Equipment financing
Equipment financing is built around a specific purchase: the equipment itself typically serves as collateral, which shapes both the structure and the tradeoffs.
What it is
Equipment financing provides funds to purchase business equipment — vehicles, machinery, kitchen equipment, medical devices — with repayment on a set schedule. Because the equipment secures the financing, the provider can typically repossess it if payments stop.
Closely related structures include equipment leases, where you pay to use the equipment rather than own it. Leases and loans behave differently at the end of the term — ownership, buyout options, and tax treatment can all differ — so identify which structure you are actually being offered.
When businesses typically consider it
Businesses typically consider equipment financing when a specific, identifiable asset will generate revenue or capacity: a delivery vehicle, a CNC machine, an oven for a second location.
Because the collateral is built in, this structure is purpose-built for equipment purchases. For expenses with no asset to secure — payroll, rent, marketing — other structures are designed for that.
Tradeoffs
- Built-in collateral vs. tied-up flexibility: The equipment securing the financing can simplify the agreement — but it also means the financing is anchored to that asset, and you cannot sell or replace the equipment freely while it is financed.
- Ownership vs. leasing: Financing usually ends with you owning the equipment. A lease may cost less per month but can end with no ownership and a decision about returning or buying out the asset.
- Matching the term to the asset: Ideally the financing term does not outlive the equipment's useful life. Paying for a machine years after it stops producing revenue is a quiet drag on cash flow.
What to compare
- Whether the offer is a loan or a lease — they are not the same product
- Total amount paid over the full term, including any buyout or residual
- Down payment and any fees due upfront
- End-of-term terms: ownership, buyout price, return conditions
- What happens if the equipment fails or becomes obsolete mid-term
- Whether other collateral or a personal guarantee is required beyond the equipment
What this page cannot know
- What any provider will offer for your specific equipment purchase
- Whether the equipment will generate enough revenue to justify the payment
- How a lease-versus-loan decision plays out for your tax situation — that is a question for your accountant
- Anything about your business you have not entered into one of our tools
Run your own numbers
Start with the numbers, not a lender. The tools are free, and nothing you enter leaves your browser.