Best Equipment Financing Companies and Loans in 2024

Equipment financing is a type of small business loan that’s used to help businesses purchase the equipment they need. According to the Equipment Leasing and Finance Association (ELFA), 79% of U.S. companies use some kind of business funding to acquire equipment. If you need new equipment to keep your business running, read on below. Our experts have compiled a list of the best equipment financing companies in 2023.

ELFA reports that 19% of companies who financed equipment purchases used secured loans. But there are dozens of equipment financing companies out there that also offer unsecured loans, making it hard to know which lender is right for you. 

In this review, we highlight the terms, rates and fees of the best equipment financing companies and explain what makes them a good choice. We also share potential downsides of each company, and provide a rating methodology you can use to select the best equipment financing option for your needs.

Best Equipment Financing Companies - Full Overview

How to Choose the Best Equipment Financing Companies

• Loan features: We looked into details of the business funding product, including loan amounts, loan terms, and repayment options.
• Application process: We analyzed the details of the application process, such as the invasiveness of the application information, whether the equipment fincnaing company requires a hard or soft pull on your credit, and what the funding time looks like.
• Interest rates and fees: We considered the costs of the loan, including any fees charged by the lender and their minimum and maximum interest rates.
• Qualification process: We looked at what it took to qualify for equipment financing, including minimum credit score, amount of annual revenue, and length in business.
• Customer support: We looked into various customer support features, such as 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 read company 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, such as payment flexibility or advanced technology, as well as their overall level of transparency.

Main Features of the Best Equipment Financing Companies

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

What is Equipment Financing?

Equipment financing is a loan used specifically for purchasing equipment. It usually doesn’t include working capital loans that are meant to provide funding for day-to-day operations. ‘Equipment’ is tangible assets such as computers, freezers, vans, trucks, tools, and other functional machinery necessary for running the business. Equipment financing can also cover software.

Businesses spend approximately $2 trillion dollars investing in equipment each year. About 57% of that investment is financed through loans, lines of credit, or other financial products.

With an equipment financing loan, the total loan amount cannot 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 acts as collateral for the loan. If you fail to pay, 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 your tax liability.

How Equipment Financing Works

Business equipment financing is usually viewed as a more cost-effective and lower-risk way compared to other forms of financing. It allows businesses to maintain their cash reserves because they do not purchase the equipment outright.

Each lender that offers equipment financing and small business 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. There are some equipment financing lenders, though, that do not require a down payment.

More than 50% of the equipment acquired by U.S. businesses is financed, according to the Equipment Leasing and Finance Association. 

Types of Equipment Financing

There are several types of business funding that you can use to finance an equipment investment including:

• Secured business loans: This type of small business loan uses the equipment as collateral, potentially reducing interest rates for the term of the loan.
• Business line of credit: As a type of short-term business loan, a business line of credit may be a good choice if you plan to pay off the debt quickly. 
• Term loan: These business loans may be either short- or long-term and used to finance equipment purchasing or leasing. However, you may be required to put up additional collateral to secure these loans. 
• SBA CDC/504 loan: These government-backed loans can be used to finance machinery and equipment as well as facilities and land. These loans are available only through Certified Development Companies (CDCs). 

According to the Equipment Leasing and Finance Association, Equipment financing lenders include traditional banks (53%), manufacturers/vendors (17%), and fintechs (14%).

Businesses That May Use Equipment Financing

Equipment financing loans are best suited for startup companies that find it difficult to obtain traditional loans. However, any business that needs equipment can use this method, not just startups. 

Here are some examples of businesses that could benefit from equipment financing and the types of equipment they finance:

• Transportation: transportation equipment represents 22.4% of the total equipment financing volume in the U.S. This includes box trucks, dry van trailers, flatbed trailers, stepdeck trailers, removable gooseneck trailers
• IT and related technology services: IT equipment represents 17.3% of the total equipment financing volume. This includes modems, routers, network switches, UPS, and servers
• Construction: construction equipment represents 16.1% of the total equipment financing volume. This includes excavators, bulldozers, trenchers, cranes, and other heavy equipment financing.
• Agricultural and farm businesses: agricultural equipment represents 14.1% of the total equipment financing volume. This includes cutters and shredders, harvesting, planting, and seeding equipment
• Industrial and manufacturing industry: industrial equipment represent 5.3% of the total equipment financing volume. This includes centrifuges, generators, storage tanks
• Medical practices : medical equipment represents 4% of the total equipment financing volume. This includes medical imaging machines, insulin pumps, nebulizers, and more
• Other industries: office equipment represents (3.6%), materials handling equipment represent 3.3%, energy equipment represent 1.9%, furniture, fixtures, and other office decor represent 1.6% of the total volume of equipment financing in the U.S.

Source: Equipment Leasing and Finance Association (ELFA)

Equipment Financing Eligibility Requirements

While every lender sets their own criteria for equipment financing loans, most work off of the same basic eligibility requirements. To approve borrowers for this type of business funding, lenders will take a close look at the following items:

• Time in business: Most lenders want you to have at least 3-6 months of business history.
• Annual revenue: Typically, lenders want to see you’re making at least $100,000 in revenue annually.
• 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.
• Industry: Not all lenders service every industry. Some limit who can apply for an equipment financing 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 lenders require business owners to finance a minimum of $20,000. If this is too high, a term loan or business line of credit may be more suitable.

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 rates and terms will depend on your specific situation, i.e., your credit score and what you require. A good equipment financing rate might be as low as 5% or even less

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. Most of the lenders on our list offer equipment financing to small business owners within 24 hours of approval.
• Spread the cost - 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 small 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.
• Boost credit score - Like any loan, your credit will be affected. If you make your payments on time, you’ll see a gradual improvement in your score.

Cons

• Tougher eligibility criteria - Most lenders seek applicants with good credit scores and strong business history.
• Restricted applications - Your loan purpose is strictly limited to the specific asset you want to purchase. Other types of working capital loans will offer more flexibility for your small business.

Conclusion

At the end of the day, finding the best equipment financing companies 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 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.