Best Equipment Financing Options of 2024
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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.
Small-business equipment loans are available from bank, online and SBA lenders. There are also specialized equipment finance companies that focus solely on this type of small-business loan.
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Best Equipment Financing Options
National Funding
Qualifications:
Minimum credit score: 600.
Minimum time in business: 6 months.
Minimum annual revenue: $250,000.
National Funding offers equipment loans with no down payment requirement to businesses that have been in operation for just six months.
Funding in as little as 24 hours.
Prepayment discounts available.
Offers loans to startups and borrowers with bad credit.
No collateral or down payment required.
Charges a factor rate making it more difficult to compare costs with other lenders.
Requires higher annual revenue than other online lenders.
OnDeck
Qualifications:
Minimum credit score: 625.
Minimum time in business: 12 months.
Minimum annual revenue: $100,000.
OnDeck’s term loan is an option for businesses that need a lump sum of money to purchase equipment. Funding can be available within the same business day.
Cash can be available within the same business day.
Streamlined application process with minimal documentation required.
Can be used to build business credit.
Requires frequent (daily or weekly) repayments.
Requires business lien and personal guarantee.
Not available in Nevada, North Dakota or South Dakota.
SBA 7(a) loan
Qualifications:
Must be a for-profit U.S. business.
Unable to access credit on reasonable terms from non-government sources.
Financial qualifications determined by individual lender.
The long repayment terms and low interest rates available through an SBA 7(a) loan make it a good option for large-ticket purchases like equipment.
Large borrowing maximums.
Interest rates are capped.
Long repayment terms available.
Personal guarantee is required.
Collateral is typically required.
Longer processing times than online lenders.
Bank of America
Qualifications:
Minimum credit score: 700.
Minimum time in business: 2 years.
Minimum annual revenue: $250,000.
Bank of America’s equipment loans can be used for a wide range of business needs, from purchasing heavy-industrial equipment to smaller office equipment.
Competitive interest rates.
Longer repayment periods.
Preferred Rewards program can offer interest rate discounts and other perks.
Multiple years in business required.
Limited rate and fee information online.
Can be slow to fund.
Application cannot be completed online.
Triton Capital
Qualifications:
Minimum credit score: 575.
Minimum time in business: 24 months.
Minimum annual revenue: $250,000.
Triton Capital offers equipment financing to borrowers with credit scores starting at 575.
Can fund within one to two business days.
No prepayment penalty.
Flexible repayment options: monthly, quarterly, annually or semiannually.
Typically requires a personal guarantee and UCC lien.
Requires high minimum annual revenue.
JR Capital
Qualifications:
Minimum credit score: 620.
Minimum time in business: 24 months.
No minimum annual revenue requirement.
JR Capital offers equipment loans and leases up to $10 million with terms that start at three years and don’t typically require a down payment.
Funding available within 48 hours.
Competitive rates and repayment terms.
No down payment required.
Must have good credit to qualify for no prepayment penalties.
Not ideal for short-term purchases; terms start at three years.
Balboa Capital
Qualifications:
Minimum credit score: 620.
Minimum time in business: 12 months.
Minimum annual revenue: $100,000.
Balboa Capital offers a variety of loan term lengths. Depending on the type of equipment and the size of the loan, terms may be 24, 36, 48 or 60 months.
Multiple financing options available.
Fast funding and simple application process.
Accepts borrowers with fair credit.
Lack of pricing information on website.
U.S. Bank
U.S. Bank Equipment Financing
$1,000,000
Qualifications:
Minimum time in business: 24 months.
U.S. Bank can offer up to 125% equipment financing that includes soft costs such as installation, tax and freight.
No down payment or blanket lien required.
Option to finance multiple pieces of equipment on one contract.
Offers up to 25% in additional financing to cover soft costs, such as installation, taxes and freight.
Can only apply online for transactions under $250,000.
Interest rates and qualification requirements not disclosed online.
How to compare equipment financing offers
To find the best loan for your needs, you should get offers from multiple lenders and compare factors such as as the following:
Interest rate. One of the main factors that determines the cost of a loan is the interest rate. A lower interest rate can often save you money.
Loan fees. Additional fees such as origination and processing fees add to the cost of a loan. Large loan fees can, in some cases, offset the benefits of a lower interest rate.
Annual percentage rate. APR uses the interest rate plus loan fees to provide the total cost of the loan. It can be helpful in comparing loan offers with different rates and fees to determine the overall cost of each loan.
Repayment term. The repayment term affects your monthly payment amount and the total interest you pay. A shorter repayment term may save you money, but the monthly payment shouldn’t be more than your budget allows.
Prepayment penalties. Some lenders charge a fee when a borrower pays off their loan early. A loan with a prepayment penalty may not be the right fit if you think you may want to pay it off before the term ends.
Funding time. There are times you may need to prioritize funding speed for a loan. However, keep in mind that faster funding often means higher interest rates and shorter terms.
What is equipment financing?
Equipment financing refers to a loan that's used to purchase business machinery and equipment. Equipment loans are typically structured as term loans that you repay, with interest, over a specific period of time.
You can use equipment loans to buy assets such as office and computer equipment, industrial machinery and business vehicles.
How equipment financing works
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 up to the full value of the equipment you’re looking to purchase — depending on which equipment finance company you use and your business’s qualifications.
Some small-business lenders may also finance some of the 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 a portion of 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.
Equipment financing vs. equipment leasing
Equipment leasing may be an option when you’re unable to get an equipment loan or it isn’t the right fit for your needs. With equipment leasing, you rent the equipment from a vendor, lender or specialized equipment leasing company.
Equipment loans | Equipment leasing | |
|---|---|---|
How it works | You borrow money from a lender to purchase equipment. | You rent equipment from a lender. |
Ownership | You own the equipment at the end of the loan term. | The lender owns the equipment. (At the end of the lease, you may have the option to renew or buy the equipment.) |
Cost | Higher monthly payments, but costs less over time. | Lower monthly payments, but costs more over time. |
Best for | Equipment you plan to use for longer than 36 months. | Equipment you plan to use for 36 months or less. |
How to apply for an equipment loan
The loan application process will vary by lender, but here are some steps to help you start the process:
1. Determine the size of your loan
Knowing the loan amount you need to purchase equipment will help you narrow your search for lenders who can offer that amount. It can also be used to estimate the amount of debt you can afford and monthly payments.
2. Review your qualifications
Number of years in business, personal and business credit scores and annual revenue are some common factors used by lenders to qualify a business for financing. Knowing how you compare to lender requirements can save you time in finding the right loan.
3. Gather documentation and apply
Whether you apply online or in person, you’ll typically need the following to start the application process:
Basic information about you and your business.
Personal bank statements and tax returns.
Business bank statements and tax returns.
Business financial statements.
Description of equipment and estimated cost.
Pros and cons of equipment financing
Affordable: Equipment loans can provide competitive interest rates and long terms.
Equipment ownership: You’ll own the equipment outright once the loan is repaid.
Self-collateralizing: Since the equipment is often used as collateral for the loan, there may be less reliance on personal credit, time in business or other collateral.
Tax savings: The interest you’ve paid is tax deductible, and you may also qualify for a depreciation tax benefit.
Outdated equipment: If the financed equipment becomes outdated, you’ll need to sell or dispose of it.
Down payment: May require a high initial down payment.
Maintenance costs: When you buy equipment, you are typically responsible for maintenance costs.
No trial run period: You often give up the opportunity to try out the equipment — something that would be available through a short-term lease.
» MORE: Best startup business loans
Equipment financing rates and terms
Repayment terms and interest rates on equipment loans 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 45% APR.
Generally, terms on business equipment loans are based on the anticipated life of the equipment or machinery you’re purchasing.
An equipment loan calculator can be used to estimate your monthly payments as well as the total cost of your loan.
Where to get equipment financing
Methodology
NerdWallet’s review process evaluates and rates small-business loan products from traditional banks and online lenders. We collect over 30 data points on each lender using company websites and public documents. We may also go through a lender’s initial application flow and reach out to company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer small-business friendly features, including:
Transparency of rates and terms.
Flexible payment options.
Fast funding times.
Accessible customer service.
Reporting of payments to business credit bureaus.
Responsible lending practices.
We weigh these factors based on our assessment of which are the most important to small-business owners and how meaningfully they impact borrowers’ experiences.
NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodology for small-business loans and our editorial guidelines.
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