What Is Equipment Financing?

What Equipment Financing Is

Equipment financing is a loan or lease used specifically to buy business equipment: machinery, vehicles, kitchen lines, medical devices, computers, manufacturing gear, and more. The equipment you are buying secures the financing.

Because the lender can repossess the equipment if you default, this collateral lowers their risk. That usually means easier approval and lower rates than unsecured borrowing, even for newer or thinner-credit businesses.

How Equipment Financing Works

A lender pays for the equipment, and you repay over a fixed term with regular payments. Terms commonly run 3 to 7 years, often matched to the useful life of the equipment. Many lenders finance 80% to 100% of the equipment cost, so your out-of-pocket down payment is small or zero.

Here is a concrete example. You finance a $80,000 commercial oven at 9% over 5 years. Your payments are fixed and predictable, the oven starts generating revenue immediately, and the oven itself is the collateral, so you are not pledging your house or other assets.

When the term ends, you own the equipment outright. Some deals are structured as leases instead, with a purchase option at the end. Both let you spread the cost over time instead of paying upfront.

What You Can Use Equipment Financing For

Almost any tangible business equipment qualifies. Specific examples:

Vehicles and fleet: trucks, vans, trailers.

Manufacturing and shop machinery: CNC machines, presses, packaging lines.

Restaurant and kitchen equipment: ovens, refrigeration, prep stations.

Medical and dental gear: imaging machines, chairs, lab equipment.

Technology: servers, computers, point-of-sale systems.

Construction and ag: excavators, tractors, attachments.

If you are buying a used machine from a private seller, financing may still work, though lenders look harder at the equipment value and condition.

Requirements and How to Qualify

Because the equipment is collateral, approval is often more forgiving than for unsecured loans. Honest ranges:

Time in business: Some lenders fund startups, but most prefer 6 months to 2 years.

Credit score: Strong rates go to 650+, but the collateral means lower scores can still qualify at higher rates.

Down payment: Often 0% to 20%, depending on the equipment and your profile.

The equipment itself: Lenders consider its resale value and useful life.

Common documents: 3 to 6 months of business bank statements, 1 to 2 years of business tax returns, a P&L and balance sheet when applicable, an equipment quote or invoice, government ID, business entity documents, and a voided business check.

What Equipment Financing Costs: Rates, Terms, and Fees

Equipment financing tends to be one of the more affordable forms of business borrowing because of the collateral. Rates move with the market, so treat these as current ranges.

Strong credit: roughly 6% to 9%.

Typical range: 8% to 20% APR.

Bank-issued financing: about 7% to 12%.

Terms commonly run 3 to 7 years. Watch for documentation fees or origination fees, and confirm whether the deal is a loan you own at the end or a lease with a buyout. A broker should lay out the full cost and structure before you sign.

Pros and Cons

The equipment is the collateral, so you usually do not pledge other assets.

It often finances 80% to 100% of cost, preserving your cash.

Rates are generally lower than unsecured options.

Fixed payments make budgeting simple.

The equipment can be repossessed if you default.

Financing only covers the equipment, not working capital around it.

For fast-depreciating gear, you can owe more than the equipment is worth mid-term.

Who Equipment Financing is Best for (and Who Should Look Elsewhere)

Equipment financing is best for any business buying a specific, durable asset that will generate revenue over years. If the purchase has a clear useful life, matching the financing term to that life is the textbook move, and the collateral keeps the cost down.

Look elsewhere if you need general working capital, cash for payroll, or funds for something that is not a tangible asset. A line of credit or working capital loan fits those better. If the equipment depreciates extremely fast, weigh whether leasing makes more sense than buying.

How to Get Equipment Financing Through Quordx

Quordx Capital is a funding brokerage, not a lender, and it is free to you, always. No application, broker, or processing fees. The lender pays Quordx Capital a commission.

You apply online in about 10 minutes. Quordx Capital reads your profile and the equipment you are buying, then matches you to 3 to 7 best-fit lenders from a network of 50+ vetted lenders and submits the package on your behalf. Lender decisions typically arrive in 24 to 48 hours, and funding can come in as little as 3 to 7 business days. Quordx Capital serves SMBs in 46 states.

Frequently Asked Questions