Equipment is the easiest asset to finance because the machine itself secures the loan. Your choice comes down to three paths: a bank or credit union loan for the lowest cost if your credit and financials are strong, an equipment lessor for speed and flexibility, or the vendor's own financing program when it offers a promotion on that exact machine.
The three paths
Each path finances the same truck, oven or excavator, but they underwrite and structure it differently.
| Path | Best for | What they look at | Ownership |
|---|---|---|---|
| Bank or credit union loan | Established businesses with clean financials | Tax returns, cash flow, existing debt, personal credit | You own it from day one; the lender holds a lien |
| Equipment lessor | Fast decisions, newer businesses, specialty assets | Credit, time in business, the asset's resale value | Loan, capital lease or true lease, depending on structure |
| Vendor or manufacturer program | Buying a specific brand during a promotion | Mostly credit and the dealer's relationship | Usually a loan or lease written by the vendor's finance arm or a partner lessor |
A bank or credit union asks for the most paperwork and gives the longest terms. An equipment lessor often approves smaller purchases from a one page application. Vendor programs are convenient but tied to one seller, so compare them against an independent quote.
Who says yes and who does not
Banks and credit unions say yes when you have at least two years in business, profitable tax returns and a relationship with them. They often decline startups, owners with recent credit problems, and used or specialty equipment they cannot value easily.
Equipment lessors say yes to a wider range of borrowers, including businesses with one or two years of history, because they understand the resale market for the asset. If you default, they know how to recover and sell the machine. They are cautious about equipment that loses value quickly, such as computers and software, and about soft costs like installation and training when those make up much of the deal.
SBA lenders finance equipment inside a larger 7(a) loan, or through an SBA 504 loan for heavy, long lived machinery. These fit when the equipment is part of an expansion or a purchase of real estate. They are slower than a lessor, so they rarely make sense for a single machine. In Canada, the Canada Small Business Financing Program covers new and used equipment through participating banks and credit unions.
Online lenders will finance equipment, but many write it as a general term loan with a shorter term. That works for urgent needs, though a dedicated lessor usually offers a structure that better matches the life of the asset.
Revenue based funders and merchant cash advance providers are a poor fit. Daily payments on a short term do not match an asset you will use for five to ten years.
Loan, lease or vendor deal
The structure affects your cash, your taxes and what happens at the end of the term.
- Equipment loan. You own the equipment, make fixed payments, and the lender holds a lien until it is paid off. Most lenders finance 80 to 100 percent of the price. Read more on equipment financing.
- Capital or finance lease. Works like a loan in substance, often with a one dollar buyout at the end. Useful when you want ownership but the lessor offers better terms or faster approval.
- True lease or fair market value lease. Lower payments, and at the end you return the equipment, renew, or buy it at market value. Good for equipment you plan to upgrade, such as medical imaging or technology.
- Vendor promotions. Low payment or deferred payment offers from a manufacturer. They can be a strong deal, but the price of the equipment may be less negotiable when you take the financing.
In the US, Section 179 and bonus depreciation affect how a loan or capital lease is treated for taxes. In Canada, capital cost allowance rules apply. Pick the structure that matches your tax position before you sign.
What to prepare
Lessors and banks ask for different amounts of paperwork. Have everything ready so you can take the best offer when it comes.
- A quote or invoice from the seller, with make, model, year, serial number and price
- Whether the equipment is new or used, and for used equipment, its hours or mileage and condition
- Time in business and your business registration or articles of incorporation
- Three to six months of business bank statements
- Two years of business tax returns and a current profit and loss for larger purchases
- A personal credit check authorization for each owner with 20 percent or more
- A short explanation of how the equipment will earn money or cut costs
- Your insurance agent's contact, since the lender will need to be listed as loss payee
For purchases under a lessor's application only limit, the quote, bank statements and a credit check are often enough.
The order to approach lenders
Shop in this sequence to get the best terms without wasting weeks.
- Ask the vendor what financing it offers. Get the promotion in writing, including the cash price without financing, so you can compare.
- Check with your own bank or credit union. If you have a deposit relationship and strong financials, they may offer the lowest cost and longest term. Ask how long their decision will take.
- Get one or two quotes from equipment lessors. Choose lessors that know your industry, whether that is construction, transportation, medical or food service. They often approve in a day or two.
- Use an SBA loan if the equipment is part of a bigger project. Combine equipment with working capital, real estate or a business purchase in one SBA 7(a) or 504 loan.
- Compare total cost and end of term terms, not only the payment. A lower payment with a large balloon or market value buyout may cost more than it looks.
Browse lessors and lenders by place to find officers who finance equipment in your market, such as Texas, Florida or Alberta.
Need help choosing a lender? Sign up through BusinessLoanBroker.ai to share your financing needs and get help with your next steps. You can also explore financing guides and tools before you apply.