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From opening a new medical practice to expanding a restaurant chain, having the latest machinery and technology upgrades helps you stay relevant and ahead of the competition. With equipment financing, you can purchase the equipment you need to successfully run your business without depleting your working capital.
The most common lenders for equipment loans are banks and online lenders. Acquiring an equipment loan can be simple for most small businesses as long as you meet the lenders’ requirements. In this guide, we’ll compare the best equipment financing companies to help you match with the right lender.
Best Equipment Financing Companies at a Glance
| Lenders | Ideal for | Min. Credit Score | Max. Loan Amount |
|---|---|---|---|
| Clarify Capital | Small Business Owners | 550 | $5 Million |
| SBA | SBA Loans | 650 | $5 Million |
| Bank of America | Business Banking | 700 | $ 5 Million |
| OnDeck | Poor Credit | 625 | $250,000 |
| Balboa Capital | Heavy Machinery | 620 | $500,000 |
| Fundbox | Startups | 600 | $150,000 |
| Funding Circle | Established Businesses | 660 | $500,000 |
| Short Term Business Loans | Immediate, short-term needs | Short-term repayment | Quick purchases or sudden expenses |
| Business Line of Credit | Flexible borrowing for variable expenses | Pay interest only on amount used | Managing fluctuating expenses |
Best for Small Businesses: Clarify Capital
Why it’s a good choice: Clarify Capital supports thousands of small businesses nationwide and across a wide range of industries. With flexible eligibility and a network of over 75 lenders, we help streamline the application process to provide your business with fast, same-day funding.
Loan Amount Range: $10,000-$5 Million
Minimum Credit Score: 550
Pros:
- Easy online application process
- APR rates as low as 6%
- Seasoned loan advisors for support
- No collateral loans available
Cons:
- Possibly short repayment terms with higher interest rates
- Certain products and services not available in every state
Loan Details:
- Requires a minimum $10,000 monthly revenue
- 6+ months in business for loan eligibility
- Loan terms range six months to two years
Best for SBA Loans: Small Business Administration
Why it’s a good choice: The U.S. Small Business Administration (SBA) offers a wide selection of loans that are flexible to use for any business need, including purchasing equipment. Since the SBA guarantees a percentage of every SBA loan, most small business owners can secure them with low down payments and interest rates.
Loan Amount Range: Up to $5 Million
Minimum Credit Score: 650
Pros:
- Capped interest rates
- Flexible loan repayment terms
- Variety of loan options available
Cons:
- Most loans require collateral
- Lengthy application process
Loan Details:
- Must demonstrate a need for funds
- Requires an unlimited personal guarantee
Best for Traditional Equipment Loan: Bank of America
Why it’s a good choice: To purchase general-purpose equipment, Bank of America offers equipment financing as well as a line of credit with fixed rates as low as 6.75%. Through its business rewards program, you can take advantage of up to a 0.75% discount on interest rates.
Loan Amount Range: $25,000-$5 Million
Minimum Credit Score: 700
Pros:
- 0% interest on medical practice loans the first six months
- Fixed-rate loans with terms up to five years
- Discounts for veterans and through rewards program
Cons:
- Lengthy application process
- May not reveal interest rate until loan contract
- Application submissions must be in person
Loan Details:
- Offers up to 100% financing for certain loan options
- Minimum two years in business eligibility
- Requires $250,000 in annual revenue
Best for Poor Credit: OnDeck
Why it’s a good choice: OnDeck offers lines of credit and term loans, including same-day loans, for small businesses to purchase necessary equipment in quick turnaround time. It also reports on-time payments to credit bureaus, helping you build business credit over time.
Loan Amount Range: $5,000-$250,000
Minimum Credit Score: 625
Pros:
- Available to businesses with poor credit
- Offers same-day funding up to $100K
- Quick application process
Cons:
- Generally high APR rates (starting at 35.4%)
- Requires a lien on your business and a personal guarantee
- Services not available in every state
Loan Details:
- Must qualify for the prepayment benefit to cover 100% interest
- 0%-4% origination fee based on the total loan amount
Best for Fast Approval: Balboa Capital
Why it’s a good choice: Balboa Capital offers up to $500K for equipment financing, which is helpful for companies purchasing heavy machinery. Quick loan approval within the hour is also available, but hard collateral is required.
Loan Amount Range: $5,000-$500,000
Minimum Credit Score: 620
Pros:
- Quick approval process, possibly within the hour
- Same-day funding for approved borrowers
- Flexible loan terms
Cons:
- Potential fees (e.g., equipment inspection fee and documentation fee)
- Requires minimum $100K in revenue
Loan Details:
- Monthly repayment plan for equipment financing; daily/weekly for short term loans
- Requires business operation of at least a year
- Term lengths range two to five years
Best for Startups: Fundbox
Why it’s a good choice: Fundbox is willing to work with businesses with less than six months in operation, which is advantageous for startups. It also has a low credit score requirement, offering same-day approval and next-day loans.
Loan Amount Range: $1,000-$150,000
Minimum Credit Score: 600
Pros:
- Open to borrowers with bad credit
- Allows early repayment with no fees
- Supports startups in business less than a year in operations
- Can receive funds within one business day
Cons:
- Short repayment terms (maximum 24 weeks)
- Potentially high APR rates
- $100,000 minimum annual revenue for eligibility
- Same-day approval with next-day funds
- Weekly repayment schedule
Best for Established Businesses: Funding Circle
Why it’s a good choice: Funding Circles offers a wide selection of loans for small businesses as well as long-term loans up to seven years. It also doesn’t require applicants to meet a minimum revenue.
Loan Amount Range: $25,000-$500,000
Minimum Credit Score: 660
Pros:
- Loan terms range six months to seven years
- No minimum revenue requirement
- No prepayment penalty on loans
Cons:
- Borrowers must provide a personal guarantee
- Origination and late fees for missed payments
Loan Details:
- Monthly repayments
- At least two years in business
- No bankruptcies within past seven years
What Is Equipment Financing?
Equipment financing, also known as an equipment loan, is a small business loan intended for purchasing necessary equipment. This type of financing allows small business owners to get the new technology and machinery they need to run their businesses successfully. Equipment can range from computers and software to vehicles and office furniture.
Both traditional banks and online lenders offer equipment loans, where the amount of funding you qualify for depends on the price of the equipment, and some lenders may finance up to 100% of the equipment value. Once you pay off the loan, you own the equipment.
How Equipment Loans Work
Unlike most small business loans that require collateral, equipment financing allows you to use the equipment as collateral for the loan. While this means the lender can seize the equipment if you fail to repay the loan, borrowers don’t have to put up an additional collateral or personal guarantee.
Equipment financing also makes it easier for small business owners with poor credit or low annual income to qualify for funding. The loan term depends on the life of the equipment, and most equipment loans have fixed interest rates and monthly payment terms.
Pros and Cons
There are several advantages to equipment financing, as well as a few drawbacks. Below are a few advantages and disadvantages to keep in mind.
Pros:
- 80-100% financing for the value of your equipment
- Accessible to poor credit (low as 550 credit score)
- Doesn’t require collateral (the equipment itself serves as collateral)
Cons:
- Limited only to leasing or purchasing equipment
- Possibility of high interest rates
- May include fees
Equipment Financing vs. Equipment Leasing
Though you can use them for the same purpose, there is a difference between equipment financing and equipment leasing. With an equipment loan, you purchase and own the equipment even though it serves as collateral.
With leasing equipment, on the other hand, you pay the vendor for the use of the equipment for an agreed term and return it afterward. You don’t own the equipment.
An easier way to understand equipment financing compared to leasing is to think of renting versus owning a home.
When renting a home, you live in it for the duration of your lease but have to renew it to continue living there, and the landlord remains the owner. However, with homeownership, you pay a mortgage to purchase and live in the home as your own, and it serves as collateral if you default on the loan.
How to Get an Equipment Loan
Fortunately, receiving equipment financing is easier since the equipment will serve as collateral. However, requirements for small business owners may still vary by lender. Here are ways to prepare for an equipment loan and narrow your lender options.
1. Check Your Eligibility
When applying for general business loans, lenders typically look at personal credit score, time in business, and annual revenue. They’ll also consider the value of your equipment, including the condition and resale value, to determine how much you can qualify for and your ability to repay the loan.
2. Gather Required Documents
Most lenders also request proof of your business’s performance credit history. They’ll likely ask for documents, including bank statements, your business plan, personal and business tax returns, personal credit score, and any licenses or certifications (if applicable).
3. Complete and Submit Your Application
The last step is to apply online and wait for approval. Traditional banks and credit unions can take several weeks to confirm the approval. Fortunately, online lenders like Clarify Capital can get same-day approval.
FAQs about Equipment Financing
What is a good rate for an equipment loan?
You can qualify for rates as low as 6% APR with an equipment loan. Rates do, however, depend on several factors, such as your credit score, time in business, and annual revenue.
Can I get an equipment loan with bad credit?
Yes. You can qualify for an equipment loan with many lenders with a credit score as low as 550. Since equipment serves as the collateral, this financing is one of the easier types of loans for those with bad credit.
What is an example of equipment financing?
If you own a restaurant, such as a bakery, you’ll likely need a commercial oven to bake your products. Since you’ll use this type of expensive machinery for as long as you’ll be in business, you can take out an equipment loan to buy and use the oven, which will serve as collateral. Once you finish with the term repayments, the oven is yours to keep.
Discover Equipment Loans with Clarify Capital
When it comes down to it, having efficient machinery and advanced technology can make or break your business. If and when a big equipment purchase is necessary, equipment financing can supply the funds you need without breaking the bank.
Our Clarify Capital team works with a network of over 75 lenders, helping you find an equipment loan with the best rates. Get started today by contacting our dedicated advisors or applying online.
Methodology:
We chose our top picks with consideration of flexible repayment options, distribution of funds in no more than 10 business days for funds, and available discounts and benefits for small business owners.
Emma Parker
Senior Funding Manager
Emma holds a B.S. in finance from NYU and has been working in the business financing industry for over a decade. She is passionate about helping small business owners grow by finding the right funding option that makes sense for them. More about the Clarify team →
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