Equipment financing is a loan or lease that pays for machinery, vehicles, technology or other business equipment, with the equipment itself as collateral. Because the lender can repossess the asset, approval is easier than for unsecured loans, down payments are small (often 0% to 20%), and terms usually match the equipment’s useful life, typically 2 to 7 years.
Key takeaways
- The equipment secures the loan, so newer businesses and fair credit can often qualify.
- Terms typically run 2 to 7 years; rates range widely with credit, time in business and the type of equipment.
- Equipment loans and $1 buyout leases let you own the asset; fair market value leases keep payments lower but you return or buy it at the end.
- For 2026, the Section 179 deduction limit is $2.56 million, and 100% bonus depreciation is available. Confirm your situation with your CPA.
Loan vs. Lease: The Main Structures
| Structure | Who owns it | End of term | Best for |
|---|---|---|---|
| Equipment loan | You, from day one | Paid off, you keep it | Long-life equipment you’ll use for years |
| $1 buyout lease (capital lease) | Effectively you | Buy for $1 | Owning with little or no down payment |
| 10% purchase option lease | Lessor until buyout | Buy for 10% of cost | Lower payment, likely ownership |
| Fair market value (FMV) lease | Lessor | Return, renew or buy at FMV | Tech and equipment that becomes outdated |
What Equipment Financing Costs
Strong businesses with good credit buying new, standard equipment get the best rates, often near bank term-loan pricing. Startups, weaker credit, used or specialized equipment, and older assets cost more. Ask for the total of payments and any documentation, buyout or end-of-term fees, not just the monthly payment.
Example: $150,000 machine, 60 months at 9%, no down payment: about $3,114 per month. If the machine adds $5,000 per month in profit, it pays for itself from the first month.
What Lenders Look For
- Time in business: 2+ years gets the best terms; many lenders finance businesses with 6 to 12 months.
- Credit: 650+ is common for standard programs; lower scores may need a larger down payment.
- Cash flow: recent bank statements; larger deals need tax returns and financial statements.
- The equipment: a vendor quote or invoice, plus year, make, model and serial number for used equipment.
Section 179 and Bonus Depreciation in 2026
Section 179 lets a business deduct the cost of qualifying equipment in the year it is placed in service, rather than depreciating it over several years. For 2026, the limit is $2,560,000, phasing out once total qualifying purchases exceed $4,090,000. 100% bonus depreciation is also available. Financed equipment qualifies, so you can take the deduction while paying over time. The equipment must be placed in service by December 31 to count for that tax year. Talk to your CPA before you buy.
Common Equipment Financing Uses
- Construction and excavation equipment. See working capital for contractors.
- Shop lifts, diagnostics and tools. See auto repair shop financing.
- Kitchen equipment and POS systems. See restaurant financing.
- CNC machines and production lines. See manufacturer working capital.
- Imaging and dental equipment. See medical practice financing.
- Trucks, trailers and fleet vehicles.
Equipment Financing vs. Other Options
Equipment financing keeps your line of credit free for working capital and usually costs less than an unsecured term loan. For a bundle of equipment plus working capital or real estate, an SBA 7(a) loan may combine them at a lower rate.
Frequently Asked Questions
Can I get equipment financing with bad credit?
Often, yes. Because the equipment secures the loan, many lenders approve fair or rebuilding credit with a larger down payment or a higher rate.
How long are equipment financing terms?
Most run 2 to 7 years, matched to the useful life of the equipment. Heavy equipment and long-life machinery can go longer.
Can I finance used equipment?
Yes. Many lenders finance used equipment, though older or specialized assets may need a larger down payment or shorter term.
Is financed equipment eligible for Section 179?
Yes. Financed and $1 buyout leased equipment generally qualifies if it is placed in service during the tax year. Confirm with your tax advisor.
Have a deal in mind? Have an equipment quote in hand? Tell us about the deal and we will match it with the lenders that fit.