Last updated: November 2026
Equipment financing pays for a specific machine, vehicle or piece of technology, and the equipment itself secures the deal. You either borrow to buy it (an equipment loan, or a lease with a $1 buyout) or pay to use it for a set term (a fair-market-value lease). Because the lender can take the equipment back if payments stop, equipment financing is usually easier to qualify for and cheaper than unsecured working capital, and terms tend to follow the equipment's useful life. Most lenders start with a vendor quote, a few months of bank statements and a look at credit and time in business. This guide brings together our articles on how it works, who offers it, what it costs and how to compare offers.
How equipment financing works
The process is short: you pick the equipment and get a written quote, the lender reviews your application and the quote, and on approval it usually pays the vendor directly. You then make fixed payments, most often monthly, over the term. With a loan you own the equipment from the start and the lender files a lien until it is paid off; with a lease, ownership depends on the end-of-term option. Many lenders will also finance soft costs such as delivery, installation and training, but some finance only the hardware, so ask. Our equipment financing guide walks through what qualifies, typical requirements, financing with weaker credit and how to get a better deal.
Equipment loan vs. lease
| Structure | Who owns it | Payments | Usually fits |
|---|---|---|---|
| Equipment loan | You, from day one (lender holds a lien) | Higher; may need a down payment | Long-lived equipment you plan to keep: trucks, heavy machinery, kitchen lines |
| $1 buyout lease | You, after the last payment | Similar to a loan | Buyers who want ownership with little or nothing down |
| Fair-market-value (FMV) lease | The lessor; you can buy, renew or return at the end | Lower | Technology and equipment that ages quickly |
| TRAC lease (vehicles) | The lessor, with an agreed residual at the end | Lower, with a balloon-style residual | Trucks and trailers used in the business |
The simple rule: do not finance an asset for longer than it will earn money. A five-year loan on equipment you will replace in three years leaves you paying for something you no longer use.
Who offers equipment financing
Providers fall into three broad groups. Banks are usually the cheapest for established borrowers with good credit, but they ask for more history and paperwork. Bank-owned specialists and independent equipment finance companies are faster and often approve on an application alone up to a set amount, commonly somewhere between $250,000 and $500,000 depending on the lender. Small-ticket lease-to-own companies serve startups and weaker credit at a higher cost. Manufacturers and dealers also arrange financing at the point of sale. Our comparison of the best equipment financing companies lists published limits, terms and requirements for banks and specialists, with sources, plus options for newer businesses.
The market is large: the Equipment Leasing and Finance Association estimates U.S. equipment finance reached a record $1.51 trillion in 2025, and reports that 87% of businesses acquiring equipment or software used some form of financing.
Working out the payment and the real cost
A payment estimate needs four inputs: the installed cost of the equipment (not the brochure price), your down payment, the rate and the term. The lowest monthly payment is not always the cheapest deal: a longer term lowers each payment but raises total interest, and fees such as documentation charges, origination fees and end-of-term purchase amounts change the real cost. Ask every provider for the APR or the total of all payments so offers can be compared on the same basis. Our article on the equipment finance calculator explains each input, shows how to test lease-versus-buy and payment-frequency scenarios, and lists the costs a simple estimate can miss.
What lenders look at
Because the equipment secures the deal, lenders look first at the equipment: its type, age, resale value and the vendor selling it. Then they look at the business: time in business, credit, bank deposits and existing debt. A written quote or invoice is usually the first document requested. Have three to six months of bank statements, formation documents and the owner's ID ready; for larger amounts, expect tax returns, financial statements and a debt schedule. Used equipment can be financed too, though some lenders set age limits and shorter terms.
Restaurant equipment, trucks and other industries
Every industry finances equipment, but the details differ. Restaurants finance ovens, walk-ins, hood systems and POS equipment that cannot fail during service; restaurant equipment financing compares loans, leases, SBA loans and faster options, what lenders look for and how to calculate the true cost. For owner-operators and fleets, semi truck financing covers loans versus leases, new versus used trucks and the application timeline. Contractors, medical practices and manufacturers follow the same logic with different equipment; our industry funding guide covers how needs differ by industry.
Section 179 and bonus depreciation in 2026
Financed equipment can still qualify for tax deductions. For tax years beginning in 2026, Section 179 lets a business deduct up to $2,560,000 of qualifying purchases, with the limit phasing out once qualifying purchases exceed $4,090,000 (IRS Rev. Proc. 2025-32). Under the 2025 tax law, 100% bonus depreciation is permanent for qualified property acquired after January 19, 2025. Whether you benefit depends on your situation, including whether a lease is treated as a true lease or a purchase for tax purposes, so ask your tax advisor before you sign.
When equipment financing fits, and when it does not
Equipment financing fits when the purchase is a specific, durable asset that earns money for longer than the term: a truck that hauls paying loads, a machine that adds capacity, an oven that keeps the kitchen open. It is a poor fit for payroll, inventory or other short-term needs, where a line of credit or working capital is the better tool, and for equipment that will be obsolete before it is paid off, where a short FMV lease or paying cash may be better. For large purchases with real estate involved, an SBA 504 loan can finance long-lived equipment alongside property; see our SBA and term loans guide.
Comparing equipment offers with FSE
FSE is an independent business funding brokerage that works with a panel of lending partners, including equipment finance providers, so one application can surface several offers to compare on payment, term and total cost. To be considered, a business generally needs at least 1 year in business and $10,000 or more in monthly revenue.
Frequently asked questions
Do I need a down payment for equipment financing?
Not always. Some lenders finance up to the full cost, including soft costs, for strong applicants; others ask for a down payment, especially for used equipment, newer businesses or weaker credit.
Is it better to lease or buy equipment?
Buy (with a loan or $1 buyout lease) when you will use the equipment for most of its life. Lease at fair market value when it ages quickly or you want to upgrade regularly.
Can a new business get equipment financing?
Sometimes. A few small-ticket and lease-to-own providers work with very new businesses at higher cost and lower limits; most banks want two or more years in business.
Does the equipment have to be new?
No. Used equipment can be financed, though lenders may limit its age, require an inspection or appraisal, and offer shorter terms.
Ready to compare equipment offers? Apply now and see options from FSE's lending partners.
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