Flexible Equipment Loans
to Keep Your Business Moving

How Does Equipment Finance Work?

With equipment finance, a lender provides funds to buy or lease equipment. After evaluating creditworthiness, cash flow, and business banking history, financing is approved. Once finalized, the business repays through fixed or flexible monthly payments.

Some financing programs offer fixed rate loans, keeping costs predictable. Others allow flexible financing for seasonal needs. Many businesses also opt for low doc equipment finance, which reduces paperwork and speeds up credit decisions.

Typically, the equipment acts as collateral. This reduces lender risk and may lead to faster approvals and better terms. Equipment financing solutions provide businesses a straightforward way to access vital tools without sacrificing liquidity.

Eligibility

Eligibility for equipment finance usually depends on these key areas:

1. Business History

Most lenders prefer businesses with 1-2 years of operating history. A proven track record increases the chance of approval for business equipment financing. However, some flexible financing options are available for newer businesses.

2. Good Credit Score

A solid personal and business credit score is important. Higher scores often lead to better rates and terms. Credit scores above 650 typically make it easier to secure equipment financing for business needs.

3. Steady Cash Flow

Consistent revenue shows a business can handle monthly payments. Lenders may assess online banking activity, investment management accounts, and savings accounts to confirm financial strength.

4. Equipment Type

The type and value of equipment matter. Details such as whether it’s new or used, cost, and business purpose must be provided. Financing options often vary based on whether the item is medical equipment, construction equipment, or IT systems.

5. Documentation

Requirements vary by lender. Some equipment financing programs ask for full financial statements, while low doc equipment finance needs fewer documents. Generally, businesses must submit tax returns, bank statements, and any necessary disclosures.

Benefits of Equipment Finance

1. Preserve Working Capital

Equipment finance helps businesses keep cash reserves untouched. By spreading the cost over time, businesses maintain liquidity for daily operations, payroll, and unexpected expenses.

2. Fast Decision Process

Credit decision for equipment financing solutions can be quicker than traditional loans. Low doc equipment finance options allow small businesses to skip long paperwork processes and get faster funding.

3. Access to Better Equipment

Businesses can afford better, more advanced commercial equipment through financing. This boosts operational efficiency and supports business growth without large upfront investments.

4. Potential Tax Benefits

Many equipment loans offer tax advantages, such as deducting interest or equipment depreciation. Consulting a tax advisor ensures businesses maximize savings through available financing options.

5. Flexible Terms

Equipment financing programs offer varied terms to meet different business needs. Options include short or long repayment periods, adjustable monthly payments, and flexible financing structures.

6. Business Credit Growth

Regular, on-time payments help build business credit profiles, if the lender reports to the credit bureaus.  This strengthens future borrowing opportunities and improves access to financial services like working capital loans, credit cards, and lines of credit.

Drawbacks of Equipment Finance

1. Higher Total Cost

Financing equipment typically costs more than paying cash up-front. Interest over time increases the total price, even with competitive financing solutions.

2. Risk of Equipment Depreciation

Some types of equipment, like IT systems, lose value quickly. This can leave businesses paying for assets that may not retain usefulness throughout the loan term.

3. Collateral Requirements

With equipment finance, the financed asset usually secures the loan. Failure to meet payment obligations can result in repossession, impacting business operations.

4. Risk of Over-Borrowing

Easy access to commercial equipment financing could lead businesses to borrow more than necessary. It’s important to carefully evaluate business needs and use calculators to estimate affordability.

5. Limited Flexibility

Some financing agreements restrict how equipment can be modified or used. Reviewing disclosures carefully ensures the terms align with operational goals.

6. Down Payment Needs

Some lenders may require an upfront payment before financing the remaining balance. This can strain cash flow, especially for startups and small businesses managing tight budgets.

Equipment Financing vs Equipment Leasing

Equipment financing leads to ownership once the loan is fully paid. Equipment leasing, on the other hand, allows businesses to rent equipment for a set time, often with lower monthly payments but without building ownership unless buying the equipment at lease-end. Leasing is often better for equipment with a short useful life, like IT hardware, while financing suits businesses looking for long-term use and investment management of their assets.

Is Equipment Finance Same as Debt Finance?

Equipment finance is a type of debt finance. It is specifically tied to purchasing business equipment, using the asset itself as collateral. Unlike general business loans or lines of credit that can fund any business activity, equipment financing solutions are restricted to equipment purchases. This targeted approach helps protect working capital and keeps financial services focused on asset growth.

Industries That Use Equipment Finance

Equipment finance is used across construction, healthcare, manufacturing, transportation, and agriculture. Companies rely on financing solutions to obtain construction equipment, medical devices, commercial vehicles, and IT systems without risking liquidity. Financing programs offer businesses a way to grow and stay competitive without tying up savings accounts or real estate assets.

Alternative Financing Options to Equipment Loans

1. Business Lines of Credit

A line of credit provides ongoing access to funds for various business needs. Unlike equipment finance, these funds can be used for payroll, inventory, or emergencies. They offer flexible drawdowns through online banking and FDIC-insured accounts.

2. SBA Loans

SBA loans offer low-interest, government-backed funding. They can be used for equipment, working capital, or real estate. However, the process for credit approval is often more detailed and slower than typical equipment financing.

3. Equipment Leasing

Leasing provides access to business equipment without long-term ownership. Monthly payments are usually lower, making it attractive for fast-changing industries like technology and healthcare. Leasing options like trac leases or tax leases provide added flexibility.

4. Short-Term Business Loans

Short-term business loans deliver fast cash for urgent purchases. While they come with higher interest rates, they are easier to qualify for and may suit businesses needing immediate financing solutions for equipment or other investments.