Mechanic worker in uniform working on car. Concept: equipment financing
Luis Amigo
By: luis_amigo1
Read in 13 minutes

How to Get Equipment Financing for Your Small Business

Oscar Wilde once said: “Anyone who lives within their means suffers from a lack of imagination.” This also applies to businesses. Even when your business seems to be working good, there will come a time when it comes stagnant if you only rely on your own means. A good entrepreneur has to foresee the next steps. Taking your business to the next level often comprises investing in equipment. When you haven’t the cash to afford those investments or you simply don’t want to strain your financials, equipment financing could be your answer.

What is Equipment Financing?

Equipment Financing provides quick access to cash to finance up to 100% of the equipment you need for your business. Applying for an equipment loan is typically a fast and easy way to finance the purchase of most types of equipment.

An equipment loan is a self-secured loan, meaning that the equipment itself acts as the collateral of the loan. Putting up collateral makes these loans slightly easier to qualify for. Lenders want to have a guarantee that they’ll receive their money back. In this case, the equipment provides security to lenders since they can always seize the equipment if the loan is not repaid.

Equipment Financing works the same as a car loan: it’s the price of the equipment what dictates the loan amount and terms, and further collateral won’t be needed.

Equipment Financing can be used for most types of business-related equipment (electronics, machinery, vehicles…) and can be used both for new and second-hand equipment.

Who is a Good Candidate for Equipment Financing?

Any business owner whose production relies on machinery or equipment is a good candidate for equipment financing. Some examples of equipment include:

  • Technology office equipment: internet modem, router, computers or headsets
  • Air compressors, jacks, oil drains and engine hoists for auto repair shops
  • Photocopiers or comb binders for your copy center
  • Commercial grills, ice machines, griddles or refrigeration equipment for restaurants
  • Dump trucks, skid-steer loaders, and excavators for your construction business
  • Any type of vehicle you need for your business
  • Wash machines, dryers and iron machines for laundry businesses
  • X-ray machines and dental chairs for dental offices
  • Salon stations, dryers and pedicure chairs for beauty salons

Since the equipment works as collateral, this is a good option for those business owners who don’t want to use personal assets as collateral. Also, business owners with a lower credit score who can’t apply for other types of business loans can benefit from equipment financing (having always in mind that a lower credit score will result in higher interest rates)

Pros and Cons of Equipment Financing


  • Quick process with less paperwork and fast access to funds
  • You won’t need to pay upfront for the equipment
  • As we have seen, you won’t be requested for personal collateral
  • They help you build your credit history
  • Interest rates are usually lower interest than credit cards
  • You can apply with lower credit score (but expect to face higher interest rates in that case)


  • Have in mind that the equipment may be obsolete by the time you repay the loan: the interest you pay during the life of the loan means you’ll end up paying more for the equipment than the initial, market price.
  • If you expect using an equipment loan to buy used equipment, you should take into account that the loan amount with covers the appraisal made on the piece of equipment might (not the price the seller is requesting, which could be higher).

How Does Equipment Financing Work?

Besides the feature that the equipment works as collateral, equipment loans work basically like regular business loans: you repay the loan through monthly installments that include principal and interests, during a fixed number of months. These are the basic features of equipment financing:

  • Loan amount: The maximum amount you can borrow equals the total value of the equipment. The way this value is calculated may differ if the equipment is new or used: for the first one, the market value will be used as a reference; in the case of second-hand equipment, an appraisal might be needed.
  • Interest Rate: The interest rate is fixed and may vary from 8% to 30%, depending on a number of factors (equipment price, duration of the loan, credit score, type of lender, etc.)
  • Loan Term: The duration of the loan will also depend on the nature of the equipment and the lender: some lenders will match the loan term with the estimated lifetime of the equipment, others will set a maximum of 10 years.
  • Funding speed: It can be as little as 2 business days. Again, the application process is easy and quick.

What Are the Requirements to Get Equipment Financing?

You will find that equipment loans have lower requirements than other types of business loans. This means lower-scoring requirements or shorter time in operations:  business owners with rating scores as low as 600 or only one years in the business might be able to get equipment financing (the requirement for most business loans is 2 years). As with any business loan, your lender may also ask for your tax returns or bank statements.

The main difference with other types of business loans is that your lender will request information about the equipment to be purchased: in your application, you’ll have to include a description of the equipment, and a price quote or equivalent documentation of the equipment cost.

Is Equipment Leasing a Good Alternative?

Some business owners choose to lease the equipment instead of financing it. What is the difference between these two options?

By using an equipment loan, you’ll own the piece of equipment after your loan gets paid off. With a lease, your business will only be able to use that equipment while you’re paying for it unless you buy it at the end of the leasing contract.

So, if you know you’ll need that equipment for a while, equipment financing could be the right move. It’s also the right choice for equipment that will retain its intrinsic value or will be still operative by the end of the contract period.

On the other hand, if you’re looking for a temporary solution to your equipment needs, leasing equipment might make more sense. It’s also a better option for equipment that rapidly loses value or will suffer technical obsolescence by the time the leasing period ends.

Who Provides Equipment Financing?

There are several options available in the marketplace to get equipment financing. Equipment loans can be obtained from sources ranging from traditional national lenders to alternative online lenders.

  • Traditional national lenders, like Wells Fargo and Bank of America, generally have stricter underwriting requirements, but better rates and terms. They may be more suitable for established businesses with strong cash flow and assets.
  • Alternative online lenders are becoming increasingly popular since they are more flexible with their requirements than traditional lenders.

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Camino Financial Small Business Loans: A Great Option to Purchase Equipment

Camino Financial offers small business loans that can be used as equipment financing. We are an excellent option if you want to buy new or used equipment but you are having a hard time financing it directly through your supplier. Although we don’t offer equipment financing as defined in the sections above, funds from our loans can be used to purchase equipment.

We are more flexible than traditional lenders: we mainly take into consideration the personal credit of the business owner and global cash flows. Some of our loan features include:

  • Funds can be used for any business purposes, so purchasing any kind of equipment is definitely a possibility
  • Loan amounts range from $5,000 to $400,000 to fit any of your equipment needs
  • Loan terms from 24 to 60 months so you can choose the duration you feel most comfortable with
  • As a requirement, you only need 9 months in operations and $30,000 in annual sales
  • If you don’t have a credit history, you can still apply for a loan. By making timely repayments, you’ll build your credit.
  • There’s no prepayment penalty if you decide to repay the loan earlier
  • Quick and streamlined paperless process that allows you to get your funds within 4-10 days. This makes Camino Financial an excellent choice if, for example, you are buying a piece of equipment on sale and under a limited time offer, or if your supplier is offering you a deal but is requesting a quick response.

You can read this article to know the most common business loan requirements to apply for a loan and check how they compare to the requirements of Camino Financial.

To have a complete list of documents most lenders require and how they compare to what we ask at Camino Financial, read this checklist.

By checking both resources you’ll soon realize that applying for a business loan with Camino Financial is the right choice to fund your equipment needs.


Last Words

Equipment financing can be the solution to keep your business functioning at optimal performance. It can also allow you to meet the increasing demand in your products or services and thus expand your business. But you need to find the right financing choice and a lender that understands your business and your unique needs. Turn to someone that knows your industry and can offer you favorable terms and conditions to meet your goals. You can rest assure that Camino Financial can be that partner. We are backed by our expertise in small business and by hundreds of satisfied business owners like you who have trusted us to provide their funding needs. If you are looking for the best option to purchase equipment for your business, take the first step today and apply for a business loan with Camino Financial.


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