Quick answer: Equipment financing is funding used to buy business equipment, where the equipment itself usually serves as collateral. Lenders and financing providers cover most of the purchase price, and you pay it back over a term tied to the equipment’s useful life. Credibly connects businesses to Credibly’s equipment financing options through its funding partner network, with financing from $10K to $10M and terms up to 5 years for qualifying businesses.¹
Jump to a section
What is equipment financing?
Equipment financing is funding used to purchase machinery, vehicles, technology, or other business equipment, where the asset usually secures the financing. Because the equipment backs the deal, lenders typically consider the value of what you’re buying alongside your credit profile. You can read more about what equipment financing is in our companion explainer.
Businesses lean on this kind of funding more than you might expect. The Equipment Leasing & Finance Association reports that roughly 8 in 10 U.S. businesses use some form of financing to acquire equipment, according to ELFA. That share reflects how common it is to preserve cash rather than buy outright.
How equipment serves as collateral
When the equipment secures the financing, the lender typically holds a security interest in it until the balance is satisfied. This collateralized structure may make underwriting more flexible in some cases, because the asset can reduce the lender’s exposure. It doesn’t guarantee approval, and regulated lenders still review credit and cash flow, but a strong, resaleable asset can help your case.
What equipment financing typically covers
Many equipment loans cover a large share of the purchase price, with the rest sometimes due as a down payment. Loan-to-value ranges vary by lender, equipment type, and condition, so a brand-new commercial truck and a piece of used kitchen gear may be financed at different percentages. Neutral rate-and-term context is available from publishers like Bankrate and NerdWallet.
How does equipment financing work?
You apply with details about the equipment and your business, the lender reviews your credit and cash flow, and once approved the funds go toward the purchase. The equipment typically serves as collateral, and you often make fixed monthly payments over a term tied to the asset’s useful life. Decisions may move more quickly with some providers because the asset backs the deal.
From application to funding
The process starts with a quote or invoice for the equipment, which tells the lender what’s being financed and what it’s worth. You submit business and financial details, the lender verifies them, and an offer follows with the amount, term, and payment. After you accept and sign, funds are released to you or the vendor.
What affects your approval
Underwriters look at your credit history, time in business, revenue, and the equipment itself. A newer asset with strong resale value can strengthen a thinner file, while specialized gear that’s hard to resell may get a closer look. The Federal Reserve’s rate environment also shapes pricing, and you can track commercial borrowing context through FRED.
Should you lease or finance your equipment?
Leasing means paying to use equipment for a set term, often with lower upfront cost and an easier path to upgrade. Financing means borrowing to own it outright, building equity in the asset over time. The right choice depends on how long you’ll use the equipment and how fast it loses value.
When leasing makes more sense
Leasing fits equipment that goes obsolete quickly or that you only need short-term. Technology, point-of-sale systems, and some restaurant gear can age quickly, so ownership may leave you with a depreciating asset. Lower monthly cost and the option to refresh at the end of a lease appeal to businesses that want flexibility.
When financing to own makes more sense
Financing fits durable equipment with a long useful life and lasting resale value. Heavy machinery, vehicles, and farm equipment can keep working well past the financing term, so owning them may build a real asset on your books. If you’ll use the equipment for years, paying to own may cost less over its full life.
Consideration | Financing to own | Leasing |
|---|---|---|
Ownership at end of term | You own the equipment outright | You return it or buy it out, depending on the lease |
Upfront vs. ongoing cost | May require a down payment; fixed monthly payments | Often lower upfront; recurring monthly payments |
Typical use case | Durable equipment with a long useful life | Fast-aging equipment or short-term needs |
Obsolescence risk | You hold the risk as the owner | Easier to upgrade at lease end |
Tax and accounting | May allow depreciation; consult a tax professional | Payments may be treated differently; consult a tax professional |
Tax and accounting treatment varies by structure and by your situation, so talk with a tax professional before deciding.
What does equipment financing cost?
Equipment financing cost depends on your rate, the term, the amount financed, and the equipment itself. Rates are usually expressed as interest for equipment loans, with stronger credit and resaleable assets earning better pricing. You can estimate payments using an equipment loan calculator before you apply.
Rates, terms, and what drives them
Your rate reflects credit, time in business, revenue, the equipment’s value, and the broader rate environment. Terms generally track the equipment’s useful life, so longer-lived assets can support longer terms and shorter-lived ones may not. Business investment trends tracked by the U.S. Census Bureau and the Bureau of Labor Statistics add useful sector context for buyers comparing options.
Equipment category | Typical useful life | Recommended term range | Lease vs. buy note |
|---|---|---|---|
Office furniture | IRS: 10-year class life / 7-year GDS recovery period | Medium-term financing | Often financed to own; slow to age |
Computers and IT | IRS MACRS: 5-year GDS recovery period for computers and peripheral equipment | Shorter term | Leasing can ease frequent upgrades |
Construction equipment | Useful life and tax recovery period vary by equipment type; IRS MACRS includes certain construction assets as 5-year GDS property | Longer term | Strong resale value supports financing |
Medical devices | High-technology medical equipment: IRS MACRS 5-year property; other medical equipment varies | Medium to longer term | Depends on how fast the tech ages |
Vehicles | Cars and light trucks: IRS MACRS 5-year property; other commercial vehicles may vary | Medium to longer term | Resale value supports financing to own |
All ranges above are general guidance and vary by lender and equipment condition.
Which financing options can fund equipment?
Several products can fund equipment, from dedicated equipment loans to SBA loans, working capital loans, and other financing products like merchant cash advances. The table below shows how they compare.
Financing option | Typical use | Collateral | Typical term |
|---|---|---|---|
Equipment financing | Buying specific equipment | The equipment | Up to 5 years |
SBA 7(a) loan | Broad business needs including equipment | Varies | Longer-term |
SBA 504 loan | Major fixed assets and equipment | The financed asset | Long-term |
Working capital loan | Flexible use including equipment | None required | Short-term |
Merchant cash advance | Flexible use including equipment | Future receivables | Short-term |
Invoice factoring, where a business sells unpaid invoices for early cash, is another option in the broader market, though it’s used for receivables rather than equipment purchases. For inventory needs, see our inventory financing guide.
SBA 7(a) and 504 loans through funding partners
SBA 7(a) loans cover broad business uses including equipment, while SBA 504 loans through a Certified Development Company focus on major fixed assets. Both come from banks and SBA-approved lenders. Check SBA.gov for current program caps, fees, and use-of-proceeds rules. As of June 10, 2026, SBA lists a $5 million maximum for 7(a) loans and up to $5.5 million for 504 loans; SBA has announced a rule effective July 4, 2026, allowing eligible borrowers to combine 7(a) and 504 loans for up to $10 million in SBA-backed financing.¹
Equipment financing through Credibly's partner network
Credibly connects businesses to Credibly’s equipment financing options, with financing from $10K to $10M and terms up to 5 years for qualifying businesses. Equipment financing generally looks for a 550+ FICO score, $25K in average monthly deposits, and at least 1 year in business, with funding speed that varies by provider.¹ Those thresholds are set by the funding partner and apply to that product specifically.
How a Credibly working capital loan can fund equipment
A Credibly Working Capital Loan is financing Credibly provides directly that you can put toward equipment when you’d rather not tie the funding to a single asset. It funds a lump sum from $25,100 to $600K with terms from 6 to 24 months and a fixed daily or weekly payment.² Credibly requires a 550+ FICO score, $20,000 in average monthly deposits, and at least 6 months in business, with a decision in as fast as 2 hours and funding in as fast as 4 hours.
How a merchant cash advance can fund equipment
A Credibly Merchant Cash Advance is a purchase of your future receivables, sized from your actual bank-statement revenue at approval. An MCA isn’t a loan. It funds from $5K to $600K with terms from 3 to 24 months, and remittance is a fixed daily or weekly dollar amount debited via ACH, set at approval from your real reported revenue.³ Some MCA providers use a soft credit inquiry, so the impact to your credit may be limited, but confirm the inquiry type with your provider before applying.
If revenue runs lower than projected, reconciliation can adjust the total amount you paid for the previous month retroactively, and modification is available proactively on both the MCA and the working capital loan.
Equipment financing by industry
Equipment needs vary widely by industry, and so does the financing that fits. Seasonal farms, high-ticket construction firms, and fast-moving restaurants each face different pressures around cash flow, useful life, and resale value. Here’s how financing tends to play out across three common segments.
Farm and agricultural equipment
Farm income arrives in cycles, so cash flow can be tight between harvests even when the year is strong. Farm equipment financing can matter most for tractors, combines, and irrigation systems that earn their keep over many seasons. Because that equipment can have a long useful life, a longer term tied to that life may help keep payments manageable against uneven revenue.
Heavy and construction equipment
Heavy and construction equipment often carries a high ticket price, which can make the asset’s resale value central to the deal. Excavators, loaders, and dump trucks may hold resale value well, so they can support stronger collateral positions and longer terms. Owners juggling project-based revenue may choose to finance to own, building equity in machines they expect to run for years.
Restaurant and foodservice equipment
Restaurant and foodservice equipment splits into two camps. Ranges, hoods, and walk-in coolers last for years and can make sense to finance and own. Point-of-sale tech and specialized gear can age fast, so leasing or buying used can limit the risk of being stuck with something obsolete. Used equipment can stretch a tight opening budget, though condition affects how much a lender will finance.
What documents do you need to apply?
Many equipment financing applications ask for the equipment quote, recent bank statements, business tax returns, identification, and basic business details. Some providers accept digital alternatives like bank-connect data and merchant processor statements, which may speed things up. The table below shows what’s typically requested and why.
Document | Why it’s required | Digital alternative | Typical format |
|---|---|---|---|
Equipment quote or invoice | Confirms what’s financed and its value | Vendor-emailed quote | PDF |
Bank statements | Shows cash flow and deposits | Secure bank-connect link | PDF or linked data |
Business tax returns | Verifies revenue and history | None | PDF |
Profit and loss statement | Shows profitability | Accounting software export | PDF or spreadsheet |
Government-issued ID | Verifies identity | Photo upload | Image or PDF |
Business license | Confirms the business is active | State registry lookup | PDF or image |
Merchant processor statements may be accepted in some cases when card revenue tells a clearer story.
How to choose an equipment financing company
Compare equipment financing companies on funding speed, product range, fee transparency, and the breadth of their partner network. The strongest fit explains every cost in plain terms, offers more than one path to funding, and can route you elsewhere when its own product doesn’t match. Match the company to your equipment and your timeline.
Funding speed matters most when a piece of equipment breaks or a deal can’t wait. Product range matters because the right structure for a $15K oven differs from the right one for a $400K excavator. Fee transparency tells you whether you can trust the offer in front of you, and a wide partner network means more chances to find a fit. Businesses may compare online financing providers like OnDeck, Bluevine, Fundbox, Kapitus, Biz2Credit, National Funding, Rapid Finance, Forward Financing, and Fora Financial alongside banks before deciding.
Weigh the cost of capital, not just the monthly payment, and check that the term lines up with how long you’ll actually use the equipment. A direct product can fit when you want flexibility on what you buy, while a partner-network equipment loan fits when the asset itself should secure the deal. Think about equipment financing inside your broader business financing options, not in isolation.
Regional availability: Credibly supports business owners across the country, including equipment financing in Chicago, in Houston, and in Michigan.
Credibly's approach to equipment funding
Credibly looks at how your business actually runs before deciding which path fits an equipment purchase. The team reviews recent bank statements to see how cash moves through your account, so steady revenue can carry weight even when a credit file is thin. Because we read your deposits directly, owners with real cash flow can qualify when the numbers tell a strong story.
When equipment is the goal, Credibly’s two direct products solve it differently. The Working Capital Loan funds a lump sum on a fixed term, which suits owners who want a defined end date and the freedom to spend on any asset. The Merchant Cash Advance funds against future receivables, sized from your real revenue, which fits owners whose income moves with their sales cycle. Both are priced with a factor rate set upfront rather than interest that builds over time.²
If a dedicated equipment loan with the asset as collateral is the better fit, Credibly connects you to equipment financing, SBA loans, and lines of credit through external funding partners.¹ Those partner products carry their own thresholds set by the funding partner.
Apply for equipment financing
Ready to put new equipment to work? See your options with Credibly and find the funding path that fits your business and your timeline.
Frequently asked questions
What credit score do you need for equipment financing?
Requirements vary by provider and by whether the funding is a direct product or comes through a partner network. Because the equipment usually secures the deal, some lenders work with lower scores than they would for unsecured funding. Strong, resaleable equipment and steady cash flow can help offset a thinner credit profile, though approval is never guaranteed.
How much of the equipment cost does financing cover?
Most equipment financing covers a large share of the purchase price, with any remainder sometimes due as a down payment. The exact loan-to-value depends on the lender, the equipment type, and its condition, so new assets and used ones may be financed at different rates. Neutral publishers like Bankrate offer current range context worth checking before you apply.
How long are equipment financing terms?
Terms generally track the equipment’s useful life, so longer-lasting assets support longer terms. Construction machinery and vehicles may carry multi-year terms, while fast-aging technology tends toward shorter ones. Partner equipment financing through Credibly runs up to 5 years for qualifying businesses, with the exact term shaped by the asset and the funding partner.
Can a newer business qualify for equipment financing?
Yes, in many cases. Because the equipment serves as collateral, the asset reduces a lender’s risk, which can open the door for younger businesses with steady revenue. Time-in-business requirements still apply and vary by product, so a business with a few months of history may have fewer paths than one past its first year.
Is equipment financing the same as an equipment lease?
No. Financing means borrowing to own the equipment, building equity in it over the term. Leasing means paying to use it for a set period, often with lower upfront cost and an easier upgrade path at the end. Financing tends to fit durable, long-life equipment, while leasing fits gear that ages quickly.
Does applying for equipment financing affect your credit?
It depends on the provider and the inquiry type. Some run a soft inquiry early and a hard pull only before funding, while others pull hard up front. Confirm the inquiry type with your provider before you apply.
¹ Some products are made available through Credibly’s network of external funding partners. Partner product thresholds are set by the funding partner and apply to those products specifically.
² Factor rates as low as 1.11.
³ Financing terms are based on a good-faith estimate and assume consistent monthly revenue. Actual time to satisfy the MCA may vary.
⁴ Credibly merchant cash advances and working capital loans to merchants in California are provided by Retail Capital LLC. All other Credibly products in all other jurisdictions are provided by Credibly or Arizona LLC.