You might need to search for the best equipment financing companies that can help you finance capital investments.
It can be challenging—if not downright impossible—to pay for equipment outright with cash, as machinery can be costly.
If you find yourself in need of business equipment loans, you’ll likely find many different lenders you could choose.Apply For A Loan To Buy Equipment!
What Is A Business Equipment Loan?
Business loans for equipment allow companies to buy machinery without shelling out the money upfront.
Different lending companies will have different restrictions for:
- how to use the heavy equipment financing
- to whom they will lend the money
You can finance almost any type of machinery. That said, the most critical factor in determining what you can finance is the value and purpose of the equipment.
Talk to a lender about your specific needs and business to get an idea of what equipment you can finance with a business loan.
How does equipment financing work?
The repayment period for these term loans is 3 to 10 years, and the lender generally offers fixed interest rates for the life of the loan.
Lenders typically only finance up to a certain percentage of the equipment’s value (usually 80-90%).
Lenders may be more willing to finance certain types of equipment that are essential to your business.
Fortunately, the equipment often works as the collateral for the loan itself, so you shouldn’t have to put other assets at risk to secure the loan.
Business equipment loan rates
The interest rates of equipment financing can range from 4% to more than 50%, depending on the type of loan and the lender.
They will depend on several factors (like your credit score).
Small Business Equipment Loans Pros And Cons
Of course, there are some pros and cons to taking microloans for business equipment.
- Updated or new equipment can help you increase your sales.
- The business owner will own whatever equipment they’re financing (compared to leasing).
- The interest paid is tax-deductible, and you can write off its depreciation.
- Some lenders will help you build business credit. Make sure to ask your lender.
- The equipment may become outdated by the time you pay off the equipment financing.
- Some lenders may require a substantial down payment.
- To qualify, small business owners may need a good business and personal credit score.
Top 7 Equipment Financing Companies
Below are the best equipment financing companies and what you need to know about them.
Camino Financial offers some of the best small business loans on the market. With us, you can get microloans up to $35,000 with annual interest rates from 31.55% to 54.90% and 24 to 36 months to pay.
You can use a Camino Financial loan as an equipment financing to purchase machinery.
The best part is that applying won’t impact your credit score.
Here are our minimal requirements:
- Have been operating for at least nine months
- Generate sales of $30,000 a year
- You can apply if you don’t have a previous credit history
- If you don’t have an SSN, we also accept ITINs
Most of the time, we will tell you if you prequalify almost instantly after you submit your application. We also use bank-level apps, like Plaid, as part of our application process. that keep your private information secure.
If you need capital to purchase equipment, we’re your best option:Complete a Loan Application
Small Business Administration (SBA)
The Small Business Administration provides the SBA 7(a) and SBA 504 programs you can use as business loans for equipment.
- The 7(a) program currently offers loans up to $5 million, with interest rates as low as 5.50%. The repayment terms of an SBA loan can be as long as 25 years, but most are around 10 years.
- The 504 program has a higher loan limit of $5.5 million, but the interest rates are a little higher, around 10%.
Though the loan application process for these equipment loans is lengthy, plus their requirements are very stringent. You’ll also need a minimum credit score of 660 at least.
This bank offers equipment financing that can help your small business.
- Starting as low as $5,000 and up to $500,000.
- In addition, they offer repayment terms of six through 72 months.
- Their interest rates start at 5.5%.
They do require a minimum credit score of 620, though.
Credibility Capital provides low-cost financing solutions to small businesses with a proven track record.
Their installment loan is a good option for equipment financing.
- From $50,000 up to $500,000
- Terms up to 5 years
- Fixed monthly payments
- Interest rates start at 7.99%
- One-time loan downpayment at close
Funding Circle is the leading global small business loan provider. Their business equipment loans offer low monthly payments, no prepayment penalties, and expedited decisions.
- Borrow $25,000-$500,000
- Terms up to seven years
- Requires decent minimum credit score to qualify
National Funding supports small businesses thanks to its flexible equipment financing. They offer dedicated equipment financing for small business owners.
- Up to $150,000
- Instead of interest rates, they have pay rates starting at 1.1
- Terms of 2 to 5 years
- Can deposit funds 24 hours after approval
OnDeck offers term loans for business investments in equipment. Borrowers receive a lump sum of cash upfront with the option to reapply for extra cash down the line. They have stringent requirements.
- Minimum of at least one year in business
- FICO score above 600
- $100,000+ in annual revenue
- Business bank account
- Up to 24 months to repay.
How To Choose A Business Loan For Equipment
Before you get business loans for equipment, you should take into consideration a few factors, like:
- Down payment. Do you have enough money to afford this payment, which could be up to 20% of the purchase price?
- Needs. Does your company need this equipment now, or can you wait to buy it until you save up the money to pay in cash?
- Usable life. If the equipment’s expected lifespan is only equal to or less than the length of the equipment financing, other options might be more feasible.
- Timeline. Some lenders fund loans rapidly, while others have a much more drawn-out process.
How To Get A Business Loan For Equipment
Getting equipment financing is a straightforward process. Here are the steps you should take to do so:
- Research different pieces of equipment and hone in on 5 different options.
- Find a lender that fits your needs by analyzing multiple companies.
- Make sure the amount they offer matches the piece of machinery you chose.
- Fill out an online or in-person application. They might ask for details on the equipment.
- Provide any supporting documentation the lender requires.
- Offer proof of funds for the down payment (if required).
- If approved, you’ll receive funding directly into your bank account.
Camino Financial has an easy application process. We won’t ask for a down payment or information about the equipment.
Equipment Financing Requirements
Many lenders want the borrower to have a good credit score and credit history.
Keep in mind that other basic equipment financing requirements exist, such as a set number of years in business and minimum annual revenue.
Most lenders will want to see bank statements to review your cash flow and will ask you to provide supporting documentation.
Some may ask you to submit a business plan, which could include:
- a detailed description of your business
- its current state
- the plans for the future
- how the equipment you’re financing would help in that regard
Fortunately, there are lenders with minimal requirements, like Camino Financial. You can use our loans for equipment financing purposes.
You only need to have been 9 months in business and a minimum annual revenue of $30,000. Plus, we won’t ask for a business plan, and you can apply with an ITIN if you don’t have an SSN.Camino Financial has minimal requirements
When Should You Get Equipment Loans?
If you need new or updated equipment but don’t have the upfront cash to cover the costs, equipment financing can help you finance the purchase. But there are a few key factors to consider
First, consider whether you can afford the monthly payments on the loan.
Remember that equipment loans typically have higher interest rates than other types of loans.
Another factor to consider is if the equipment is essential to your business and will help you grow or improve your operations, then an equipment loan may be a good option.
However, if the equipment is not essential or will not have a significant impact on your business, then you may want to consider other options.
Finally, consider the impact of taking out an equipment loan on your business’s cash flow.
Equipment loans can be a great way to finance necessary purchases, but you’ll want to ensure that the loan doesn’t put your business in a difficult financial situation.
If you have an urgent need for cash, emergency loans could be a better option for you.
What Kind Of Equipment Can I Finance?
There are many different pieces of machinery that you can finance with business loans for equipment, including:
- New or used equipment
- Commercial vehicle financing (trucks, cars, vans, etc.)
- Hardware and software for payment processing
- Machinery and tools (freezers, ovens)
- Office fixtures and furniture
- Computers and computer software
- Telephone systems
- HVAC equipment or solar panels
How Much Does Equipment Financing Cost?
The cost of your equipment financing depends on a few factors, including:
- The loan provider
- Funded amount
- Interest rate
- Equipment loan term and length
- The kind of equipment borrowed
Certain equipment is more valuable and expensive and thus costs more.
Other Financing Alternatives
Maybe you need equipment, but you’re still unsure if a loan is the correct option for you. Well, here are other alternatives:
Grants are like loans because you receive a set amount of money upfront. The difference is that you don’t have to pay them back.
Even though you might not find specific equipment grants, there are still many of them that you can use to buy machinery.
There are many government and private grants out there. Visit grants.gov to find one.
Business Line Of Credit
A business line of credit is a product that allows a company to borrow money up to a specific limit. The lender usually determines the limit.
This type of financing can be helpful for companies that have seasonal fluctuations in their cash flow or need some extra working capital.
Business lines of credit typically have lower interest rates than other types of loans.
However, the lender usually charges an annual fee, and the company will need to maintain a good credit rating to keep the line of credit open.
Business Credit Cards
Business credit cards can help you manage your expenses, build your credit score, and earn rewards.
Some business credit cards also offer perks like free employee cards, extended warranties, and purchase protection. These can be helpful if you often travel or make many business purchases.
Most times, when it comes to buying equipment, short-term business loans are a better alternative to credit cards.
When you’re ready to apply for a business credit card, be sure to compare different offers to find the one that’s right for you.
Equipment Financing vs. Equipment Leasing
Business loans for equipment aren’t the only option to help your company get the necessary equipment. In some cases, some could opt for equipment leasing.
With equipment leasing, you’ll be renting the equipment instead of purchasing it outright. So it works a lot like leasing a personal vehicle.
When the equipment lease term ends, you’ll give the equipment back to the company from whom you’ve leased it.
You might have the option of purchasing that exact piece of equipment or starting a new lease.
Equipment leasing might be beneficial if the equipment you need has a short lifespan or you only need it for a relatively short period.
Leasing equipment could also save you money, as it can be cheaper on a short-term basis.
Here are some key points to consider:
- With a loan, you’ll own the equipment outright and can do with it as you please. With an equipment lease, you’ll be renting the equipment from the leasing company and have to abide by their rules.
- Equipment loans usually have lower payments than leases, but you’ll ultimately pay more in the long run since you’ll pay the total price of the equipment.
- Leases typically have shorter terms than loans, so you’ll have the opportunity to get new equipment more often.
- If you decide to purchase the equipment at the end of a lease, you may have to pay a “buyout” fee.
Ultimately, whether to finance your equipment with a loan or a lease comes down to what makes the most financial sense for your particular situation.
Be sure to compare the total cost of ownership, payments, and terms before making a decision.
Ready To Purchase The Equipment You Need?
It can be pretty expensive to buy equipment and machinery. That’s why many small business owners look to business loans for equipment. These loan products can be a great way to get the equipment you need now while allowing you to pay for it later.
There are various types of equipment loans, each with different timelines, interest rates, and fees.
As a business owner, you want to do the right thing and make the best financial decision. The last thing you want is to get into debt, but the right loan can help your company continue growing.
You can use Camino Financial loans for equipment financing.
Our motto, “No Business Left Behind,” is what inspires us to provide great lending products and educational resources.
Request a quote for a business loan today so you can get the equipment your business needs.Apply now!
What does an equipment loan cover?
Equipment loans cover a percentage of your business’s total purchase price of a piece of machinery.
How long can you finance equipment?
The average repayment period is 1 to 25 years.
Can I use Section 179 tax deduction for equipment financing?
Yes, you can use Section 179 to take a tax deduction for business equipment financing.
How do you qualify for equipment financing?
Many lenders will look at your credit score and history, your time in business, your annual revenue, and your official business plan.
Does the SBA offer equipment loans?
The SBA offers many loan programs. You can use most of them for equipment financing.
Where to get equipment financing?
You have several equipment financing options. Some are SBA, CFDI lenders, online lenders, banks, or credit unions.
Are there equipment loans for startups?
Yes, there are equipment loans for startups. But because they’re for new businesses with no track record, interest rates might be higher.
Can I get equipment loans with bad credit?
It’s possible to get equipment loans with bad credit, but it may be more difficult or expensive than if you had good credit.
If you have bad credit, you may want to consider finding a cosigner or putting up collateral to improve your chances of receiving approval.
Can I get an equipment loan for used equipment?
Yes, but it depends on the lender and the type of financing you’re seeking. Some lenders may have restrictions on loaning money for used equipment, while others may be more flexible.
How hard is it to get an equipment loan?
It really depends on the lender and what kind of equipment you’re looking to finance.
Generally, though, getting equipment financing shouldn’t be too difficult as long as you have decent credit and can provide collateral.
Is an equipment loan an asset?
If the business uses the accrual basis of accounting, then the loan is an asset. On the other hand, if the company uses the cash basis of accounting, then the loan is not an asset.
Is having access to equipment loans good for small businesses?
It depends on the specific situation of the small business in question.
If the small business is in need of new or updated equipment and cannot afford to purchase it outright, then a loan may be a good option. This way, the business can spread out the cost of the equipment over time, making it more manageable.
On the other hand, if the small business is already struggling to make ends meet, taking on additional debt in the form of an equipment loan may not be the best idea. In this case, it might be better to look for alternative financing options, such as grants or crowdfunding.