Equipment Financing for Small Businesses: Buy More, Spend Less Cash

Equipment is the engine of many small businesses. The commercial oven, the excavator, the CNC machine, the delivery truck — without it, there's no revenue. But equipment is expensive, and buying it outright can devastate your working capital. Equipment financing solves this problem elegantly.

What Is Equipment Financing?

Equipment financing is a loan or lease specifically for purchasing business equipment. The equipment itself serves as collateral, which typically makes qualification easier and rates more competitive than unsecured working capital products.

You make fixed monthly payments over a term (usually 24–72 months) and own the equipment outright at the end. Meanwhile, the equipment is generating revenue from day one.

Equipment Loan vs. Equipment Lease

Equipment loan: You borrow money to purchase equipment. You own it. At the end of the term, no more payments — the equipment is yours free and clear. Best for equipment you'll use long-term and want to own.

Equipment lease: You make payments to use the equipment for a defined period. At the end, you can often purchase it at fair market value, return it, or upgrade. Best for technology and equipment that becomes obsolete quickly.

For most heavy equipment, vehicles, and long-lasting industrial machinery, ownership via a loan is usually preferable. For software-heavy equipment, medical devices, and technology that evolves rapidly, a lease gives you the flexibility to upgrade.

What Equipment Qualifies?

Almost any business equipment qualifies for equipment financing:

• Commercial kitchen equipment (ovens, fryers, refrigeration)
• Construction equipment (excavators, loaders, lifts)
• Commercial vehicles and trucks
• Medical and dental equipment
• Manufacturing machinery
• Restaurant equipment
• Technology and computers
• Fitness equipment (for gyms)
• Agricultural equipment

Used equipment qualifies as well as new — typically up to 10–15 years old depending on the lender.

Rates and Terms

Equipment financing rates vary based on credit profile, time in business, and equipment type:

• Strong credit (680+), 2+ years in business: 6%–15% APR, up to 60–84 months
• Average credit (580–679), 1–2 years: 15%–25% APR, up to 48–60 months
• Lower credit or newer business: 25%–35% APR, up to 36 months

Even at 25% APR, equipment financing often makes sense because the alternative — buying outright — removes $50,000–$200,000 from your working capital in a single transaction.

The Section 179 Tax Benefit

The IRS Section 179 deduction allows businesses to deduct the full purchase price of qualifying equipment in the year it was placed in service — rather than depreciating it over multiple years. For 2024, the deduction limit is $1,160,000. This can substantially reduce the after-tax cost of equipment acquisition. Consult your accountant about how to maximize this benefit.

The Bottom Line

Equipment financing is one of the most straightforward and sensible forms of business funding. The asset pays for itself while you pay for it — and you preserve your working capital for operations. HeyFunder offers equipment financing for a wide range of business types. Apply in 5 minutes.