How Does Equipment Financing Work?

Many small business owners ask, “How does business equipment financing work?” Equipment financing works similarly to term business loans regarding payment options. You pay fixed periodic payments (including principal and interest) every month until the principal balance is paid in full. In the end, you own the equipment free and clear.

With the business equipment loan options available, you can borrow up to $5 million per piece, perfect for heavy equipment financing. The interest rate with an equipment finance company starts at as low as 5%. To qualify for equipment financing, you don’t need excellent credit. All you need is to have a 600+ minimum credit score.

Examples of what businesses can purchase using equipment financing include:

- Computers

- Printers
- Copiers
- Other office equipment
- Desks (Office furniture)
- Farm equipment
- Factory and manufacturing equipment
- Industrial equipment
- Vehicles
- Auto repair equipment for mechanics and garages
- Gas station equipment
- Construction equipment (Other heavy equipment)
- Landscaping equipment
- Dog grooming equipment
- Gym equipment
- Medical equipment
- Dental equipment
- Chairs for hair salons or beauty spas
- Restaurant equipment (ovens, freezers, etc.)
- Laundry & dry-cleaning equipment.
- Cannabis equipment.
- Please inquire about other business assets!
The above list is just some of the equipment types available. Businesses seeking unique or niche equipment and machinery can also take advantage of equipment financing.

As mentioned above, with business equipment loans, the asset is the collateral. That’s why the interest rate starts this low, and you don’t have to wait weeks because quick approval is prevalent.

To determine the value, the equipment loan finance company may ask for information about the equipment purchases, including the purchase price, age, seller, and manufacturer info, among other items. The equipment financing lender needs this info to ensure they can recoup their investment in case of a default.

Equipment financing also offers potential tax savings with Section 179 Tax Deductions. The program was originally intended for business vehicles but can now reduce a business’s tax liability for most business equipment. Business owners can still use Section 179 vehicle deductions as well. Ensure you consult your accountant or tax pro to verify any potential tax implications.