Equipment financing is a loan for purchasing machinery and equipment essential to running your business. You can use an equipment loan for anything from office furniture and medical equipment to farm machinery or commercial ovens.
There are equipment finance companies that focus solely on this type of small-business loan. But you can also get an equipment loan from the U.S. Small Business Administration or a bank.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Here are 7 equipment financing options
Lender | NerdWallet Rating | Max loan amount | Min. credit score | Next steps |
|---|---|---|---|---|
Funding Circle - Online term loan with Fundera by NerdWallet | 5.0/5 Best for Online equipment loans for businesses with strong credit | $500,000 | 660 | with Fundera by NerdWallet |
Credibility Capital - Online term loan with Fundera by NerdWallet | 4.5/5 Best for Online equipment loans for businesses with strong credit | $500,000 | 650 | with Fundera by NerdWallet |
Triton Capital - Equipment financing with Fundera by NerdWallet | 4.0/5 Best for Equipment financing for bad credit | $250,000 | 600 | with Fundera by NerdWallet |
OnDeck - Online term loan with Fundera by NerdWallet | 5.0/5 Best for Equipment financing for bad credit | $250,000 | 625 | with Fundera by NerdWallet |
TAB Bank - Term loan with Fundera by NerdWallet | Best for Bank equipment financing | $200,000 | 650 | with Fundera by NerdWallet |
SBA 7(a) loan with Fundera by NerdWallet | Best for SBA equipment loans | $5,000,000 | 650 | with Fundera by NerdWallet |
SBA CDC/504 loans with Fundera by NerdWallet | Best for SBA equipment loans | $5,000,000 | 680 | with Fundera by NerdWallet |
Here are 7 equipment financing options
Best for Online equipment loans for businesses with strong credit
Best for Equipment financing for bad credit
Best for Bank equipment financing
Best for SBA equipment loans
Our picks for
Online equipment loans for businesses with strong credit
Funding Circle - Online term loan
Max Loan Amount
$500,000
Min. credit score
660
Est. APR
5.99-16.49%
Funding Circle is an option for established businesses that are financing an expansion or refinancing debt.
May fund quickly
Max loan
$500,000
Min. Credit score
660
Apr range
5.99-16.49%
Credibility Capital - Online term loan
Max Loan Amount
$500,000
Min. credit score
650
Est. APR
9.49-15.49%
Credibility Capital offers low-cost business loans that work best for small-business owners with strong credit.
Max loan
$500,000
Min. Credit score
650
Apr range
9.49-15.49%
Our picks for
Equipment financing for bad credit
Triton Capital - Equipment financing
4.0
NerdWallet rating with Fundera by NerdWallet
Max Loan Amount
$250,000
Min. credit score
600
Est. APR
10.75-35.00%
Triton Capital offers fast equipment loans up to $250,000 for businesses in a range of industries.
Max loan
$250,000
Min. Credit score
600
Apr range
10.75-35.00%
OnDeck - Online term loan
Max Loan Amount
$250,000
Min. credit score
625
Est. APR
29.90-97.30%
OnDeck offers a fast term loan for small-business owners with less-than-stellar credit who want to expand.
May fund quickly
Max loan
$250,000
Min. Credit score
625
Apr range
29.90-97.30%
Our pick for
Bank equipment financing
TAB Bank - Term loan
with Fundera by NerdWallet
Max Loan Amount
$200,000
Min. credit score
650
Est. APR
8.99-35.99%
TAB Bank offers competitive interest rates for business owners with strong credit — and can sometimes fund faster than an SBA loan.
Max loan
$200,000
Min. Credit score
650
Apr range
8.99-35.99%
with Fundera by NerdWallet
Our picks for
SBA equipment loans
SBA 7(a) loan
Max Loan Amount
$5,000,000
Min. credit score
650
Est. APR
9.75-12.25%
7(a) program participants include specialized lenders like Live Oak Bank and big-name traditional banks like Wells Fargo.
Lowest interest rate
Max loan
$5,000,000
Min. Credit score
650
Apr range
9.75-12.25%
SBA CDC/504 loans
Max Loan Amount
$5,000,000
Min. credit score
680
Est. APR
2.60-3.20%
You cannot put an SBA CDC/504 loan toward working capital, existing debt or a rental real estate investment.
Max loan
$5,000,000
Min. Credit score
680
Apr range
2.60-3.20%
How Much Do You Need?
Equipment financing is a type of asset-based financing, which means the equipment itself is collateral for the loan.
- You can get an equipment loan equal to up to 100% of the value of the equipment you’re looking to purchase — depending on which equipment finance company you use and your business’s qualifications. You repay the loan over time, with interest.
- Some small-business lenders may also pay for soft costs, such as delivery, installation, warranties, assembly and other one-time expenses required to get your equipment set up and running. Certain equipment financing companies will finance these costs on top of the full value of your equipment — offering, for example, 125% financing — 100% for the equipment, 25% for soft costs.
- Other equipment financing companies, however, may finance only a percentage of the cost of the equipment, say 75%, and allot the remainder of the loan (25%) to your soft costs.
- Because soft costs typically require a large investment upfront when you purchase your equipment — and don’t add value to the equipment long term — it can be helpful to find an experienced equipment financing company that will finance some of these expenses. This way, you’re receiving the same interest rate to finance your soft costs as you are for the rest of your equipment loan — and you don’t have to use funds you have on hand or take out a separate loan to cover them.
Repayment terms and interest rates on equipment financing can vary depending on the equipment finance company, your business’s qualifications and how long the equipment you’re purchasing is projected to have value.
- Anecdotally, equipment financing interest rates range from 4% to 30% APR.
- Generally, terms on equipment loans are based on the anticipated life of the equipment or machinery you’re purchasing. A shorter term may have you scrambling to make payments, and a longer term means you’ll be paying for the equipment after you stop using it.
Lenders may offer equipment leasing as an alternative to equipment loans. With equipment leasing, you rent the equipment from a vendor, lender or specialized equipment financing company. At the end of the lease, you return the equipment, renew the lease or buy the equipment.
- On one hand, equipment leasing can help reduce costs and maximize an investment. For instance, a piece of equipment becomes less valuable and productive as it gets older, so leasing it for a limited time may be a smart move. Some equipment leasing companies also offer the option of buying the equipment at current market value.
- On the other hand, equipment leasing can cost more than financing if you plan to use the equipment for a long time. According to the Equipment Leasing and Finance Association, leasing is “likely the preferable option” for equipment you plan to use for 36 months or less. If you’ll use it for longer, it makes more sense to buy.
Pros
- Affordable. Equipment loans can provide competitive interest rates and long terms. SBA 7(a) loans, for example, typically offer terms up to 10 years for equipment purchases.
- Equipment ownership. You’ll own the equipment outright once the loan is repaid. If you need cash for other business purposes, you might arrange a sale-and-leaseback agreement with the equipment finance company; that involves selling the equipment to a lender in return for quick cash and then leasing it back from that lender.
- Self-collateralizing. You may not need to rely as heavily on personal credit, time in business or other collateral to qualify. Startups and businesses with bad credit may qualify for equipment financing.
- Tax savings. At tax time, the interest you’ve paid is deductible, and you may also qualify for a depreciation tax benefit.
Cons
- Outdated equipment. If the financed equipment becomes outdated, you’ll need to sell or dispose of it.
- Down payment. An equipment loan may require a high initial down payment.
Online lenders
Online equipment finance companies can offer access to equipment financing with more flexible qualifications than traditional bank or SBA loans. Some online lenders work with startups or businesses with bad credit.
Many online business lenders also offer streamlined application processes and fast financing — in some cases, funding loans within 24 hours.
Equipment loans from online equipment financing companies are typically more expensive than bank or SBA loans, however, with shorter terms and higher interest rates.
Banks and credit unions
Although banks and credit unions generally offer equipment loans with the most favorable interest rates and terms, they also have strict eligibility requirements. To qualify for equipment financing from a bank, you’ll typically need strong personal credit (a FICO score of 700 or higher), several years in business and excellent financials.
If you can meet these requirements, however, getting an equipment loan from a bank or credit union will likely be your most affordable option. Plus, some institutions, such as Bank of America, have business divisions devoted to equipment financing across different industries.
SBA lenders
As an alternative to traditional bank financing, you might work with an SBA lender (typically a bank or credit union) to get an SBA loan. SBA loans have long terms — generally up to 10 years for equipment loans — and low interest rates. They also allow you to use the equipment you’re purchasing, as well as equipment you already own, as collateral.
To qualify for an SBA loan, you’ll generally need a good personal credit score, 690 or higher (although some SBA lenders may have lower score requirements), and strong business finances.
Get equipment financing in your industry:
- Learn more about gym equipment financing.
- Compare the best financing options for restaurant equipment.
- Find online lenders that offer dental equipment financing.
The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.
Last updated on January 3, 2023
Frequently Asked Questions
Equipment financing is a loan used for purchasing business machinery and equipment. Equipment loans are typically structured as term loans that you repay, with interest, over a specific period of time.
Repayment terms on equipment financing can range from several months to 10 years. Generally, terms are based on the anticipated life of the equipment or machinery you’re purchasing.
Interest rates on equipment financing can fall as low as 4%, but as high as 30%. In general, banks will offer equipment loans with the most competitive rates and terms.
Startups may be able to get equipment financing. Because the equipment you purchase serves as collateral on your loan, lenders can be more flexible with their qualification requirements.