What is equipment financing?

Equipment financing is a loan or lease used to acquire business equipment — vehicles, machinery, technology, restaurant equipment, medical devices, or any physical asset used in your business. The equipment itself serves as collateral, which makes it easier to qualify for than unsecured loans. Loan amounts typically cover 80%–100% of the equipment cost.

What are typical equipment financing rates?

Equipment loan rates range from 4% to 30% APR in 2026, depending on your credit score, time in business, and the type of equipment. Businesses with 700+ credit and 2+ years in operation can access rates of 4%–8%. Fair credit borrowers (600–680) typically pay 10%–25%. New businesses or lower credit scores pay 15%–30%+.

Should I get an equipment loan or equipment lease?

Get a loan if you want to own the equipment, build equity, and benefit from depreciation deductions. Get a lease if you want lower monthly payments, prefer to upgrade equipment regularly (especially technology), or want to preserve cash for operations. A loan is usually cheaper long-term; a lease offers more flexibility. The Section 179 deduction allows you to immediately expense the full cost of purchased equipment (up to $1.16 million in 2026), which is a major tax advantage of buying over leasing.

Can a startup get equipment financing?

Yes. Equipment financing is one of the most startup-friendly loan types because the equipment serves as collateral regardless of business history. Many equipment lenders work with businesses as young as 3–6 months old and with credit scores as low as 600. You may need a larger down payment (15%–20%) and pay a higher rate, but approval is more accessible than for unsecured loans.

Equipment Financing 2026 — Loans vs. Leases, Rates, and Best Lenders

Equipment financing lets you acquire the tools your business needs without draining cash reserves — and the equipment itself serves as collateral, making it more accessible than most other business loans. Rates run 4%–30% depending on credit and business history; most businesses qualify with 600+ credit and 6+ months of operation. Here’s how loans and leases compare and where to find the best rates.

Equipment Loan vs. Equipment Lease

	Equipment Loan	Equipment Lease
Ownership	You own the equipment	Lessor owns it
Down payment	10%–20% typical	Often $0 down
Monthly payments	Higher	Lower
End of term	You keep the equipment (fully owned)	Return, renew, or buy at residual value
Depreciation deduction	Yes (Section 179 or MACRS)	No (lease payments are deductible as operating expenses)
Best for	Long-lived equipment, want equity	Technology, equipment that becomes obsolete quickly
Tax advantage	Section 179 immediate expensing	Operating expense deduction

Section 179 (2026): The IRS allows businesses to immediately expense up to $1.16 million of equipment purchased in 2026, rather than depreciating it over years. For a profitable business, this can create a tax deduction that effectively reduces the cost of equipment by 20%–37% (your marginal tax rate).

Example: You buy a $100,000 piece of machinery. With Section 179 at a 25% effective tax rate, your after-tax cost is $75,000. A lease of the same equipment gives you no ownership and no depreciation benefit.

Equipment Financing Rates by Credit Profile (2026)

Credit Score	Time in Business	Typical APR Range
720+	2+ years	4%–8%
680–720	2+ years	7%–15%
640–680	1–2 years	12%–22%
600–640	6–12 months	18%–30%
Below 600	Any	25%–40%+ or declined

Equipment type also affects rates: vehicles and medical equipment are considered lower risk (higher resale value); specialized or custom equipment may carry higher rates.

Best Equipment Financing Lenders in 2026

Lender	Amount	Rate Range	Min. Credit	Min. Time	Best For
Crest Capital	$5K–$1M	5%–20%	650	2+ years	Wide equipment range
National Funding	$10K–$500K	4.99%–36%	600	6 months	Startups, fast approval
Balboa Capital	$10K–$250K	5%–20%	620	1+ year	Flexible terms
Currency Capital	$10K–$2M	4%–30%	620	6 months	Large equipment
Taycor Financial	$2K–$2M	5%–25%	600	3 months	Startups, soft credit pull
Bank of America	Up to $1M	Prime + spread	700	2+ years	Existing BofA customers
SBA 504 (via CDC)	Up to $5.5M	~7.5%–9% fixed	680	2+ years	Heavy equipment, real estate

For the lowest rates on large equipment purchases, the SBA 504 loan is the best option — fixed rates of ~7.5%–9% for up to 25 years on equipment with a 10+ year useful life. But approval takes 60–90 days.

How Equipment Financing Works — Step by Step

Identify the equipment you need and get a quote or invoice from the seller
Choose loan or lease based on ownership goals, tax situation, and cash flow needs
Apply with a lender — most require basic business information, 3–6 months of bank statements, and a quote for the equipment
Lender appraises the equipment (for large loans) or approves based on the purchase price
Lender pays the seller directly (for loans) or takes ownership and leases to you (for leases)
You make monthly payments over the loan/lease term
At end of term: You own the equipment (loan) or return/buy it (lease)

Approval time: As fast as same-day for online lenders under $150,000. 1–5 days for most equipment loans. 60–90 days for SBA 504.

Types of Equipment Leases

Operating lease (true lease): Lower payments, no ownership at end, equipment returned to lessor. Best for technology, vehicles, medical imaging equipment — assets with fast obsolescence.

Finance lease (capital lease): Structured to result in ownership. Higher payments, but you buy the equipment at end for a nominal $1 or pre-set residual value. Tax treatment similar to a loan.

TRAC lease (terminal rental adjustment clause): Common for vehicles and trucks. The residual value is negotiated upfront. If the actual resale value at end of term is higher than the negotiated residual, you may receive a refund.

Sale-leaseback: You sell equipment you already own to a lender, then lease it back. This turns owned assets into immediate cash while retaining use. Useful for businesses that need liquidity but can’t afford to stop using the equipment.

Equipment Financing by Industry

Restaurant equipment: Commercial ovens, fryers, refrigeration — high demand, common financing. National Funding and Crest Capital specialize here.

Medical/dental equipment: X-ray machines, dental chairs, diagnostic imaging — high-value, specialized lenders. Healthcare Capital, Crest Capital, and Stearns Bank serve this space.

Construction equipment: Excavators, cranes, loaders — heavy equipment with strong resale value means competitive rates. Caterpillar Financial, Komatsu Financial, and traditional equipment lenders.

Technology: Servers, software, phone systems — short useful life means leasing often makes more sense than purchasing. Dell Financial Services and vendor financing programs are common.

Transportation/trucking: Semi-trucks, trailers, fleet vehicles — specialized lenders include Mission Financial, Commercial Fleet Financing, and CLFG.

No-Credit-Check Equipment Financing

Some equipment lenders offer approvals based primarily on the equipment’s value rather than your credit — sometimes called “equipment value-based financing” or “hard money equipment loans.” Rates are high (25%–40%+) but this option exists for business owners with very poor personal credit.

More practically: equipment with high resale value (vehicles, medical equipment, restaurant equipment) is easier to finance with poor credit than custom or specialized machinery with little resale market.

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

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