Equipment financing is one of the most common forms of business funding because the financed asset secures the arrangement. From delivery trucks to CNC machines to medical and dental equipment, the equipment's value and resale market drive the structure.
This guide covers purchase-oriented equipment funding; see Equipment Leasing for arrangements where the provider retains ownership.
How it generally works
You identify the equipment, obtain a quote, and the funder structures an amount against the equipment's cost and expected resale value. The equipment typically serves as collateral, which can make approval easier for businesses without extensive credit history.
Terms generally align with the equipment's useful life, and payments may be structured around seasonal revenue in many industries.
Common uses
- Vehicles, trucks and fleet additions
- Manufacturing and construction machinery
- Medical, dental and diagnostic equipment
- Kitchen and restaurant equipment
- Computers, servers and technology systems
Qualification factors providers commonly review
- The equipment type, cost, and resale market
- Time in business and revenue stability
- Business credit profile
- Whether the equipment is new or used
- Vendor quote or invoice detail
Potential advantages and trade-offs
Advantages: the equipment secures the arrangement, terms can match the asset's life, and the business owns the asset at the end of the schedule in purchase structures.
Trade-offs: the business bears obsolescence and maintenance risk on owned equipment, and very specialized equipment with thin resale markets can be harder to fund.
How repayment is typically structured
Fixed payments over a defined term, commonly monthly, with the equipment as collateral. At the end of the schedule, ownership transfers to the business in purchase structures. Leasing structures differ : see our Equipment Leasing guide.