By Marianne Hayes | Edited by Kurt Adams and Xiomara Martinez White Equipment financing — also called equipment loans — helps small business owners acquire, upgrade or replace essential or heavy equipment, such as restaurant refrigerators, computers, vehicles and commercial copy machines. Equipment loans can help avoid a substantial strain on your business's cash flow from an upfront purchase. There may even be equipment financing options available to startups and businesses with bad credit.
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Here’s our picks for the best places for equipment loans.
| Lender | Best for | Max. loan amount | Starting interest rates | Time to funding | Min. credit score |
|---|---|---|---|---|---|
| National Funding | Bad credit | $150,000 | 4.99% | 24 to 72 hours | Higher than 575 |
| Currency | Fast funding | $100,000 | 7.50% to 12.50% | 1 to 3 business days | 625 |
| Commercial Fleet Financing | Commercial vehicles | $1,000,000 | Not disclosed | 1 business day | 640 |
| Taycor Financial | Startups | $2,000,000 | 3.49% to 28.00% | 4 to 24 hours | 550 |
| CIT | Large amounts | $500,000 | Starting at 5.49% | 1 business day | 620 |
Pros
Low minimum credit score requirement
Payments not required for the first three months
Cons
It could take up to three business days to receive funding
No down payment required, but this could trigger a higher monthly payment since you’re borrowing more
If you’re looking for an equipment loan but have a less-than-perfect credit score, National Funding might be worth exploring. You can finance new or used equipment — plus, borrowers have a few months before their first payment is due.
Pros
Ideal for business owners with commercial transportation needs
Open to startups that make a substantial down payment
Cons
High minimum credit score requirement
Lack of transparency around average interest rates
If you’re looking for an equipment loan for commercial vehicles, Commercial Fleet Financing specializes in commercial transportation equipment like trucks and trailers. Creditworthy business owners could secure funding in as little as 24 hours.
Pros
No minimum time-in-business requirement
Lower credit may not be an issue
Cons
Interest rates may be in the double-digits
A longer loan term could mean paying more interest over time
Taycor Financial may be appealing to newer businesses, as the lender may be open to offering equipment loans and leases to startups. Borrowing limits are high, though interest rates can be steep.
Pros
Qualified borrowers could be approved for up to $500,000
Interest rates could be as low as 5.49%
Cons
Startups must be in business for at least two years
Not ideal for business owners with a lower credit score
CIT’s equipment financing stands out for its high borrowing limits. Eligible business owners could receive up to $500,000 in just one business day.
Equipment financing is a type of business loan that enables companies to purchase the needed equipment to operate their businesses — think computers, vehicles or large machinery. An equipment loan is a kind of asset-based financing, which means that the equipment acts as collateral to secure the loan.
Equipment loans typically come for a fixed term — generally around five years, though specific lenders may vary. You’ll be expected to make regular payments on an equipment loan, oftentimes in monthly installments of the loan principal plus interest, which can be as high as 28% in some cases. Some lenders require a down payment, which can help to reduce the overall amount you owe and possibly even the lifetime of the loan.
To qualify for equipment financing, lenders will typically examine your credit score, time in business and annual revenue.
Personal credit score: Lenders will examine your personal credit score to determine eligibility. Many online lenders, including Currency and Commercial Fleet Financing, have minimum credit score requirements in the 600s.
Time in business: Some lenders may have a minimum time in business requirement of two years, but there are online lenders available that only require six months in operation.
Annual revenue: Traditional banks may require minimum annual revenues of $250,000.
When applying for equipment financing, the lender may require the following documents:
Business owners can finance all sorts of equipment, including vehicles, computers, kitchen appliances, commercial office supplies and more. Equipment loans can make sense across many industries.
Yes, some equipment lenders only require six months in business to qualify for equipment financing — and some don’t have any time-in-business requirements. This allows startups to finance any necessary equipment within their first year of business.
Yes, some lenders require minimum credit scores as low as 550 — however, it is worth noting that borrowers with higher credit scores are more likely to get equipment loans with lower interest rates. A higher rate will make your loan more expensive in the long run.
The interest rate on equipment loans depends on a few different factors, though the borrower’s credit score will likely influence their loan’s interest rate. (Note, however, that every lender is different, and will weigh these factors in their own way.) Interest rates for equipment loans vary, but can typically range anywhere from 3.49% to 28%.
Yes, some lenders may provide equipment financing options for pre-owned equipment. Shopping around with different lenders can help you compare your options so you can make the best decision for your business.
It all depends on your situation. The following factors will likely come into play when applying for equipment financing:
Because the equipment acts as collateral to secure the loan, it’s generally easier to qualify for an equipment loan versus a traditional business loan, as the latter may have stricter lending requirements.
The loan itself is not an asset, but equipment loans are an asset-based form of financing. This means that you’re using a loan to purchase an asset — the equipment itself will serve as collateral for the loan, and once your loan is fully paid, you’ll own the equipment free and clear.
Some equipment loans have generous term lengths of up to nine years. Others may be as short as six months. Just keep in mind that a longer loan term will mean paying more interest over the life of the loan.