Finimpact

Best Equipment Financing for Small Businesses

Buying equipment is a major startup cost for many entrepreneurs. Unfortunately, many business owners don't have that much capital on hand, especially If they haven't been in business for very long.

Equipment Financing for Small Businesses
Tara Mastroeni
Written by:Tara Mastroeni
Real Estate and Personal Finance Expert

Thankfully, equipment financing is there to help entrepreneurs shoulder those costs. As the name suggests, equipment financing is a specific type of loan that’s used to help businesses purchase the equipment they need. If you need new equipment to keep your business running, read on below. We've compiled a list of the best equipment financing companies in 2022.

Our Top Picks for Best Equipment Financing

credibly
  • Simple application process
  • As soon as same day funding
  • Open to high-risk industries
Credit Score
Min. Credit Score 500+
Loan Amount
Loan Amount $5K-$400K
Loan Repayment
Loan Repayment 6-18 months
forafinancial
  • Ideal for plenty of industries
  • Approval not solely credit based
  • Early payoff discounts
Credit Score
Min. Credit Score 550+
Loan Amount
Loan Amount $5K-$750K
Loan Repayment
Loan Repayment 4-15 months
Fundbox review
  • No monthly fees or prepayment penalties
  • Same-day or next-day funding
  • Best for business lines of credit
Credit Score
Min. Credit Score 600+
Loan Amount
Loan Amount $5K - $150K
repayment
Loan Repayment 6-12 months

How to Choose the Best Equipment Financing Company

There are dozens of equipment financing companies out there and, if you’re not a financial expert, It can be hard to choose between them. Luckily, our experts have done the hard work for you and found some of the industry’s top contenders.

Still, it’s important to understand what’s behind each selection. Here’s a list of the various factors that our team used to determine their rankings:

  • Loan Features: First, we looked into details of the loan itself, including loan amounts, loan terms, and your repayment options.
  • Application process: Next, we looked into the details of the application process, such as the invasiveness of application information, whether the company requires a hard-pull or soft-pull on your credit, and their funding time.
  • Interest rates and fees: Then, we considered the costs of the loan, including any fees charged by the lender and their minimum and maximum interest rates. Typically, interest rates for an equipment financing loan range between 8% - 30%.
  • Qualification process: Next came the qualification process. Equipment financing lenders typically have requirements such as a minimum credit score, a minimum amount of annual revenue, and a time in business requirement.
  • Customer support: Additionally, we looked for various customer support features like the ability to talk to a customer service representative, the degree of multi-channel support, and the availability of educational information or tools.
  • Online user reviews: We also read reviews on independent review sites like Trustpilot to gain a sense of the level of customer satisfaction.
  • Perks and Bonuses: Finally, we took into account any special service offerings like payment flexibility or advanced technology, as well as looking at their overall level of transparency.

Best Equipment Financing Companies in 2022

1. Credibly - Best for borrowers with bad credit

Credibly Offers equipment financing for almost any type of equipment that your business needs, from medical devices to tools and farm equipment to office furniture, they've got you covered. Plus, since they offer flexible financing requirements and same-day funding, they may be a good option for those with less-than-perfect credit

Pros
Flexible qualifying requirements
High loan amounts
Fast funding
Cons
Lack of transparency
Collateral requirement
credibly review

Since the equipment itself generally acts as collateral for the loan, Credibly is able to offer incredibly flexible qualifying criteria. Despite requiring a minimum credit score of just 500 and a minimum time in business of six months, the company boasts that over 90% of its equipment financing applicants get approved.

Features

Min. Credit ScoreMin. Time in BusinessMin. Annual RevenueLoan AmountInterest Rate
No Requirement6 monthsNo Requirement$10,000-$10M9.99% and up

The Bottom Line

If you don’t have a great credit score, Credibly could be a good option for equipment financing. Their flexible qualifying requirements and short funding times ensure that you'll have a good shot at accessing the money you need when you need it most. Just be sure to read the fine print first.

Try Credibly

2. Fora Financial - Best for flexible-use funding

It's important to note that Fora Financial does not offer a true equipment financing loan. Instead, their small business loans can be used to finance new equipment purchases. With that in mind, if you're looking for a loan that can be used to buy new equipment and cover some of your other working capital costs, Fora Financial might be a smart option.

Pros
No use requirement
No collateral requirement
Opportunity to receive additional funding
Cons
Short-term financing
Lack of transparency
fora financial review

To qualify for a small business loan with Fora Financial, potential borrowers need to have six months in business and an annual revenue of at least $144,000. In addition, the company also states that it will not work with any businesses that have had a recent bankruptcy.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Factor Rate

Not Listed

6 months

$144,000

$5,000 - $750,000

1.1 -1.3

The Bottom Line

One of Fora Financial's biggest drawbacks is their short loan terms. If you're thinking of borrowing from them, make sure that you’re prepared to pay back the loan in as little as 15 months. Still, if you need financing that can be used for something other than simply buying equipment, they may be your best bet.

3. Fundbox - Best for low-fee loans

While Fundbox does not offer a true equipment financing loan either, It does have a term loan option that can be used to purchase equipment. In particular, Fundbox’s low fees and flexible repayment options make them a strong option for less-established businesses.

Pros
Short time in business requirement
Fewer fees
Access additional funds without reapplying
Cons
Short-term financing
Potentially high rates
fundbox review

Fundbox only uses personal credit scores, so you can apply even if you haven’t established business credit yet. Additionally, they offer funding up to $2M, which is more than some of their competitors.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

600

3 months

$100,000

Up to $2M

4.66%


The Bottom Line

If you’re looking for an equipment financing loan with fewer fees, you may want to seriously consider Fundbox. Unlike most lenders, they do not charge a prepayment penalty or an origination fee. That said, those lower fees do come at a trade-off. You’ll also need to be prepared to pay off your loan within a year.

Try Fundbox

4. Biz2Credit - Best for newer businesses

Biz2Credit offers funding that is closely tied to the equipment itself, so there's no worry of borrowing more money than you can handle. Plus, their eligibility requirements should be attainable for less-established businesses.

Pros
More lenient qualifying requirements
Longer loan terms
Cons
Collateral requirement
High interest rates

Equipment financing loans with Biz2Credit are closely tied to the equipment itself. For Instance, borrowers can finance up to 100% of the equipment value and loan terms will often match the estimated life of the equipment.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

560

3 months

$50,000

Up to 100% of the equipment value

8% - 30%


The Bottom Line

If you're newer in business, you're going to want to consider Biz2Credit. Their eligibility requirements are more suited to new businesses than other lenders. However, keep in mind that you'll only be able to borrow up to 100% of the equipment value. If you need more funds, you will need to look elsewhere.

Try Biz2Credit

5. Fundera - Best for obtaining multiple loan quotes

The most important thing to understand about Fundera Is that it is not a direct lender. Rather, it is a lending platform that will connect you with a lender that suits your needs. On the one hand, using the service will give you the opportunity to obtain quotes from multiple lenders easily. On the other hand, you won't be able to apply for a loan with them directly.

Pros
Ability to get multiple quotes
Flexible eligibility criteria
Cons
Double application process
Difficult to know if you’ll qualify
fundera

Most of the information about eligibility criteria on Fundera’s website is based on data from customers who have used the service. Fundera will still work with you if you don’t meet these qualifications exactly. However, they have found that borrowers who meet this criteria have the best chance of getting an affordable loan.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

600

2 years

$130,000

Up to 100% of the equipment value

4% - 40%

The Bottom Line

If you’re new to the process of shopping around for a loan, Fundera might be an easy place to start. You'll have the ability to get quotes from multiple loans in one place. However, if you’re on the cusp of being able to qualify for a loan and need to know your lender’s eligibility criteria, you might be better suited with a different company.

Try Fundera

6. BlueVine - Best for lines of credit

BlueVine doesn’t explicitly offer equipment financing. Instead, they offer business lines of credit that can be used to buy equipment. It's important to understand that a line of credit functions very differently than a traditional loan. It will work more like a credit card. You’ll be able to draw against the line of credit whenever you need funds and the interest rate will likely be variable as well.

Pros
Easy application process
Quick funding
Flexible repayment
Cons
Not available in all states
Not available for all industries

Since BlueVine does not offer equipment financing loans, there is no collateral requirement. However, in order to borrow from the company, you will have to agree to a personal guarantee, meaning you'll be on the hook for paying off the loan even if your business defaults.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

550-600

6 months

$120,000

Varies depending on credit limit

Variable

The Bottom Line

A line of credit is a very different financial product and a traditional equipment loan. If you need flexible equipment funding, this may be an option for your business, but if you’d rather have set payments and a fixed interest rate, consider another company instead.

Try BlueVine

7.Torro - Best for true startup funding

In today's financial industry, true startup funding can be hard to find. Most lenders want to see a business history, which can be hard to provide if you need equipment financing to get your company started. That’s where Torro‘s startup funding program comes into play. As long as you have a decent personal credit score, you have a shot at being approved for an equipment financing loan.

Pros
Minimal qualification requirements
Same-day funding
Multiple funding options
Cons
Limited information provided
Low funding cap

While Torro’s startup funding is perfect for fledgling businesses, more established businesses may be able to access up to $2M in funding as long as they can provide proof of six months in business, and at least $120,000 in annual revenue.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

600

No Requirement

No Requirement

$150,000

Not Listed

The Bottom Line

While Torro’s funding caps are fairly low compared to their competitors’, their minimal application requirements and same-day funding options make them a good fit for businesses that are just getting off the ground. If you don't have enough of a business history to be approved for equipment financing by a more traditional lender, think about using Torro

Try Torro

8.Lendio- Best for longer loan terms

Lendio is another online lending platform that will help connect you to the lender that best suits your needs. Again, you won't be able to get funding directly through Lendio. Rather, you’ll fill out an application, receive a handful of quotes for equipment financing loans, and then you’ll apply for the loan with your chosen lender.

Pros
Multiple lenders available
Longer loan terms
Equipment financing calculator
Cons
Double application process
Lengthy application
lendio review

Since Lendio is another online loan marketplace, it's hard to nail down any exact eligibility requirements. In general, the company has found that applicants with a credit score of at least 650 and a few years of business history have the best chance of being approved.

Features

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

650

3 - 6 months

Varies by lender

$5,000 - $5M

7.5% and up

The Bottom Line

If you doubt you'll be able to pay off your equipment purchase in a matter of months, think about using Lendio. With loan terms that last between one to five years, Lendio offers the longest loan terms of all the companies we've covered.

Try Lendio

Best Equipment Financing Main Features Table

Now that you’ve had a chance to learn about each company in depth, this side-by-side comparison will help you decide which one is the best fit for you.

Company

Min. Credit Score

Min. Time in Business

Min. Annual Revenue

Loan Amount

Interest Rate

Credibly

Not Required

6 months

Not Required

$10,000 - $10M

9.99% and up

Fora Financial

Not Listed

6 months

$144,000

$5,000 - $750,000

1.1% - 1.3%

Fundbox

600

3 months

$100,000

Up to $2M

4.66%

Biz2Credit

560

3 months

$50,000

Up to 100% of the equipment value

8% - 30%

Fundera

600

2 years

$130,000

Up to 100% of the equipment value

4%-40%

BlueVine

550-600

6 months

$120,000

Varies depending on credit limit

Variable

Torro

600

No Requirement

No Requirement

$150,000

Not Listed

Lendio

650

3 - 6 months

Varies by lender

$5,000 - $5M

7.5% and up

What is Equipment Financing?

Equipment financing is a loan for purchasing equipment. ‘Equipment’ is tangible assets such as computers, freezers, vans, trucks, tools, and other functional equipment necessary for running the business. Equipment financing can also cover software.

With an equipment financing loan, the total loan amount can not exceed the total economic value of the equipment itself. You pay interest on the loan, but it is not as steep as other methods (such as credit cards or working capital loans) because the equipment collateralizes the loans. If you fail to pay, then the lender will seize the equipment.

Remember that equipment financing is a loan, not a lease. You own the equipment and have to make payments, whereas, with a lease, you are renting the equipment and do not own it. With equipment financing, you can claim depreciation on your asset to reduce tax liability as to the legal owner of the asset.

What Sort Of Business Might Use Equipment Financing

Equipment finance is suited for startup companies that find it difficult to obtain traditional finance. But any business that needs equipment can use this method, not just startups.

Equipment finance is often easier to obtain than other financing options. After all, the equipment itself acts as collateral in the event of loan default. Equipment finance can also sometimes be cheaper than other loan types.

If you are involved in purchasing any kind of work-related equipment, you can get an equipment financing loan for it. Here are some examples of businesses that could benefit from equipment financing:

  • If you start a restaurant, you will need to buy ovens, fridges, and other essential equipment. This equipment can cost tens of thousands of dollars, too much to pay upfront.
  • A technology startup might need to purchase office computers and other office supplies.
  • Construction and transportation companies need trucks, motor vans, cranes, diggers, power tools, and heavy-duty equipment that are expensive to purchase upfront.

Here are some examples of equipment you can purchase using an equipment financing loan:

  • Solar panels and air conditioning units.
  • Office equipment – lights, chairs, printers, carpets, paintings, etc.
  • Blenders, refrigerators, ovens, coffee makers.
  • Smartphones, computers, iPads, video games consoles, music stations.
  • Gym equipment and relaxation facilities for employees.
  • Software including operating systems, application, and accountancy software.
  • All kinds of delivery vehicles
  • Clothes and uniforms.
  • Point of Sale (‘POS’) payment processing systems.
  • Welding and soldering equipment
  • Saws and industrial sawhorses
  • Painting or pressure washing equipment
  • Landscaping tools and equipment
  • Ladders and scaffolding

Equipment Financing Eligibility Requirements

While every lender sets their own criteria for equipment financing loans, most work off the same basic eligibility requirements. Here's a closer look at what you’ll need to be approved for financing.

Industry: Not all lenders service every industry. Some limit who can apply for an equipment financing loan.

  • Time in business: Most lenders want you to have at least 3-6 months of business history, so startups may have to look into specialized funding options.
  • Annual revenue: Typically, lenders want to ensure that you're projected to make at least $100,000 in revenue for the year.
  • Credit score: You’ll need a personal credit score of at least 500. In some cases, a lender may ask for a business credit score as well.

How Does Equipment Financing Work?

Business equipment financing is usually viewed as a more cost-effective and lower-risk way to acquire machinery than other forms of financing. Plus, with heavy equipment financing, you get to maintain your cash reserves because you don’t need to purchase the item outright. Each lender that offers equipment financing and small business equipment loans will have different terms, but you can usually find a lender that will finance around 80% of the asset’s total purchase price.

Generally speaking, you will need to pay the initial 20% of the cost and then repay your lender over the term of the agreement in regular payments. The amount you borrow will usually determine the length of the loan.

Equipment Financing Rates

While equipment financing rates are very competitive (due to the collateral supplied), they tend to have high minimum loan amounts. Some require borrowers to finance a minimum of at least $20,000, though it will also depend on the kind of loan you want. If this is too high, consider a term loan or business line of credit to finance your equipment purchases.

There is little standardization for equipment financing rates because there are many different types of equipment. It’s important to distinguish equipment financing from inventory financing and equipment leasing, as the average rates will differ. Equipment financing rate and terms will depend on your specific situation, i.e., your credit score and what you require.

Equipment Financing Pros and cons

Pros

  • Fast approvals - Since the asset is being used as collateral it’s usually much faster to arrange this type of lending. As you can see, most of the lenders on our list offer equipment financing within 24 hours of approval
  • Spread the cost - Equipment purchases tend to be quite expensive. Financing is the perfect way to spread the costs over a long period of time so your cash flow doesn’t take a hit
  • No additional collateral needed - Your other business and personal assets aren’t at risk if you default on a loan. Only the asset you’ve applied to secure a loan will be seized if you default
  • Tax benefits - You can write off all of your loan repayments as tax-deductible expenses, helping you to minimize your total bill at the end of the year
  • Fuel growth - For small businesses that might not have the capital to purchase large pieces of equipment, loans are a real lifeline. The injection of cash can prove an incredible boost to growth

Cons

  • Tougher eligibility criteria - Most lenders are looking for applicants with good credit scores and strong business history. This is to ensure the funding is going to an experienced business that can handle the responsibility of large asset management
  • Restricted applications - Your loan purpose is very strictly limited to the specific asset you want to purchase. Other types of working capital loans offer a lot more flexibility

Conclusion

At the end of the day, finding the best equipment financing company is no different than finding a lender for a different type of loan. You'll want to shop around for multiple quotes before applying and to read any terms and conditions carefully before signing on the dotted line.

However, none of that can happen until you’ve chosen the lender that’s the best fit for you. If. you're ready to take the next step toward getting the equipment funding you need, use the list above to help you get started.

Frequently Asked Questions (FAQ)

Can you finance used equipment?
In some cases, you may be able to finance used equipment. However, lenders prefer financed equipment to be in new or like-new condition.
Can I get equipment financing if I have bad credit?
Yes, some lenders will accept credit scores as low as 500. That said, if you have a lower score, you may be subject to a higher interest rate or additional qualifying requirements.
What’s the difference between equipment financing and equipment leasing?
Equipment financing allows you to buy the equipment outright while equipment leasing allows you to rent it for a specified amount of time. Generally, it's a good idea to lease equipment that ages out quickly while it makes more sense to buy equipment with a longer lifespan.
Can I get equipment financing for a startup?
Luckily, It is possible to get equipment financing as a startup. You'll just have to find the right lender and you may face a lower funding cap.

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About the Author

Tara Mastroeni

Real Estate and Personal Finance Expert

Tara Mastroeni is a strategist and writer with over a decade of experience creating content for the real estate and personal finance industries.

More about me