Equipment Financing: 7 Best Companies and Lenders of 2022

• You can get an equipment loan equal to up to 100% of the value of the equipment you’re looking to purchase — depending on which equipment finance company you use and your business’s qualifications. You repay the loan over time, with interest.
• Some small-business lenders may also pay for soft costs, such as delivery, installation, warranties, assembly and other one-time expenses required to get your equipment set up and running. Certain equipment financing companies will finance these costs on top of the full value of your equipment — offering, for example, 125% financing — 100% for the equipment, 25% for soft costs.
• Other equipment financing companies, however, may finance only a percentage of the cost of the equipment, say 75%, and allot the remainder of the loan (25%) to your soft costs.
• Because soft costs typically require a large investment upfront when you purchase your equipment — and don’t add value to the equipment long term — it can be helpful to find an experienced equipment financing company that will finance some of these expenses. This way, you’re receiving the same interest rate to finance your soft costs as you are for the rest of your equipment loan — and you don’t have to use funds you have on hand or take out a separate loan to cover them.

• Anecdotally, equipment financing interest rates range from 4% to 30% APR.
• Generally, terms on equipment loans are based on the anticipated life of the equipment or machinery you’re purchasing. A shorter term may have you scrambling to make payments, and a longer term means you’ll be paying for the equipment after you stop using it.

• On one hand, equipment leasing can help reduce costs and maximize an investment. For instance, a piece of equipment becomes less valuable and productive as it gets older, so leasing it for a limited time may be a smart move. Some financing companies also offer the option of buying the equipment at current market value.
• On the other hand, equipment leasing can cost more than financing if you plan to use the equipment for a long time. According to the Equipment Leasing and Finance Association, leasing is “likely the preferable option” for equipment you plan to use for 36 months or less. If you’ll use it for longer, it makes more sense to buy.

Pros

• Affordable. Equipment loans can provide competitive interest rates and long terms. SBA 7(a) loans, for example, typically offer terms up to 10 years for equipment purchases.
• Equipment ownership. You’ll own the equipment outright once the loan is repaid. If you need cash for other business purposes, you might arrange a sale-and-leaseback agreement with the equipment finance company; that involves selling the equipment to a lender in return for quick cash and then leasing it back from that lender.
• Self-collateralizing. You may not need to rely as heavily on personal credit, time in business or other collateral to qualify. Startups and businesses with bad credit may qualify for equipment financing.
• Tax savings. At tax time, the interest you’ve paid is deductible, and you may also qualify for a depreciation tax benefit.

Cons

• Outdated equipment. If the financed equipment becomes outdated, you’ll need to sell or dispose of it.
• Down payment. An equipment loan may require a high initial down payment.

Online lenders

Banks and credit unions

SBA lenders

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