Equipment financing is one of the most accessible forms of business lending — often easier to qualify for than working capital because the equipment itself serves as collateral. Here's what lenders look at, what rates look like, and how to navigate the process.
How Equipment Financing Works
Unlike unsecured working capital loans, equipment financing is secured by the asset you're purchasing. If you stop making payments, the lender repossesses the equipment. That reduced risk is why the credit requirements are lower and the rates are better than most alternative products.
You can finance new or used equipment — vehicles, machinery, restaurant equipment, technology, medical devices, and more. Typical financing covers 80 to 100% of the equipment value, and terms usually run 2 to 7 years depending on the asset's useful life.
What Lenders Require
| Factor | Typical Requirement |
|---|---|
| Personal Credit Score | 600–620 minimum; 650+ for better rates |
| Time in Business | 1+ year (some lenders do 6 months for strong profiles) |
| Annual Revenue | Generally $75K+ though lower for very small equipment |
| Down Payment | 0 to 20% depending on credit and equipment type |
| Equipment Age | Most lenders finance equipment up to 10 to 15 years old |
Rates and Terms
Equipment loan rates in 2026 typically run 6 to 20% APR depending on credit profile, time in business, and equipment type. This is significantly cheaper than working capital products and, for newer businesses, often more accessible than SBA. The rate reflects the lender's risk — newer businesses and lower credit scores pay more.
New vs. used: Lenders prefer new equipment because its value is easier to establish and it depreciates more predictably. Used equipment financing is available but typically requires an appraisal and the rates are slightly higher. For specialized equipment with limited resale market, expect the lender to be more conservative on LTV.
Equipment Leasing vs. Equipment Loans
An equipment loan means you own the equipment at the end of the term — you're building an asset. A lease means you're renting it, and at the end of the term you either return it, buy it at fair market value, or upgrade to new equipment. Leases often have lower monthly payments because you're not buying the full value of the asset. The right choice depends on how long you'll need the equipment and whether ownership matters for your business.
The Process
Equipment financing moves faster than SBA — most decisions come in 24 to 72 hours for straightforward applications. You'll need a quote or invoice for the equipment, basic business financials, and personal credit authorization. Lenders may ask for bank statements (typically 3 to 6 months) and sometimes a business tax return depending on the size and your profile.
A Strategic Use Case Most People Miss
Equipment financing can be a smart way to preserve working capital. Rather than paying cash for a $50,000 piece of equipment, finance it at 8% over 5 years ($1,013/month) and keep that $50,000 available for operations, inventory, or opportunities. If your business generates more than 8% return on deployed capital, financing the equipment is mathematically better than paying cash.