Low Rate Equipment Financing
Equipment Financing Overview
If you need equipment for your business but don’t have the money to buy it, an equipment lease or loan can save the day! You can qualify for up to 100 % equipment financing to purchase restaurant appliances, farm tools, vehicles, or other essential equipment and machinery for your business.
Free Guide To
Small Business Financing
How Equipment Financing Works
It is relatively easy to qualify for equipment financing because the equipment collateralizes the loan. Even those with poor credit and startups can qualify. While some businesses may be asked to provide a down payment, many are able to get 100 % financing.
The most popular way to get equipment financing is through an equipment lease. There are multiple types of equipment leases which we'll review below.
A fair market value (FMV) lease may be a good option for equipment that goes out of date quickly (e.g. computers). This type of lease has lower monthly payments than a loan and gives you the option to return the equipment at the end of the lease or purchase it for its fair market value.
$1 buyout leases and 10 % option leases are better options for equipment that has a long shelf life (e.g. cranes, tractors) or that you want to own. These types of leases give you the option to purchase the equipment for a nominal cost at the end of the lease.
In terms of accounting and tax treatment, buyout and option leases are similar to a loan. Typically, you can deduct the entire purchase price of the equipment in the year of purchase on your taxes. For FMV leases, you can deduct the monthly rental payments on your taxes.
Lease rates range from approximately 6-16 % and 1-5 year terms.
Sometimes, equipment financing is structured like a loan. If you’re familiar with an auto loan, equipment loans are similar. The equipment serves as collateral for the loan, and you typically don’t have to provide any additional collateral.
Like car loans, equipment loans carry a fixed interest rate and a fixed term, so your monthly payments are the same over the life of the loan. Rates average 4-12 %, and the term ranges from about 1-7 years.
Will I Qualify?
It is relatively easy to qualify for equipment financing because the equipment serves as collateral for the loan or lease, reducing the risk for the lender. Ultimately, whether you qualify and the interest rate you’ll pay depend on a number of factors: credit score, if you've ever had a repossession, the age of your business, business financials, the cost and nature of the equipment, and the term of the lease or loan.
Business owners with a bad credit scores and startups can generally qualify for equipment financing but must be prepared to pay slightly higher rates. Those with credit scores about 660 (check your score for free) will typically receive much better terms. Having a down payment can help such borrowers qualify for equipment financing.
The type of equipment also plays a role. It’s easier to get financing for new equipment compared to second hand equipment. Also, durable equipment like cranes and refrigerators tend to retain their value over time and present a better credit risk than things like computers or medical equipment.
Lastly, all else being equal, the longer the lease or the loan term, the better the interest rate will be.
Maximum Loan Amount
1 - 7 Years.
As little as 1 week
May be required for startups or low credit borrowers.
Typically, no collateral beyond the equipment is needed.
Have a question?
Typically, equipment financing rates are fixed and span between 4 – 12 % for a loan and 6- 16 % for a lease. The typical loan term is 1-7 years, and the typical lease is 2-5 years. For example, let's say you qualify for 100 % financing for a $10,000 piece of equipment at an 8 % interest rate over 4 years. Your total payback amount will be $10,800, and your total monthly payments will be $225.
Your interest rate depends on a variety of factors, including:
Your credit score (check your score for free here)
Age of the business and financials
The nature and cost of the equipment
The length of the loan
Relatively easy to qualify for; bad credit ok and startups can qualify
Quick to obtain, not much paperwork
Low interest rates
100 % equipment financing is available in many cases
Typically no need for collateral outside the equipment itself
Deduct full cost of the equipment through Section 179.
Equipment can depreciate quickly
You must pay for equipment insurance and maintenance
You will likely pay a higher interest rate if you have bad credit or are just starting out in business
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