What Is Equipment Financing?
Equipment financing is a loan or lease specifically used to purchase commercial equipment. The equipment being financed serves as collateral — meaning you don't need to pledge other business assets or property to secure the loan.
This collateral structure makes equipment financing accessible even for businesses with lower credit scores or limited operating history, because the lender's risk is tied directly to the asset's value. As you make consistent, on-time payments, you simultaneously strengthen your business credit profile for future financing needs.
Key Benefits
- Preserve working capital — no large upfront payment
- Equipment serves as its own collateral
- May qualify for Section 179 tax deduction
- Build business credit with each on-time payment
- Finance new or used equipment
- Startup-friendly — less than 1 year in business OK
Qualification Requirements
- Credit score 580+ (lower scores considered with larger down payment)
- Equipment invoice or quote from vendor
- 1+ year in business (startups considered for smaller amounts)
- Proof of business income or revenue
Loan vs. Lease: Which Is Right for You?
| Feature | Equipment Loan | Equipment Lease |
|---|---|---|
| Ownership | You own the equipment | Lender owns, you use it |
| Monthly Payment | Higher (includes principal) | Lower |
| End of Term | Fully yours | Buy out, return, or renew |
| Tax Benefit | Depreciation + interest deduction | Full payment deductible |
| Best For | Long-term, high-value assets | Technology, frequently upgraded equipment |
Illustrative example terms shown for demonstration only. Not an offer or guarantee of financing.