5 Best Equipment Financing Companies & What to Know Before Applying
Equipment financing can help you purchase the equipment your business needs even if you don’t have enough cash on hand to buy it yourself. Reviewing rates, terms, fees, and the time to funding can help you find the best equipment financing company for your needs.
For many small businesses, keeping the lights on depends on your ability to purchase and maintain specific equipment. Business equipment—such as an industrial oven, a screen-printing machine, or a food truck—can be costly to replace, especially when it malfunctions unexpectedly. Equipment financing offers you a way to replace your equipment now, even if you don’t have the cash flow to pay for the full purchase.
This guide will cover everything you need to know to get started with equipment financing, including how equipment financing works, how to choose between financing and leasing your equipment, and how to compare the best equipment financing companies.
In this guide:
- 5 of the Best Equipment Financing Companies
- What Is Equipment Financing and Who Is it Good For?
- What Types of Equipment Can I Finance?
- Equipment Financing vs Equipment Leasing: What’s the Difference?
- Is it Easy to Qualify for Equipment Financing?
- Equipment Financing Rates & Terms
- What are the Downsides to Equipment Financing?
- How to Apply for Equipment Financing
5 of the Top Equipment Financing Companies
Credibility Capital offers short- and long-term loans to applicants who have good to excellent credit and have been in business for at least two years. If you’re considering this equipment loan, it’s important to note that they do charge an upfront origination fee, so you should include that fee when comparing lenders.
- APR Range: 8% to 20%
- Loan Terms: 12, 24, or 36 months
- Loan Amounts: $10,000 to $350,000
- Usual Deposit Time: Typically, 7 days
- Origination Fee: 3% – 5%
- Minimum Credit Score: 680
Currency Capital specializes in equipment financing for businesses of various sizes. Customers who are interested in an equipment financing loan must contact the company to receive individualized information about rates, terms, and eligibility.
- APR Range: 6% to 24%
- Loan Terms: 6 months to 84 months
- Loan Amounts: $5,000 to $2 million
- Usual Deposit Time: 24 hours to 2 weeks
- Origination Fee: Varies
- Minimum Credit Score: 585
Funding Circle is a popular online lender that provides small business loans that can be used for a variety of reasons, including staffing, working capital, and purchasing equipment. Funding Circle offers an easy online application process and provide personalized rates in as little as 10 mins.
- APR Range: 4.99% or higher, based on your credit
- Loan Terms: 6 to 60 months
- Loan Amounts: $25,0000 to $500,000
- Usual Deposit Time: Funding is as little as 5 days
- Origination Fee: 3.48% to 7.99%
- Minimum Credit Score: 620
>> Read More: Lending Club vs Funding Circle
- APR Range: 9.99% to 30%
- Loan Terms: 3 to 36 months
- Loan Amounts: $6,000 to $500,000
- Usual Deposit Time: As soon as 1 to 2 business days
- Origination Fee:
- 2.5% to 4% for first loan
- 1.25% to 3% for second loan
- 0% to 3% for third+ loans
- Minimum Credit Score: 600
Crest Capital offers a number of financing options including equipment financing, vehicle financing, and software financing. They pride themselves on being a “no-hassle” financer with fast approvals and low rates. Plus, Crest Capital will also fund loans for used and privately sold equipment.
- APR Range: As low as 5%; varies based on loan amount, time in business, etc.
- Loan Terms: 24 to 74 months
- Loan Amounts: $5,000 to $500,000
- Usual Deposit Time: As fast next day
- Origination Fee: No origination fee
- Minimum Credit Score: 650
What Is Equipment Financing and Who Is it Good For?
As necessary as it is, purchasing equipment can represent a significant financial setback for a small business. However, small business owners who don’t have the working capital to make large purchases can turn to equipment financing companies to secure a much-needed equipment loan.
Whether you need new computers for the office, a forklift for the warehouse, or any other type of expensive equipment, financing your purchase will allow you to obtain most or all of the funds up front, so you can replace your machinery, get back to work, and pay it off over time while avoiding costly alternatives, such as high-interest credit card debt.
What Types of Equipment Can I Finance?
From printers and computers to conveyor belts and paving machines, you can finance almost any equipment purchase.
Say, for example, a restaurant owner finds that her refrigeration unit is broken beyond repair. As a food-safety essential, she needs to replace it as quickly as possible. If she doesn’t have the cash on hand, she can turn to restaurant equipment financing to purchase the refrigerator and pay it down over the course of several months or years.
Similarly, the owner of a construction site may need to upgrade or purchase new equipment in order to meet deadlines. An industrial equipment financing option can help him purchase the equipment in time to meet the demands of his client or customer agreement.
Equipment Financing vs Equipment Leasing: What’s the Difference?
When discussing equipment financing, equipment leasing also frequently enters the conversation. Both of these options allow business owners to acquire the equipment they need when they don’t have the working capital to buy it themselves. However, there are some significant differences that may make one option better than the other given your unique situation.
Equipment financing, like any other small business loan, is a lump sum cash advance that can be used to make a purchase. It comes with fixed payments and terms, and at the end of the repayment term, you will own the equipment outright. With competitive equipment financing rates, this can be a much more affordable option, especially when it comes to equipment that you plan to keep long term.
Equipment leasing is akin to leasing a vehicle: at the end of your lease you do not own the equipment. Instead, you must continue the lease or make arrangements to purchase the equipment, though that will likely be more expensive than if you had bought the equipment in the first place.
However, in some cases, equipment financing may make more sense. For example, if you have poor credit, you may find that no credit check equipment financing options carry high interest rates and make leasing more affordable. Or if you plan to replace the equipment in question every few years, leasing may be a better option.
Is it Easy to Qualify for Equipment Financing?
In general, most businesses can qualify for equipment financing. However, rates and terms are based on a variety of factors, often including both the applicant’s and the business’ credit score. Borrowers with higher credit scores will be able to take advantage of more affordable equipment financing options, while borrowers with average or below average credit may find that rates are high and terms are less flexible.
As you review your options, be sure to make note of requirements as they pertain to each lender. This includes things like annual revenue minimums, industry type, credit score, and more.
Although many lenders require credit scores of 600 or higher, others extend loans to borrowers with lower credit scores. Similarly, many lenders prefer to work with businesses that have been open for two years or longer, but there are exceptions available to new businesses.
>> Read More: Small Business Loans for Bad Credit
Equipment Financing Rates & Terms
Equipment financing rates and terms will vary based on the lender, the value of the equipment, your personal credit score and your business credit history. However, you can typically expect a rate between 6% and 30%.
You could find repayment terms as short as six months or as long as 84 months, though 36- to 60-month terms are most common.
What are the Downsides to Equipment Financing?
There are many benefits to equipment financing, but one of the downsides is the loan term in relation to the longevity of the equipment. In some cases, particularly when borrowers enter into longer repayment terms, the equipment can break and depreciate over the life of the loan, leaving you paying for repairs or replacements while still making payments on the original equipment.
For that reason, it’s important to evaluate the life expectancy of the equipment as it relates to the term of the loan. In some cases, a shorter loan term and higher monthly payments may help avoid this issue.
How to Apply for Equipment Financing
Every equipment financing company has its own unique application process, but typically loan applications can be completed online and have minimal paperwork requirements. When applying you’ll usually need to provide the following:
- Company name
- Basic business contact information
- Your Drivers license or State ID
- Bank statements and a voided business check
- The estimated cost of equipment
Bottom Line: Is Equipment Financing Right for Your Small Business?
Business equipment financing can help you purchase the equipment that is essential to your day-to-day operations—even if you don’t have the cash on hand. Business owners should consider equipment financing in addition to other short-term lending options, like loans or a business line of credit, as they review their options. However, keep in mind that equipment financing isn’t always right, and some businesses owners may find that leasing their equipment may make more sense.