By Jill A. Chafin | Edited by Kurt Adams and Janet SchaafEquipment 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 to reduce strain on your business’s cash flow for an upfront purchase. There may be equipment financing options available for startups and companies with bad credit.
Here are our picks for the best lenders for equipment loans.
| Lender | Best for | Max. loan amount | Starting interest rates | Approx. time to funding | Min. credit score |
|---|---|---|---|---|---|
| National Funding | High revenue businesses | $500,000 | 4.99% | 24 hours | 650 |
| Commercial Fleet Financing | Commercial vehicles | $1,000,000 | Not disclosed | 24 hours | 640 or higher is preferred |
| Taycor Financial | Startups | $2,000,000 | 3.49% | 24 hours | 550 |
| CIT | Fast funding | $500,000 | 5.49% | 24 hours | Not disclosed |
| Funding Circle | Online term loan | $500,000 | Not disclosed | 3 days | 660 |
| Bank of America | Traditional bank | Starting at $25,000 (no max.) | 6.25% | 10 business days | Not disclosed |
| SBA | Large amounts | $5,000,000 | Prime + 2.75% | 5 to 10 business days | 680 |
| Term length | 24 to 60 months |
| Max. amount | $500,000 |
| Starting interest rate | 4.99% simple interest |
| Min. credit score | 650 |
| Min. time in business | 6 months |
Low borrowing limits
No down payment means a higher monthly payment
With a required annual revenue of $250,000 to be eligible, National Funding could be a good fit for high revenue businesses looking for equipment loans. You can finance new or used equipment or secure a competitive lease contract with the Lowest Payment Guarantee program.National Funding also focuses on minority-, women-, and veteran-owned businesses looking to secure financing.
| Term length | Flexible |
| Max. amount | $1,000,000 |
| Starting interest rate | Not disclosed |
| Min. credit score | 640 or higher is preferred |
| Min. time in business | Not disclosed |
May require a down payment for borrowers with poor credit
Lack of transparency around average interest rates
| Term length | 12 to 84 months |
| Max. amount | $2,000,000 |
| Starting interest rate | 3.49% to 28.00% |
| Min. credit score | 550 |
| Min. time in business | None |
Interest rates may be in the double digits
A longer loan term could mean paying more interest over time
| Term length | 6 to 72 months |
| Max. amount | $500,000 |
| Starting interest rate | 5.49% |
| Min. credit score | Not disclosed |
| Min. time in business | 2 years |
Typically requires at least two years time in business
Lack of transparency about minimum credit score requirements
| Term length | 6 to 84 months |
| Max. amount | $500,000 |
| Starting interest rate | Not disclosed |
| Min. credit score | 660 |
| Min. time in business | 2 years |
Collateral is generally required
Doesn’t offer specific equipment loans
Funding Circle’s streamlined application process makes it an excellent option for a term loan that can be used for equipment. Although Funding Circle doesn’t offer specific loans for equipment, you can borrow up to $500,000 with their small business loan and use the funds for almost any business-related expense — including equipment purchases.In addition, a dedicated Account Manager will help guide you through the loan process to ensure you’re on the right track. You may need to provide collateral to secure a Funding Circle loan.
| Term length | Up to 60 months |
| Max. amount | Starting at $25,000 (no published maximum) |
| Starting interest rate | 6.25% |
| Min. credit score | Not disclosed |
| Min. time in business | 2 years |
Requires $250,000 in annual revenue
Lack of transparency about minimum credit score requirements
Bank of America offers a wide array of financial services, including business lending, checking and saving accounts, credit cards and merchant services. With 6,402 branches nationwide, Bank of America could be a good option if you’d prefer in-person support at any stage of your business’s financial journey.To qualify, you need a minimum of $250,000 in annual revenue. Make sure to unlock extra perks through Bank of America’s Preferred Rewards for Business program.
| Term length | 120 months |
| Max. amount | $5,000,000 |
| Starting interest rate | Prime + 2.75% |
| Min. credit score | Typically 680 |
| Min. time in business | Typically 2 years |
Collateral and/or a personal guarantee may be required
Long processing time compared to online lenders
If you need to purchase or upgrade equipment to keep your business running, an SBA 7(a) loan provides the most significant amount — up to $5,000,000. An SBA 504/CDC loan is another option to purchase large machinery, too. You can use the funds for general equipment and inventory, like computers, restaurant appliances, office furniture, technology systems, medical equipment and more.The Small Business Administration guarantees a portion of every SBA loan, allowing lenders to offer affordable rates to small business owners. Note that the SBA recommends a FICO Score of 680 or higher to improve your chances of approval.
Equipment financing is a business term loan that enables companies to purchase equipment needed to operate their businesses — such as computers, vehicles or large machinery. An equipment loan is a type of asset-based financing, meaning the equipment acts as collateral to secure the loan.
Equipment loans typically come with a fixed term — generally around five years, though specific lenders may vary. You’ll need to make regular payments on an equipment loan, usually 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 reduce the overall amount you owe and possibly even the loan’s lifetime.
You have several options when looking to finance equipment for your business.
To qualify for equipment financing, lenders will typically look at the following:
When applying for equipment financing, the lender may require the following:
Business owners can finance all sorts of equipment, such as vehicles, computers, kitchen appliances and commercial office supplies. Most industries can apply for equipment loans. Restaurant owners can also consider a specific restaurant loan to purchase business-related expenses.
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.
Equipment loans may be available for businesses with bad credit. Some lenders accept minimum credit scores as low as 550 — however, having a higher credit score will likely help you secure a lower interest rate. No-credit-check equipment loans don’t exist, but because the equipment acts as the collateral to secure the loan, borrowers with poor credit may find equipment financing to be an accessible funding option.
The interest rate on equipment loans depends on a few factors, though the borrower’s credit score will likely influence their loan’s interest rate. (Note, however, that every lender differs and will weigh these factors in their way.) Interest rates for equipment loans typically range anywhere from 3.49% to 28%.
Yes, some lenders provide equipment financing options for pre-owned equipment. Shop around with different lenders to compare 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 ten 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.
