Equipment financing refers to any loan or lease used for acquiring business assets, such as electronics, machinery, and vehicles. Compared to other loan types, equipment financing tends to be more cost-effective and easier for business owners to obtain.
Instead of purchasing equipment upfront, and paying yourself out of pocket, an equipment loan will provide you with monthly payments, at fixed interest rates, over a period of 6 months to 6 years.
The physical assets you purchase will serve as collateral for the loan so that if you default, the lender can repossess your assets. Once the loan is paid in full, you own the equipment.
Qualifying for an equipment financing loan depends on several factors, including your personal credit score, business operational history, and the equipment cost. Interest rates for equipment loans typically range between 5% and 30%.
Some lenders may require you to make a down payment of 10% to 20% of the equipment cost.
Small Business Loans - Learn more about the best lenders and loans for 2019.
Commercial Loans - Learn more about commercial loans and the best loan providers.
Why We Chose Lendio:
Lendio offers a wide variety of loan types, from business lines of credit to equipment loans, as well as property loans. Lendio also provides different loan amounts to suit each type of loan they offer, with high loan limits and relatively low interest rates.
Lendio acts as an intermediary, giving you access to over 75 lenders and increasing your chances of acquiring the funding you need. They also have a quick application process and pay-out time.
For more loan options, be sure to check out our list of small business loan providers.
Things to Consider When Evaluating Equipment Financing Companies:
- Look at the company's experience in financing equipment. Experienced companies will be more financially sound and be more knowledgeable of working with companies in different financial situations.
- Consider a company that has a wide variety of industry specializations and is not just experienced in the construction industry.
- Ask a company for references and check customer reviews so that you can evaluate the company's reputation.
Best Equipment Financing Companies:
Equipment Finance Company
$5,000 - $5,000,000
Provides access to over 75 lenders and has a quick application process.
$5,000 - $500,000
Offer flexible loan terms and quick funding but applicants must have been in business for at least 2 years.
Up to $150,000
Offers funding to small businesses with lower credit scores.
$5,000 - $500,000
Has a fast approval rate but there are undisclosed additional fees.
$25,000 - $500,000
Offers fast funding with fixed monthly payments but is not ideal for start-ups.
Up to $500,000
Offers flexible terms and repayment options but applicants must have been in business for more than 2 years.
A fast application process with moderate interest rates, but applicant must have been in business for more than 5 years.
Up to $500,000
The borrower qualifications are not as strict as Currency's competitors, but therre are penalty fees for late payment.
Up to $250,000
Businesses must have an annual revenue of $300,000 to qualify for loans. Balboa has flexible loan offerings and good rates.
Up to $500,000
Offers flexible rates and terms. The company does not provide clear borrower qualifications.
How do you get equipment financing?
You can apply for an equipment financing loan from a trusted lender. The application process is generally easy and funding is provided fast. You will need to furnish a few documents, including your:
- Driver's license.
- Personal credit score.
- Bank statements.
- Business tax returns.
- Equipment quote.
How long can you finance equipment?
This depends on the lender, but payment terms usually range from 6 months to 6 years.
What is a construction equipment loan?
Also known as heavy equipment financing, a construction equipment loan is another term for an equipment loan. These loans allow business owners to purchase construction equipment over a fixed period.
What is an equipment finance lease?
Equipment lease financing allows you to lease equipment from a company instead of taking out a loan. Equipment leases typically have smaller monthly payments and are best for businesses that need equipment temporarily.
Should I lease or buy equipment?
This is dependent on the size of your business, cash flow, and whether or not your equipment needs to be replaced after a few years.
Leasing requires a minimal initial expense, but you may end up paying more in the long run. Whereas, if you purchase the equipment, you have complete ownership and may also qualify for tax incentives.
Most business owners who lease equipment either need it temporarily or prefer to have it upgraded after a few years, such as computers.
What are the best business equipment financing companies?
What are the best commercial equipment financing companies?
Where can I find an equipment financing calculator?
Many equipment financing companies, such as Lendio, have calculators on their websites to help you determine whether an equipment loan is right for you.
What are the average equipment financing rates?
On average, equipment financing interest rates range from 5% - 30%.
Where can I get equipment financing for bad credit?
Although not impossible, it is harder to get an equipment loan if you have bad credit as the minimum credit score required is 600+.