Equipment Financing

A loan to buy a specific thing, secured by that thing. A truck, a forklift, a walk-in cooler, a dental chair, a CNC machine, a salon's stations, a gym's rack line. The lender pays the vendor, takes a lien on the asset, and you pay it off over two to seven years. If you stop paying, the lender takes the asset back.

That security is why it is the cheapest money most small businesses can get and the easiest to qualify for. A bank lending unsecured wants two years of returns and a strong score, because if you stop paying there is nothing to collect. An equipment lender has the equipment. That changes every threshold.

It funds in two to five business days from a signed quote, which is slower than a cash advance by a couple of days and cheaper by a wide margin.

More businesses than for any other product here. Six months in business is a common floor and some lenders go lower; a personal score around 600 is typical and specialist programs reach into the 500s with a larger down payment; deposits around $15,000 a month is a usual minimum. A brand-new business with an experienced owner, a strong personal file and a resaleable asset is a normal startup equipment file.

The asset matters as much as you do. A dealer-sold truck with a serial number and a resale market is easy; a custom-built machine with one buyer in the country is hard, whoever is applying.

Expect 10 to 20 percent down. Strong credit, a long trading history and a highly resaleable asset push it toward zero; a new business, a weak score or specialised equipment push it higher. Zero-down offers exist and are usually paid for through the rate.

Terms run two to seven years, roughly matched to the asset's useful life: three to five for vehicles and shop equipment, five to seven for a kitchen line, imaging equipment or a machine tool. A shorter term costs less in total and more each month.

Rates sit closer to a bank's than to any working capital product, because the collateral is real. Ask for the total cost in dollars over the term and the monthly payment, and check for a balloon at the end.

Used equipment finances routinely. Lenders cap by age and hours rather than refusing — often around ten to fifteen years for vehicles and machinery — and want a valuation or an inspection, a shorter term and sometimes a larger down payment than on new.

Dealer stock finances most easily: a serial number, a seller the lender can pay directly, usually a warranty. Private sales and auctions can be financed with an inspection and a bill of sale, more cautiously. The savings at auction are real; so is a machine with no recourse.

Finance it if you will still want the asset in five years: you build ownership and it usually costs less overall. Lease it if it dates quickly — cardio equipment, alignment systems, imaging with software that ages — or if you need the lowest monthly figure and are willing to own nothing at the end.

Read the end of the lease before the start. A dollar buyout is a loan in a lease's clothing. A fair-market-value buyout on a machine you intend to keep costs materially more than either. A fixed balloon is a cliff to plan for ninety days ahead, not the week it arrives.

Section 179 lets a business deduct the cost of qualifying equipment in the year it is placed in service rather than depreciating it over years, and financing does not disqualify it: the full purchase price can often be deducted while you are still making payments. Limits change annually. The IRS publication on depreciation is the authority, and your accountant is who tells you how it lands for you.

A repair is not an asset. An engine rebuild, a compressor on a walk-in, a transmission, the recovery hours after a system failure: nobody can repossess labor and parts, so nobody finances them as equipment. Those are working capital.

The rule that saves the most money in this market is the split: finance the machine as a machine and the rest as working capital, in two applications a few days apart. A $35,000 van on a six-month advance because the advance was faster costs several times what the same van costs on a four-year equipment loan. Rent for three days instead.

We have written one guide for each of the common purchases and breakdowns — trucks, vans, forklifts, kitchen lines, lasers, lifts, mowers, plows — grouped on the guides page under Something broke and Buying, expanding, opening.

The lender repossesses the equipment, sells it and applies the proceeds to the balance. If the sale raises less than you owe — and it usually does — the shortfall remains your liability, and a personal guarantee makes it personally yours. Losing the asset does not end the debt.

Before signing: the total cost in dollars, the buyout terms, whether the lien is on the financed asset alone or a blanket filing over everything the business owns, who installs and certifies, and what insurance the lender requires you to carry on the asset. A blanket UCC filing in first position can stop any other funder lending to you until it is released.