Equipment financing lets you acquire the tools your business needs without depleting cash reserves. Here's how it works and how to get the best deal.
How Equipment Financing Works
Equipment financing allows businesses to purchase equipment using the equipment itself as collateral. The lender typically funds 80-100% of the equipment cost, and you repay over a fixed term (usually 2-7 years) while using the equipment. At the end of the term, you own the equipment outright. This structure makes equipment financing one of the most accessible forms of business credit — even for businesses with limited history or imperfect credit — because the lender\'s risk is backed by a tangible asset they can recover if you default.
Equipment Financing vs. Equipment Leasing
Financing (a loan) results in ownership — you build equity in the equipment with each payment and own it free and clear at payoff. Leasing is essentially a rental agreement — you make payments for the use of the equipment but typically don\'t own it at the end of the lease (though many leases have a purchase option). The right choice depends on: how long the equipment will be useful, whether technology obsolescence is a concern, your tax situation (leases can be 100% expensed vs. depreciated with loans), and whether ownership matters for collateral or resale value.
Current Equipment Financing Rates
Equipment financing rates in 2025 range from approximately 5-7% APR for bank equipment loans to 8-18% APR for non-bank commercial lenders. SBA 504 loans, which can be used for major equipment, offer rates tied to U.S. Treasury rates — currently in the 6-8% range for 10-year terms. Online equipment financing lenders typically charge 10-25% APR for smaller amounts or less-established businesses.
What Equipment Qualifies?
Virtually any tangible business asset qualifies: commercial kitchen equipment, construction machinery, medical and dental equipment, manufacturing machinery, vehicles and trucks, technology hardware, agricultural equipment, and fitness equipment. Software and other intangibles generally do not qualify. The equipment must be for business use and have a verifiable market value.
Documentation Required
Equipment financing typically requires less documentation than unsecured loans. Most lenders require: equipment quote or invoice, 3-6 months of business bank statements, basic business information (EIN, address, time in business), and personal information for a credit check. For amounts over $150,000, expect to also provide business tax returns and financial statements.
Section 179 Tax Deduction
One significant advantage of equipment financing is the Section 179 tax deduction, which allows businesses to deduct the full purchase price of qualifying equipment in the year of purchase rather than depreciating it over time. In 2025, the Section 179 deduction limit is $1,160,000. This means a $100,000 equipment purchase can reduce your taxable income by $100,000 in year one — significantly reducing the net cost of the acquisition. Consult your tax advisor about how this applies to your specific situation.
Approvd connects businesses with equipment lenders across industries. Explore equipment financing options with no impact to your credit score. Use our loan calculator to model your payments.