The business equipment financing option is very similar to term business loans, the only difference being it’s specifically for purchasing equipment. Because equipment financing is so advantageous, small business owners can purchase what they need with a low or no down payment, easy repayment terms, and save money with competitive rates.

In general, equipment loan alternative lenders and most equipment financing lenders will allow the borrower to use the asset as collateral, so they’re protected; thus, the rate is lower and could increase the loan amount. All of these points can help cash flow when you need to finance equipment.
How much can you borrow with business equipment loans?

Typically, the small business can get up to 100% of the loan amount needed to purchase equipment and equipment leasing. In some cases, a down payment and minimum credit score may be required for equipment financing. Since the asset is collateral, you’ll save money with equipment financing because the interest rate would be lower than other equipment finance options like unsecured business credit lines, invoice factoring, merchant cash advances, or different types of small business loans.

MAX FUNDING AMOUNT: Up to $5M per piece
FACTOR RATES: Starting at 3.5%
TERM: 1 – 10 years
SPEED: 3 – 10 Business days

Many small business owners ask, “How does business equipment financing work?” Equipment financing works similarly to term business loans with regard to payment options. You pay fixed periodic payments (including principal and interest) every month until the principal balance is paid in full. In the end, you own the equipment free and clear.

You can borrow up to $5 million per piece with the business equipment loan options available, perfect for heavy equipment financing. The interest rate with an equipment finance company starts at as low as 5%. To qualify for equipment financing, you don’t need excellent credit. All you need is to have a 600+ minimum credit score.

Businesses can get equipment financing to purchase:

• • Computers
• • Printers
• • Copiers
• • Other office equipment
• • Desks (Office furniture)
• • Vehicles
• • Construction equipment (Other heavy equipment)
• • Landscaping equipment
• • Dog grooming equipment
• • Medical equipment
• • Chairs for hair salons or beauty spas
• • Restaurant equipment (ovens, freezers, etc.)
• • Please inquire about other business assets!

As mentioned above, with business equipment loans, the asset is the collateral; that’s why the interest rate starts this low, and you don’t have to wait weeks because quick approval is prevalent.

To find out the value, the equipment loan finance company may ask for information about the equipment purchases, including the purchase price, age, seller, and manufacturer info, among other items. The equipment financing lender needs this info to ensure they can recoup their investment in case of a default.

Example of How Business Equipment Financing Works:

Equipment financing works by giving you the means to grow your business without the need to save for long periods. This often gives businesses the edge, letting them outperform their competition.

Let’s say you’re a baker. To increase your cupcake productivity by 3x, you need an industrial oven, which costs $75,000.

You can negotiate a five-year term with as low as 5% interest by applying for an equipment loan. But, again, because you’re using the oven as collateral, you’ll save money by getting a lower rate and potentially higher loan amount than you would with other funding products. Also, you most likely won’t need a personal guarantee with equipment finance.

After making regular equipment financing loan term payments for five years, the balance is paid off, and you own the equipment outright. Equipment financing is the best way to acquire expensive machinery for

Equipment Financing Options Are the “Go-To” Source for Growth

• • According to Monitor Daily, the equipment finance industry hit a $1.16 trillion high in 2021. Around 80% of companies purchasing equipment or software used various financing options.
• • 60% of U.S. small business owners turn to equipment financing options and equipment leasing to help them operate smoothly and grow steadily. This info comes directly from the Equipment Leasing and Financing Association.
• • In January 2020, the approval for equipment financing was 76.3%, according to ELFA’s Monthly Leasing & Finance Index. This means that every three out of four applicants got approved for an equipment loan with equipment lenders.
• • The Equipment Leasing and Financing Association says that as of December 2022, new financing volume was up 9% YoY and up 6% at year-end.

For a small business to get larger loan offers with low interest and a longer term, they generally need collateral. This is understandable, as equipment loan finance companies want to ensure their risk is minimal in the case of a default. The equipment financing lender will grant favorable terms for their equipment loans by simply using the equipment as collateral. This is possible even if their credit scores don’t rival a blue-chip company or the annual revenue isn’t in the seven-figure range.

As a matter of fact, an alternative lender (or traditional bank) might even overlook the age of a new business with collateral in the picture. With secure financing equipment loans, the purchased asset acts as collateral. For this reason, even small businesses with a subpar credit rating, an imperfect balance sheet, imperfect cash flow, or less than two years of business banking activity can apply for equipment financing.

On the other hand, if the same company applied for a standard term loan, the situation would be different. They would have to pay higher rates with a short-term business loan only because they don’t have collateral to reduce the risk.

Financing equipment also allows you to own the asset instead of leasing. Though equipment leasing has advantages, there’s a good chance it will cost more money than purchasing in the long run. You’ll find out more about this in a bit.
Also, keep in mind that the primary purpose of equipment financing is to avoid paying the entire cost upfront. So instead, you make monthly payments, which helps cash flow.

Did you know that interest payments are usually tax-deductible? It’s a significant selling point for many businesses and one of the primary equipment financing ‘pros’ to think about. Although lease payments may qualify for a tax deduction, why not own it instead?

With all the benefits listed, let’s go into the cons of equipment financing.
The first concern would be about new equipment becoming outdated over time. It’s a valid concern. Nobody can predict what the future holds or what their annual revenue will be. Industries are evolving at an accelerated pace. It would mean that by the time equipment loans are paid off, the asset might be worthless. The worst-case scenario would be that the asset would lose most of its value while still paying off the equipment loan. In these cases, equipment leasing would’ve saved more money.

Another equipment financing drawback would be fixing the equipment when it breaks down. If you own it, you have to fix it. On the other hand, if you’re leasing, the equipment financing company handles the maintenance and repairs.
The final drawback of an equipment loan is that you have to pay interest on a term loan. It costs more going down the equipment financing road than buying it outright.

As you can see, equipment financing has many pros and a few cons, so it’s a good choice for certain companies that are ok with the loan terms and a bad one for others.

Approved businesses generally met the following criteria:

ANNUAL REVENUE: $250K
CREDIT SCORE: 600+
TIME IN BUSINESS: 1 year+

The equipment financing application process is quite fast, and our 1450+ 5-Star reviewed customer service makes it simple. First, the process with most online lenders takes 3-10 business days, depending on the loan terms, amount, and if the equipment/vehicle needs to be registered with the local government.

For some companies, it’s easier and better to make a lease payment than to own. So before applying, make sure you ask yourself these questions:

• • What is the likelihood that the equipment will become outdated soon?
• • Will you need this equipment a few years from now?
• • Is this purchase so vital that it’s worth the interest payments?
• • Do you intend to use the equipment for your business long term?

This will help us determine the right terms and repayment options for the equipment financing loan – or if you should even purchase the equipment. You should also make sure you know the current market value and final invoice price. This will ensure that you request the right amount.

Equipment financing applicants must provide the following information and documents:

• • United States driver’s license
• • Voided check
• • Bank statements from the past three months
• • Invoice for equipment
• • Financial statements (If necessary)

The application process is fast, and you can do it within a few minutes. You can either fill out our one-page equipment financing online application. Or call us so a dedicated account manager can guide you through the process.

Once we receive your application, a senior account executive will contact you. We’ll review your best equipment financing options and fixed-term business loan offers on this call. You will get absolute transparency. There are no hidden fees or surprises. You will know precisely what loan options, rates, and terms you can expect for the equipment financing option you choose.

Your equipment financing loan gets set up when your application passes underwriting guidelines and gets credit approval. Next, the cash gets sent directly to the merchant. Depending on your convenience, we’ll either help you set up automatic payments, or you can arrange to pay by check/electronic payment.

Your term loan isn’t just a way to get equipment financing. It’s also an excellent opportunity to start building (or improving) your credit.

How do you get the best interest rate and terms on your future equipment loan?

The rules are pretty simple. Regardless of the type of small business loans you get, it can’t be emphasized enough to make all of your required payments on time and in full. If you get a business credit line or another form of revolving credit, keep your balance well below the credit limit. These steps will positively impact your personal credit score as well as your business credit score. And that means preferred interest rates and terms the next time you need small business financing.

If your application for business equipment financing is declined, we may recommend other small business loans and financing options to fit your specific needs. With this secondary option, business owners will be able to purchase equipment. However, the terms might not be as favorable as an equipment loan. It will mean a slightly higher interest rate and short term. Possible examples include term loans or other types of small business loans.

Your equipment financing application may have declined due to poor credit scores or cash flow. In this case, the best way to get equipment financing would be a business credit card or a personal loan. Both credit cards and personal loans are much easier to qualify for than small business loans. It would be best to consider credit repair services to improve your personal and business credit score before applying with an equipment financing company. These services can raise your personal credit score by focusing on the credit standards that are keeping it down. You can also try your local credit union to see their options.