Equipment Financing Guide: Everything You Need To Know

Camino Financial03 Feb 2024
Equipment Financing Guide: Everything You Need To Know
Equipment financing can be a versatile solution for businesses looking to acquire essential tools without stretching their budget too thin. The best thing is that there are various options available. Understanding the different types is essential to making the best business decision. This guide will provide the definition of this topic, an overview of the best lenders, and what you need to know before you borrow money. So, whether you're looking for new or used equipment, here's everything you need to know about how to finance it.
Table of Contents
1. Top 7 equipment financing companies
2. How to choose a lender
3. How to apply for business equipment loans
4. Business equipment financing 101: the basics
4. 1. Equipment finance definition
4. 2. Pros and cons
4. 3. What kind of equipment can I finance?
4. 4. Financing for equipment requirements
4. 5. How much does equipment financing cost?
5. Information to help you decide if you should apply for equipment financing
6. Other financing alternatives
7. Ready to purchase the equipment you need?
8. Frequently asked questions

Top 7 Equipment Financing Companies

These are some of the best equipment financing options in the market.

Camino Financial

Camino Financial Logo Camino Financial offers some of the best small business loans on the market. With us, you can get loans up to $50,000 with a 24-month payback period.
Even though Camino Financial loans are not specifically for equipment, you can use them to purchase machinery, equipment or even vehicles.
Here are our minimal requirements:
  • Have an active and registered business for at least 12 months
  • Generate sales of $30,000 a year (or $2,500 monthly)
We use bank-level apps, like Plaid, as part of our application process to keep your private information secure.
If you need financing for equipment, we're your best option.
Apply for a business loan today

Small Business Administration (SBA)

SBA logo 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%.
The loan application process is lengthy, and their requirements are very stringent. You'll also need a minimum credit score of at least 660.

CIT Bank

CIT bank logo This bank offers business equipment financing that can help your small business.
  • Up to $500,000.
  • In addition, they offer repayment terms of 6 to 72 months.
  • Their interest rates start at 5.49%.

Credibility Capital

creditibility capital logo Credibility Capital provides low-cost financing solutions to small businesses with a proven track record. Their installment loan is a good option for heavy equipment financing.
  • From $50,000 up to $500,000
  • Terms up to 5 years
  • Fixed monthly payments
  • APR from 9.49% to 15.49% and a closing fee of up to 4.99%
  • Minimum credit score of 650

Funding Circle

funding circle logo Funding Circle is the leading global small business loan provider. Their business loans offer low payments, no prepayment penalties, and expedited decisions.
  • Borrow from $25,000 and up to $500,000
  • Terms from 6 months and up to seven years
  • Requires a decent minimum credit score to qualify

National Funding

national funding logo National Funding supports small businesses thanks to its flexible loans. 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 24 to 60 months
  • Can deposit funds 24 hours after approval

On Deck

ondeck logo 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, like 1 year in business, a FICO score above 600, and $100,000+ in annual revenue.
  • Loan amounts from $5,000 up to $250,000
  • Up to 24 months to repay
  • The APR can go as high as 98%

How To Choose A Lender

Do Your Homework

Research, research, research. You wouldn't buy a car without comparing models, prices, and features, would you? It's the same with lenders. Dive deep into understanding the market. Look at their credibility, track record, and each option's products. Read customer reviews, ask for referrals, and use online resources. Remember, knowledge is power.

Understand Your Business Needs

You can find a lender that aligns perfectly by knowing your specific requirements. For example:
  • Are you a startup or a seasoned stalwart? Each has different needs.
  • Are you purchasing cutting-edge tech or second-hand machinery? This affects the terms of the loan.

Check The Interest Rates

While a low-interest rate might initially seem appealing, it's crucial not to jump in immediately. Sometimes, an attractive rate could mask extra fees or longer repayment terms. Be thorough and meticulous in your evaluation to ensure you understand the total cost of the loan.

Ask About The Repayment Structure

Each lender has a different policy when it comes to repayment terms. Some may offer flexible schedules, adapting to your business cash flow, while others may have a rigid structure. It's essential to fully understand these terms to ensure they align with your business's financial capability and plan.

Transparency Matters

Ensure the lender provides clear, easy-to-understand terms and conditions without hidden clauses or complex language. It's crucial to know exactly what you're agreeing to. This helps you avoid any unwelcome surprises later in the loan period.

Customer Support

Even after you've signed on the dotted line, you may have questions or need assistance. A lender with excellent customer service is worth its weight in gold. You don't want to be stuck with a no-show when you need them the most.

Assess The Speed Of Service

In the world of business, time is money. A quick approval and disbursement process can mean the difference between seizing an opportunity and watching it slip away.

Is The Lender Flexible?

Life isn't always a straight line, and your financial journey isn't likely to be, either. Can the lender adapt to changes in your circumstances or business needs? Are their terms and conditions set in stone, or do they allow some wiggle room?

Other Factors To Consider

  • 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 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 financing, other options might be more feasible.

How To Apply For Business Equipment Loans

Here are the steps you should take to do so:

1. Identify Your Needs

Ask yourself:
  • What equipment is essential for your business?
  • Do you need it to be new, or can you manage with a used one?
  • How much can you realistically afford to pay monthly for the loan?

2. Research Your Options

There's a whole ocean of financing options out there, from traditional banks to alternative online lenders. There are various loan options that suit different business needs and circumstances. Spend time researching to find the best habitat for your business's financial health. Hone in on five different options. Analyze them well and see which ones match your business or your needs. After a thorough analysis, decide which lender you will apply with. Just make sure the amount they offer matches the piece of machinery you chose.

4. Assess Your Credit Score

Your credit score allows lenders to determine your reliability as a borrower. Make sure to know where you stand. If your credit score is less than stellar, what steps can you take to improve it before applying for a loan?

5. Compile Necessary Documents

Lenders require several documents, like:
  • tax returns
  • financial statements
  • lease agreements
Gathering them beforehand can make the process smoother and faster. Most lenders will also want to see your business plan. This document shows where you are, where you're going, and how you plan to get there. Include your business's financial history, current financial statements, and future projections. #DidYouKnow At Camino Financial, we won't ask you to show us a business plan.

6. Apply for the Loan

Each lender will have a slightly different application process. Some may allow you to apply online, while others require a more formal meeting. Be prepared, be honest, and remember that it's okay to ask questions. Remember, some equipment lenders will ask you to pay a down payment once they approve your application.
#DidYouKnow At Camino Financial, we won’t ask for a down payment or information about the equipment.

Business Equipment Financing 101: The Basics

Equipment Finance Definition

Business loans for equipment give companies a lump sum allowing them to make equipment purchases or buy machinery without spending their money upfront. Different lending companies will have different restrictions. 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. Lenders typically only finance up to a certain percentage of the equipment's value (usually 80-90%).

How Does It Work?

Once you receive the loan, you need to repay it by making periodic payments that include the principal amount and the interest rates. Unlike traditional loans, you can only use the funds from equipment financing to purchase equipment. One of its distinct features is that the equipment you purchase is collateral for the loan. This self-secured nature often makes it easier for businesses to qualify, even if they don't have a long credit history or perfect credit score. If a business fails to repay the loan, the lender has the right to seize and sell the equipment to recover their money. Upon the loan's final payment, the borrower typically assumes full ownership of the equipment.

Pros And Cons

  • 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.
  • You get the ability to finance new equipment that can help your businesses grow and improve your operations.
  • The equipment may become outdated when you pay off the loan.
  • Some lenders may require a substantial down payment.
  • To qualify, small business owners may need a good business and personal credit score.

What Kind Of Equipment Can I Finance?

Generally, if it's something your business needs to operate efficiently, you can likely finance it. Equipment financing typically covers physical assets that are crucial to your daily operations. This might include:
  • machinery for manufacturing businesses
  • commercial kitchen appliances for restaurants
  • office equipment and furniture for a corporate setting
  • servers and computers for tech-based businesses
  • specialized equipment such as X-ray machines for the medical or dental industry
Now, here's where some folks get a little tripped up. While commercial equipment loans can cover a wide array of physical assets, they usually do not cover expendable or consumable goods. For instance, you can't typically finance office supplies, like stationery or printer ink, with an equipment loan. Nor could ongoing expenses such as rent, wages, or utility bills. In a nutshell, think of these loans as tools for obtaining tangible, long-lasting assets that directly contribute to your business's functionality.

Examples Of Equipment You Can Finance With A Loan

There are many different pieces of machinery that you can finance with business loans for equipment, including:
  • 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
  • Medical equipment

Most Common Requirements

  • Credit Score. Most lenders will want to check both your personal and business credit scores. A good credit score can help you secure better interest rates and terms.
  • Financial Statements. You will need to provide your business's financial statements. This includes balance sheets, income statements, and cash flow statements. Also, lenders will require you to meet a minimum annual revenue.
  • Tax Returns. Lenders may require tax returns to evaluate your business's profitability and financial stability. This typically includes both personal and business tax returns.
  • Time in Business. The length of time your business has been operational is crucial. Many lenders prefer businesses that have been in operation for at least two years, as it suggests stability and experience.
  • Equipment Quotes. Before applying, you'll need a quote or invoice for the equipment you plan to finance. This helps the lender understand precisely how much funding you need.
  • Collateral. In most cases, the equipment you're financing will serve as collateral. However, some lenders might require additional collateral depending on your loan amount and creditworthiness. If they don't ask for collateral, they might require a personal guarantee or impose a lien upon other business assets.
  • Proof of Ownership. If you own your business, lenders will need proof of ownership. This could be in the form of articles of incorporation or other legal documents.
Fortunately, there are lenders with minimal requirements, like Camino Financial.
You can use our loans for equipment financing purposes. Plus, we won't ask for a business plan, and you can apply with an ITIN if you don't have an SSN. Apply for a business loan today

How Much Does Equipment Financing Cost?

The cost depends on a few factors, including:
  • The loan provider
  • Funded amount
  • Interest rate
  • Term and length
  • Collateral
  • The kind of equipment borrowed
Certain equipment is more valuable and expensive and thus costs more.

Average Loan Rates And Terms

The interest rates 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). On the other hand, the length often aligns with the equipment's expected lifespan. Most equipment loans have terms ranging from 2 to 7 years.

Information To Help You Decide If You Should Apply For Equipment Financing

When Is The Right Moment To Finance Equipment?

There are a few key considerations that you should take into account:
  • The first is whether or not the equipment you purchase is essential to your business operations and if it will positively impact your bottom line.
  • If the answer is yes, then financing may be an attractive option as it allows you to spread the cost of the equipment over time rather than investing in a significant upfront cost.
  • Additionally, it may prove advantageous if you can take advantage of tax benefits or access funds that would not have been accessible otherwise.
  • It's also important to consider the repayment terms, as this will determine how much cash flow is available for other business expenses.
  • Ultimately, it can be a great way to get the essential resources necessary for your business operations without putting too much strain on your budget.
  • It's important to do your research and ensure you are getting the best terms available to maximize this opportunity.
  • Finally, leasing may be an option worth exploring if you're looking for a long-term solution, as it offers lower monthly payments and greater flexibility.
  • Leasing allows businesses to upgrade their equipment as technology advances and can be beneficial if long-term reliability is a priority.
  • It's crucial to consider all the pros and cons of leasing and financing before making a decision and any particular business needs that may factor into the choice.

Using A Loan vs. Paying Upfront

A key benefit to taking out a loan is that you may be able to get the equipment right away rather than having to wait until you have saved up enough money. Loans also offer more flexibility in repayment plans, allowing you to make payments over a more extended period and potentially spread out the cost. However, taking out a loan can be risky if not planned properly. It is important to consider the amount you are borrowing, the repayment period, and any associated fees or interest rates. Paying upfront may be beneficial if you have saved up enough money to cover the cost, as it can potentially be a less expensive option. Additionally, it allows you to avoid taking on additional debt and the responsibility of making regular payments.

Should You Apply For An Equipment Loan?

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. Consider if the equipment is essential to your business and will help you grow or improve your operations. If so, then an equipment loan may be a good option. However, if the equipment is not essential or will not significantly impact your business, 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.
#CaminoTip If you have an urgent need for cash, emergency loans could be a better option for you.

The Different Places You Can Get Commercial Equipment Loans

Business equipment financing can come from various sources, including :
  • Banks and credit unions offer competitive rates and terms and the potential to build a business relationship with your local community.
  • Online lenders are often cheaper and easier to apply for but may have less flexible repayment options.
  • The Small Business Administration (SBA) provides guarantees, making it easier for small businesses to secure loans with favorable terms and lower interest rates. The catch? The application process can be lengthier and more stringent.
#CaminoTip Knowing the potential return on investment (ROI) can help ensure you get your money's worth in the long run.

Other Financing Alternatives

Maybe you need equipment, but you're still unsure if a loan is the correct option. Well, here are other alternatives:

Installment Loans

An installment loan is a common financing method where businesses borrow a lump sum of money, which they repay over time with interest. You can get them from banks or alternative lenders. Unlike equipment financing, you can use the funds from installment loans for any business-related expenses, offering greater flexibility. This type of loan is repaid in regular payments (usually monthly) over a predetermined term. This straightforward and predictable structure makes installment loans attractive for many businesses. Apply for a business loan today


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.
#CaminoTip There are many government and private grants out there. Visit 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 must maintain a good credit rating to keep the line of credit open.

Business Credit Cards

Business credit cards can help you manage 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.
#CaminoTip 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, compare different offers to find the one that's right for you.

Equipment Lease

Business loans for equipment aren't the only option to help your company get the necessary equipment. You could opt for equipment leasing. You'll rent the machinery with equipment leasing instead of purchasing it outright. It works a lot like leasing a personal vehicle. When the equipment lease term ends, you'll return the equipment 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. It 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.

Equipment Leasing vs. Financing: Main Differences

venn diagram illustrating the differences and similarities between equipment leasing and financing
#CaminoTip 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. 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 grow.
Fortunately, you can use Camino Financial loans for equipment financing.
Request a quote for a business loan today so you can secure financing and purchase the equipment your business needs. Apply for a business loan today  


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 7 years (or sometimes even up to 25 years, like with an SBA loan, for example).

Can I use Section 179 tax deduction for equipment financing?

Yes, you can use Section 179 to take a tax deduction for business equipment loans.

How do you qualify for equipment financing?

Many lenders will look at your credit score, history, time in business, annual revenue, and 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 options. Some are SBA, CFDI lenders, online lenders, a bank, or credit unions.

Are there equipment loans for startups?

Yes, there are commercial 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?

Getting equipment loans with bad credit is possible, 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 financing you seek. 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 depends on the lender and what equipment you're looking to finance. Generally, 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 a small business?

A loan may be a good option if the small business needs new or updated equipment and cannot afford to purchase it outright. This way, the company 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 as an equipment loan may not be the best idea.

What are typical terms for equipment financing?

Typical terms range from 2 to 7 years, depending on various factors like the specifics of the equipment.

Is it hard to get financed for equipment?

Some businesses can get financed through banks or other lending institutions, while others may need to look into private funding sources or crowdfunding platforms. No matter your route, having a well-crafted business plan and credit history is essential to show you're a trustworthy borrower.

What credit score do you need for an equipment loan?

A credit score of 680 or higher is generally needed to get approved for an equipment loan. Your credit score measures how likely you are to repay debt, and lenders use it to determine how much interest to charge on a loan.

Is equipment financing a good idea?

It can be a good idea, but it depends on your situation. If you're not sure whether or not equipment financing is a good idea for you, here are a few things to consider:
  • What is the interest rate?
  • How long do you have to pay it off?
  • Is there a prepayment penalty?
  • Are there any other fees?
  • What is the equipment worth at the end of the loan?

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