your line of credit and working capital for day-to-day needs.
How to compare offers
Look beyond the monthly payment: the total cost, the term length, whether there’s a balloon payment, and what happens at the end (do you own it?). Compare a few providers before committing.
| Provider | Type | Often suits | Visit |
|---|---|---|---|
| Lendio A free marketplace that matches your application to 75+ small-business lenders with one form. | Marketplace | Comparing many lenders at once | Visit Lendio (opens in a new tab) |
| National Funding Direct lender for small-business term loans and equipment financing, including some lower-credit profiles. | Direct lender | Equipment financing and working capital | Visit National Funding (opens in a new tab) |
Have a quote or invoice for the specific equipment ready when you apply — lenders want to know exactly what they’re financing. And as always, confirm current rates, fees, and end-of-term terms directly with the provider.
Frequently asked questions
- Is it better to finance or lease equipment?
- Financing (a loan) means you own the equipment at the end, which suits long-lived assets you'll keep. Leasing can mean lower payments and easier upgrades, which suits equipment that ages quickly. The right choice depends on how long the equipment stays useful and your cash flow — and there can be tax differences, so ask your accountant.
- Can I get equipment financing with newer business credit?
- Often it's more accessible than unsecured financing, because the equipment serves as collateral that reduces the lender's risk. Requirements still vary by lender — confirm directly.
Sources
- U.S. Small Business Administration — Fund your business
- IRS — Section 179 deduction (Publication 946)
Loan programs, rates, and eligibility change. We re-check sources on the “updated” date, but always confirm current terms directly with a provider.