Equipment Financing 101: What Every Business Owner Needs to Know

If you're running a business that depends on equipment — whether that's a construction company, a trucking operation, a medical practice, or a manufacturing shop — you know that equipment is expensive. A single excavator can cost $200,000. A CNC machine might run $500,000. Even a commercial oven package for a restaurant can hit $50,000.

Most businesses can't write a check for those amounts. That's where equipment financing comes in.

What Is Equipment Financing?

Equipment financing is a loan or lease specifically designed to help businesses acquire equipment. Unlike a general business loan, the equipment itself typically serves as collateral — which means lenders can offer better rates and more flexible terms than unsecured financing.

There are two main structures:

• Equipment loans: You borrow money to buy the equipment outright. You own it from day one and make monthly payments over a fixed term (typically 24-84 months). At the end, you own the equipment free and clear.
• Equipment leases: A lender purchases the equipment and you make monthly payments to use it. At the end of the lease, you may have the option to buy it at fair market value or a predetermined price ($1 buyout).

What Do You Need to Qualify?

Every lender has different criteria, but here's what most will look at:

• Credit score: A-credit borrowers (720+) get the best rates. But many lenders work with credit scores as low as 550, just at higher rates.
• Time in business: Most lenders want to see at least 2 years. Startup programs exist but typically require stronger personal credit and larger down payments.
• Revenue: Lenders want to see that your business generates enough revenue to make the monthly payment. A common rule of thumb: your monthly payment should be less than 10% of your monthly revenue.
• Equipment details: What you're buying, whether it's new or used, and the vendor/dealer you're purchasing from.

What Does the Process Look Like?

1. Application: Fill out a simple application with your business info, equipment details, and desired financing amount. This is usually a soft credit pull — no impact to your score.
2. Matching: Your broker (that's us) shops your deal across multiple lenders to find the best fit for your situation.
3. Offers: You receive one or more offers with specific terms — rate, monthly payment, term length, and any down payment required.
4. Documentation: Depending on the deal size and your credit profile, the lender may request bank statements, tax returns, or an equipment quote.
5. Funding: Once approved and docs are signed, funds are sent to the equipment vendor. Many deals close in 24-48 hours for straightforward transactions.

What Rates Can You Expect?

Rates vary significantly based on your credit profile, the equipment type, and the deal size:

• A-credit (720+): 5.99% - 9.99%
• B-credit (680-719): 9.99% - 14.99%
• C-credit (620-679): 14.99% - 19.99%
• Below 620 / startup: 19.99%+ or may require larger down payment

These are rough ranges. Your actual rate depends on the full picture — time in business, revenue, industry, and the specific equipment.

Tips for Getting the Best Deal

1. Know your credit before you apply. Check your personal and business credit reports so you know where you stand.
2. Get a detailed equipment quote. Lenders want to see exactly what you're buying, from whom, and at what price.
3. Work with a broker, not just one bank. A broker shops your deal across multiple lenders. Your bank only offers their own products.
4. Ask about Section 179. If you buy and put the equipment in service during the tax year, you may be able to deduct the full purchase price.
5. Don't let perfect be the enemy of good. If you need the equipment to generate revenue, waiting for a slightly better rate while losing months of productivity rarely makes financial sense.