Equipment Financing 101
Finance new or used equipment without draining your cash reserves.
Equipment financing lets you acquire the machinery, vehicles, technology, or tools your business needs — and pay for them over time. The equipment itself typically serves as collateral, making approval faster and easier than unsecured loans.
What Can Be Financed?
Almost any tangible business asset qualifies: construction equipment, commercial vehicles, restaurant appliances, medical devices, manufacturing machinery, IT hardware, and more. Both new and used equipment can be financed, and some lenders also cover software and installation costs.
How Equipment Loans Work
The lender advances the full purchase price (or a large percentage) and you repay it in fixed monthly installments over the equipment's useful life — typically 2 to 7 years. At the end of the term, you own the equipment outright. Interest rates are generally lower than unsecured loans because the asset backs the loan.
Equipment Loans vs. Leasing
With a loan you build equity and own the asset at the end. With a lease you pay to use the equipment for a set period and return it (or buy it at residual value). Loans are better for long-lived assets you plan to keep; leases suit technology that becomes obsolete quickly.
Qualification Requirements
Most equipment lenders require at least 6 months in business, $10,000 or more in monthly revenue, and 6 months of bank statements. Because the equipment secures the loan, credit requirements are more flexible than for unsecured financing — making this accessible to newer businesses.
Tax Advantages
Equipment purchases may qualify for Section 179 deductions or bonus depreciation under U.S. tax law, allowing you to deduct the full cost in the year of purchase rather than depreciating it over time. Canadian businesses may benefit from CCA (Capital Cost Allowance) deductions. Consult your accountant for specifics.
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