Equipment is the backbone of most businesses, from restaurant ovens and construction machinery to medical devices and delivery trucks. Equipment financing allows you to purchase or lease the tools your business needs without depleting your cash reserves. This guide covers everything you need to know about equipment loans, leasing, and how to get the best rates.
Equipment financing is a loan or lease specifically designed to help businesses acquire equipment. The equipment itself serves as collateral, which means lenders can offer more favorable terms than unsecured loans, even to borrowers with imperfect credit.
Equipment Loan: You borrow a set amount, purchase the equipment, and own it outright once the loan is paid off. Down payments of 10-20% are common. Terms typically range from 2 to 7 years. Best when you plan to use the equipment for its full useful life.
Equipment Lease: You make monthly payments to use the equipment for a set term. At the end, you may return it, buy it at fair market value, or renew. No down payment in most cases. Best when equipment becomes obsolete quickly or you want to preserve capital.
Interest rates for equipment financing typically range from 4% to 20%, depending on your credit score, time in business, and the type of equipment. Terms match the useful life of the equipment, usually 2 to 7 years. Loan amounts can range from $5,000 to several million dollars for heavy machinery.
Because the equipment serves as collateral, qualification requirements are more flexible than unsecured loans. Most lenders require 1+ year in business (some accept startups), a credit score of 600+ for the best rates (580+ for alternative lenders), and annual revenue of $100,000+. Startups may qualify with a strong personal credit profile and a business plan.
Construction (excavators, cranes, trucks), restaurants (commercial kitchen equipment), medical practices (imaging, dental chairs), trucking (trucks, trailers), manufacturing (CNC machines, assembly lines), landscaping (mowers, equipment), fitness centers (gym equipment), and auto repair (lifts, diagnostic tools).
Apply through Lending Valley to compare equipment financing offers from multiple lenders. Our marketplace approach ensures you get competitive rates without shopping around to dozens of lenders individually.
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New to business funding terminology? See our Business Funding Glossary for definitions of key terms.
