Need to purchase or upgrade equipment but don't want to drain your cash reserves? Equipment financing lets you get the machinery, vehicles, or technology you need while preserving working capital.
What Is Equipment Financing?
Equipment financing is a type of business loan specifically designed to purchase machinery, vehicles, technology, or other physical business assets. Unlike general purpose business loans, equipment loans use the equipment itself as collateral — which typically means better rates and easier qualification, even for businesses with less-than-perfect credit.
Equipment financing generally covers 80–100% of the equipment cost, with any remaining balance due as a down payment. Terms typically range from 2–7 years, aligned with the useful life of the equipment. Because the collateral is built into the product, equipment financing is one of the most accessible forms of business lending — even newer businesses and those with sub-600 credit scores can often qualify.
Equipment Loan vs. Equipment Lease: Key Differences
The first decision in equipment financing is whether to pursue a loan (which results in ownership) or a lease (which results in usage rights). Both have legitimate advantages depending on your situation, tax strategy, and how quickly the equipment will become obsolete.
| Factor | Equipment Loan | Equipment Lease |
|---|---|---|
| Ownership | You own the equipment | Lender owns it; you use it |
| End of term | Equipment is yours, free and clear | Return, renew, or buy out at residual value |
| Monthly payment | Typically higher | Typically lower (20–40% lower) |
| Tax treatment | Depreciation + Section 179 deduction | Full lease payments deductible as business expense |
| Best for | Long-life assets, no tech obsolescence risk | Tech, vehicles, assets that update every 3–5 years |
| Down payment | 10–20% typical | Often $0 down or first/last payment only |
| Balance sheet impact | Asset + liability recorded | Operating expense (off-balance-sheet for some leases) |
The Section 179 Tax Advantage for Equipment Loans
One of the strongest arguments for equipment loans over leases is Section 179 of the tax code, which allows businesses to deduct the full cost of qualifying equipment in the year of purchase — up to $1,160,000 in 2025 — rather than depreciating it over several years. This can dramatically reduce your effective cost of equipment in the year you acquire it. Consult your accountant about how Section 179 applies to your specific purchase.
What Equipment Can Be Financed?
Almost any tangible business equipment qualifies, including:
- Restaurant and food service: Commercial ovens, refrigeration, dishwashers, POS systems, walk-in coolers
- Construction and contracting: Excavators, forklifts, cranes, compactors, generators
- Medical and dental: Imaging equipment, dental chairs, surgical equipment, diagnostic tools
- Manufacturing: CNC machines, lathes, injection molding equipment, assembly line machinery
- Transportation: Commercial trucks, delivery vans, trailers, refrigerated vehicles
- Technology: Servers, workstations, telecommunications infrastructure, security systems
- Agriculture: Tractors, harvesters, irrigation systems, livestock equipment
- Printing and publishing: Offset presses, digital printers, bindery equipment
Even used equipment typically qualifies, though rates are slightly higher than for new purchases and lenders may cap the equipment age (typically no older than 10–15 years at the end of the loan term).
Qualification Requirements by Business Profile
Equipment financing is generally easier to qualify for than unsecured business loans because the equipment itself significantly reduces lender risk. Here's how requirements typically vary by business profile:
| Profile | Min. FICO | Time in Business | Monthly Revenue | Down Payment |
|---|---|---|---|---|
| Strong profile | 680+ | 2+ years | $20K+ | 0–10% |
| Standard profile | 600–679 | 1+ year | $10K+ | 10–15% |
| Challenged credit | 550–599 | 1+ year | $10K+ | 15–25% |
| Startup | 640+ | 0–12 months | Variable | 20–30% |
For very large equipment purchases ($500K+), lenders will typically require 2 years of tax returns, full financial statements, and a business plan for the acquisition.
Equipment Financing Rates: What to Expect
Equipment loan rates are generally lower than unsecured business loans because the collateral reduces lender risk. Current market ranges:
- Bank or credit union: 5%–10% APR for qualified borrowers with strong credit and business history
- Online lenders: 7%–20% APR for a broader range of credit profiles
- Equipment leasing: Effective rates of 6%–15%, often quoted as a money factor rather than APR
- Manufacturer financing programs: Sometimes 0%–3.9% promotional rates for qualifying equipment from specific brands
Use our business loan calculator to model different equipment loan amounts, rates, and terms to understand your monthly payment and total cost before applying.
The Equipment Financing Application Process
Equipment financing moves faster than most other loan types because the collateral simplifies underwriting. Here's what to expect:
- Equipment quote or invoice: Lenders need to know exactly what you're financing. Obtain a formal quote from the seller specifying make, model, year, and purchase price.
- Application (15–30 minutes): Basic business information, EIN, owner details, and equipment details.
- Financial documents: Typically 3 months of bank statements and the most recent tax return. For larger amounts, more extensive financials.
- Approval (1–5 days): Equipment financing decisions are faster than unsecured loans — often within 24 hours for standard amounts.
- Funding (1–3 days after approval): Funds typically go directly to the seller, not to your bank account.
Industry-Specific Considerations
Equipment financing is structured differently by asset class, and working with lenders who specialize in your equipment type typically yields better terms. Restaurant equipment lenders understand commercial kitchen depreciation curves. Construction equipment lenders know heavy machinery resale values. Medical equipment lenders are familiar with healthcare regulatory requirements. Matching the right lender to your equipment type is one of the key ways Approvd adds value — our network includes industry-specific equipment financing specialists across all major asset categories.
If your business also needs working capital alongside equipment financing — for example, to hire staff to operate new machinery or fund the increased inventory a new piece of equipment enables — consider pairing equipment financing with a business line of credit or revenue-based financing for the operational capital component.
How Approvd Helps with Equipment Financing
Approvd matches your equipment financing needs with lenders who specialize in your industry and equipment type. A restaurant equipment lender structures deals very differently than a construction equipment lender — our advisors know which partners to approach for each asset class, maximizing your approval chances and minimizing your rate. We can also help you evaluate the loan vs. lease decision and model the tax implications of Section 179 before you commit.
Frequently Asked Questions
Related Financing Product
Business Line of Credit
Flexible working capital — draw what you need, when you need it.