Top 10 Equipment Financing Options for Small Businesses
Every business needs equipment, but not every business has the cash to buy it outright. Equipment financing helps you acquire what you need while preserving working capital.
The Equipment Financing Landscape
The equipment financing market has exploded in recent years, offering options for businesses of all sizes and credit profiles.
Top 10 Options
1. Traditional Equipment Loans
Borrow money specifically to purchase equipment, which serves as collateral.
Best for: Businesses with good credit wanting to own equipment Terms: 2-7 years, 6-20% rates Down payment: 0-20%
2. Equipment Leasing
Make monthly payments to use equipment without owning it.
Best for: Equipment that becomes obsolete quickly Types: Operating lease, capital lease, $1 buyout
3. SBA 7(a) Loans
Government-backed loans with excellent terms.
Best for: Larger purchases, businesses with strong financials Terms: Up to 10 years for equipment Rates: Prime + 2.25-4.75%
4. SBA 504 Loans
For major equipment (along with real estate).
Best for: Large, long-life equipment Structure: 50% bank, 40% CDC, 10% down
5. Vendor Financing
Financing offered by equipment manufacturers or dealers.
Best for: Specific equipment with promotional rates Watch for: Balloon payments, hidden fees
6. Equipment Sale-Leaseback
Sell equipment you own, lease it back.
Best for: Unlocking capital from existing equipment Benefit: Immediate cash infusion
7. Line of Credit
Draw funds as needed for equipment purchases.
Best for: Multiple smaller purchases Flexibility: Revolving, reusable
8. Merchant Cash Advance
Fast funding for equipment emergencies.
Best for: Urgent needs, credit-challenged businesses Speed: Same-day possible
9. Online Equipment Lenders
Fintechs specializing in equipment financing.
Best for: Quick approval, varied credit profiles Examples: Balboa Capital, Crest Capital
10. Credit Cards
For smaller equipment purchases.
Best for: Purchases under $10K Benefit: Rewards, 0% intro periods
How to Choose
Consider these factors:
- ●Equipment life vs. loan term: Don't finance longer than useful life
- ●Total cost: Compare APR, not just payment
- ●Tax implications: Section 179, depreciation
- ●Ownership goals: Own vs. lease
- ●Cash flow impact: Match payments to revenue
Tax Benefits
Section 179 allows you to deduct the full purchase price of qualifying equipment in the year you buy it (up to limits). This can significantly reduce the effective cost of financed equipment.
Conclusion
The right equipment financing depends on your specific situation. Consider your credit, cash flow, how long you'll need the equipment, and whether ownership matters to you.