Equipment and Machinery Financing

What Drives the Cost

There is no single market rate for equipment loans. Pricing depends on credit, time in business, the type and age of the asset, the term, the down payment and the lender's own cost of funds. Beyond the rate, compare documentation fees, origination fees, prepayment terms, and any end-of-lease charges or buyout amounts.

Here is a hypothetical example of how rate and term add up. A business finances $200,000 over 60 months at a 9% annual rate. The monthly payment is about $4,152, and total payments come to about $249,100, so roughly $49,100 goes to interest. Stretching the term lowers each payment but raises total interest, and a term that outlasts the equipment's useful life can leave you paying for a machine you no longer use.

Tax Rules Worth Knowing

Buying equipment, including with borrowed money, can create meaningful federal tax deductions. Two provisions matter most:

• Section 179 expensing. For tax years beginning in 2026, the IRS sets the maximum Section 179 deduction at $2,560,000. That limit is reduced dollar for dollar once the cost of qualifying property placed in service during the year exceeds $4,090,000. The deduction also cannot exceed taxable income from the active conduct of a trade or business, though unused amounts can generally be carried forward.

• Bonus depreciation. Federal law now provides a permanent 100% first-year depreciation deduction for qualified property acquired after January 19, 2025.

Both depend on when equipment is placed in service, not when it is ordered or paid for. Leases are handled differently, since payments on a true lease are generally deducted as a business expense instead. Tax results depend on your situation, so review any purchase with a qualified tax professional before relying on these deductions.

Specialized Financing by Equipment Type

Different assets raise different underwriting questions, so this section includes focused guides for common situations. Manufacturers planning new lines or automation face long lead times and installation costs. Machine shops buying mills and lathes need to judge cost per spindle hour. Contractors deal with seasonality, rentals and job-driven timing. Companies that already own valuable real estate or equipment can convert it into cash by selling it and leasing it back.

Related guides in this section:

• Manufacturing Equipment Financing

• Machinery Financing

• Heavy Equipment Financing

• CNC Machine Financing

• Sale-Leaseback

• Equipment Sale-Leaseback

Frequently Asked Questions

Can a startup finance equipment?
Yes, though the options are narrower. Lenders that work with newer companies often ask for a larger down payment, strong personal credit, a personal guarantee or additional collateral. Equipment with strong resale value improves the odds.

Do I need a down payment?
It depends on the lender and the borrower. Some lenders finance the full cost of the equipment for well-qualified applicants, while others ask for money down, especially on used, specialized or high-value assets.

Can I finance used equipment?
Yes. Many lenders finance used equipment bought from dealers, auctions and private sellers. Expect closer review of age, hours and condition, and possibly an inspection or appraisal before funding.

How fast can funding happen?
Small, straightforward deals with non-bank lenders can sometimes close within days. Bank and SBA-backed loans, and larger or more specialized transactions, usually take longer because of documentation, appraisals and credit review.

Explore Financing Options for Your Business

The right structure depends on how long you will use the equipment, how the payment fits your cash flow and what you can qualify for today. Gather a vendor quote, recent financial statements and a clear picture of your existing debt, then compare loan and lease offers side by side on total cost, not just the monthly payment. With that groundwork done, you can choose equipment financing that fits your business and keeps your cash free for everything else.

Equipment financing lets a business buy or lease the machines, vehicles and tools it needs and pay for them over time, instead of draining cash on one large purchase. The equipment usually serves as collateral, which is why this kind of funding is often easier to qualify for than an unsecured loan and why repayment terms tend to follow the working life of the asset.

This guide covers what can be financed, how loans compare with leases, who lends against equipment, what underwriters look for, what drives cost, and which tax rules are worth raising with your accountant before you sign.

What You Can Finance

Almost any tangible asset with a useful life and a resale market can be financed. Common categories include:

• Production and manufacturing assets such as CNC machines, presses, injection molding machines, packaging lines and industrial robots.

• Construction and heavy equipment such as excavators, loaders, dozers, cranes and paving machines.

• Vehicles and transportation such as box trucks, tractor-trailers, service vans and forklifts.

• Medical, dental and lab equipment such as imaging systems, dental chairs and diagnostic analyzers.

• Restaurant and food service equipment such as commercial ovens, walk-in coolers and dish systems.

• Technology and office equipment such as servers, networking gear and phone systems, which lenders often finance over shorter terms because they lose value quickly.

Many lenders will also roll soft costs into the deal, such as delivery, rigging, installation, training and software that ships with the machine. Ask early, because policies on soft costs vary widely from one lender to the next.

How Equipment Loans and Leases Work

With a loan, you own the equipment from day one. The lender pays the seller, takes a security interest in the asset, usually by filing a UCC-1 financing statement or noting its lien on a vehicle title, and you repay principal and interest over a fixed term. When the balance is paid off, the lien is released.

With a lease, the lessor owns the equipment and you pay to use it. What happens at the end depends on the structure:

• $1 buyout lease. You make fixed payments and buy the equipment for a nominal amount at the end. It is generally treated much like a purchase.

• Fair market value lease. Payments are lower because the lessor expects the asset to keep some value. At the end you can return it, renew, or buy it at its market value at that time.

• Fixed purchase option lease. A middle ground where the buyout price is set at signing as a percentage of the original cost.

A simple rule of thumb: if you plan to run the equipment until it wears out, a loan or a $1 buyout lease usually makes sense. If the asset becomes outdated quickly or you expect to upgrade within a few years, a fair market value lease can keep payments lower and make replacement easier.

Where the Money Comes From

• Banks and credit unions tend to offer the lowest pricing to established businesses with strong financials, but they usually ask for more documentation and take longer to approve.

• Non-bank equipment lenders and leasing companies often approve faster, accept shorter operating histories, and know how to value specialized or used assets.

• Manufacturer and dealer programs are offered at the point of sale and sometimes include promotional terms on new models. Compare them with outside offers, since a low rate can be offset by a higher equipment price.

• SBA-backed loans through the U.S. Small Business Administration 7(a) and 504 programs can fund equipment, and the 504 program is designed for major fixed assets, including long-term machinery and equipment. These loans can carry long terms but involve more paperwork.

• Asset-based lenders may lend against equipment you already own, either inside a broader credit facility or through a sale-leaseback.

What Lenders Look At

Because the asset secures the debt, equipment financing underwriting weighs the machine almost as heavily as the borrower. Expect questions in these areas:

• The equipment itself: type, age, condition, hours or mileage, and how easily it could be resold. General-purpose assets with active resale markets are the easiest to finance.

• Operating history and revenue: lenders prefer an established track record, though younger companies can often qualify with a larger down payment or extra collateral.

• Credit: business credit and, for most small companies, the owners' personal credit. A personal guarantee is common.

• Cash flow: whether current earnings, plus any savings or new revenue the equipment produces, can cover the new payment.

• Existing debt: other loans, leases, and any liens already filed against the business.

Small requests are often decided on a short application and recent bank statements. Larger deals usually require tax returns, financial statements, a debt schedule and a vendor quote or invoice.