Equipment Financing

The short answer: Equipment financing is a loan or lease used specifically to buy business equipment — vehicles, machinery, computers, ovens — where the equipment itself serves as the collateral. If you default, the lender can repossess the asset.

Qualification

Easier to qualify for than an unsecured loan because the equipment secures the financing. Lenders still review credit and cash flow, but the collateral lowers the bar and often improves the terms.

Speed

Moderate — typically faster than an unsecured bank loan and far faster than an SBA loan, though slower than an MCA.

Repayment structure

Fixed monthly payments over a term that usually matches the equipment's useful life. Some structures (leases) offer a buyout at the end; others leave you owning the asset outright once paid off.

Cost structure

Secured financing is cheaper than unsecured options like an MCA, and often cheaper than a general term loan because the collateral reduces the lender's risk. Rates vary by asset type, your credit, and the lender.

Appropriate use cases

• Buying equipment that will generate revenue over time — a delivery truck, a commercial oven, a CNC machine.
• Spreading the cost of an asset across the period it earns, rather than paying upfront.
• Preserving other credit lines for operating needs.

Potential disadvantages

The funds can only be used for the equipment itself — not for payroll, inventory, or other operating costs — and the asset can be repossessed if you default. It's a poor fit for businesses that need flexible, general-purpose capital; for that, see working capital financing or the full business funding guide.