Equipment Financing for Small Businesses — 2026 Guide
Last reviewed: May 2026 — APR ranges verified via Balboa Capital, Crest Capital, National Funding, and Currency Capital published rate schedules and Nav.com lender database.
- Equipment financing rates range from 5.5–18% APR for qualified borrowers — the equipment itself serves as collateral, so no separate business assets need to be pledged.
- 100% financing (zero down payment) is available for equipment with strong resale markets such as semi-trucks and construction machinery.
- The Section 179 deduction allows businesses to deduct the full purchase price in Year 1 (2026 limit: $1,220,000), substantially reducing net financing cost.
- Fintech lenders fund in 24 hours to 5 days; Small Business Administration (SBA) 7(a) loans offer lower rates (9.5–12% APR) but take 30–90 days to fund.
What Is Equipment Financing?
Equipment financing is a loan or lease used to purchase or access business equipment, where the equipment itself serves as collateral. Rates currently range from 5.5–18% APR (annual percentage rate) for qualified borrowers, with the financed equipment securing the loan — meaning no separate collateral is required. Lenders advance 80–100% of the equipment’s purchase price, and repayment terms range from 24 to 84 months. Rate ranges are based on lender-published rates as of May 2026.
Unlike a general business loan, machinery financing is tied to a specific asset. If you default, the lender repossesses the equipment — not your other business or personal assets (in most cases).
100% financing is available for equipment with strong resale markets such as semi-trucks and construction machinery — zero down payment required.
FundingCompass research, May 2026
Pros
- Equipment serves as its own collateral — no separate business assets pledged, and liens are typically filed only against the financed asset
- 100% financing available on equipment with strong resale value (semi-trucks, construction equipment), meaning zero down payment required
- Section 179 tax deduction allows you to deduct the full purchase price in Year 1 (up to $1,220,000 in 2026), substantially reducing net financing cost
- Accessible to borrowers with credit scores as low as 580 through specialty lenders, with funding in 24 hours to 5 days
Cons
- Rates depend on credit profile, collateral, and term length — borrowers at 580 credit pay 4–8 percentage points more than borrowers at 680
- Technology and specialised equipment (under 60–80% advance rate) may require a meaningful down payment
- SBA 7(a) loans offer lower rates (9.5–12% APR) but take 30–90 days to fund — a significant trade-off for time-sensitive needs
- Balloon payments may apply at end of term on some structures, requiring refinancing or lump-sum payoff
- APR (Annual Percentage Rate)
- The annualised cost of borrowing, including interest and mandatory fees. Equipment financing APRs range from 5.5–18% for qualified borrowers, based on lender-published rates as of May 2026. Always compare offers using APR rather than monthly payment alone.
- Residual Value
- The estimated market value of the equipment at the end of the lease or loan term. In an operating lease, the lessor retains the residual value — this is what makes monthly payments lower than loan payments on the same equipment.
- Section 179 Deduction
- A US tax provision allowing businesses to deduct the full purchase price of qualifying equipment in the year it is placed in service, rather than depreciating over its useful life. The 2026 limit is $1,220,000.
- Balloon Payment
- A large lump-sum payment due at the end of a financing term, after which smaller periodic payments have been made. Some equipment financing structures use balloon payments to keep monthly costs low, requiring refinancing or a cash payoff at term end.
- Loan-to-Value (LTV)
- The ratio of the loan amount to the equipment's appraised or purchase value. A $80,000 loan on a $100,000 piece of equipment is an 80% LTV. Higher LTV means more risk for the lender and typically a higher interest rate.
Equipment Loan vs. Equipment Lease — Key Differences
| Equipment Loan | Operating Lease | Finance Lease | |
|---|---|---|---|
| Ownership at end | You own it | Return to lessor | Option to purchase |
| Balance sheet treatment | Asset + liability | Off-balance sheet | Asset + liability |
| Tax treatment | Depreciation + interest deduction | Lease payments deductible | Depreciation + interest |
| Best for | Long-lived equipment | Equipment you upgrade frequently | Equipment with residual value |
| Typical term | 24–84 months | 12–60 months | 24–84 months |
| Down payment | 0–20% | First + last month | 0–10% |
When to choose a loan: If you plan to use the equipment for its full useful life, an equipment loan is typically cheaper over the total term. You own the asset outright at the end.
When to choose a lease: If the equipment becomes obsolete quickly (computers, medical imaging, certain manufacturing machinery), an operating lease lets you upgrade without residual value risk. Lease payments are fully deductible as operating expenses.
Current Equipment Financing Rates — 2026
| Lender | APR Range | Min. Credit Score | Max. Loan | Funding Speed |
|---|---|---|---|---|
| Crest Capital | 5.5–12% | 650 | $1,000,000 | 2–5 days |
| Balboa Capital | 6–18% | 620 | $500,000 | Same day |
| Currency Capital | 5.99–14% | 640 | $2,000,000 | 2–3 days |
| National Funding | 7–26% | 600 | $400,000 | 24 hours |
| Taycor Financial | 6–20% | 580 | $2,000,000 | 2–3 days |
| SBA 7(a) | 9.5–12% | 680+ | $5,000,000 | 30–90 days |
Rates verified May 2026 via published lender schedules. Your actual rate depends on credit score, time in business, equipment type, and loan-to-value ratio.
The single largest factor in your rate is credit score — a borrower at 680 typically qualifies for rates 4–8 percentage points lower than a borrower at 580. Equipment type matters too: a semi-truck or CNC machine (established resale market) gets a better rate than specialised single-use equipment with limited resale value.
Scenario: A landscaping company finances a $120,000 skid steer loader at 8% APR over 60 months through an equipment lender.
| Amount financed | $120,000 (100% — no down payment) |
| Monthly payment | ~$2,433 |
| Term | 60 months |
| Total interest | ~$25,980 |
| Effective APR | 8% |
| Section 179 saving | ~$30,000 (at 25% tax rate) |
With the Section 179 deduction at a 25% effective tax rate, the ~$30,000 tax saving nearly offsets the entire interest cost — making the effective cost of the machinery financing significantly lower than the stated rate suggests.
What Equipment Can Be Financed?
Most business equipment with a clear market value qualifies. Common categories:
Transportation: Semi-trucks, trailers, vans, forklifts, construction vehicles. Highest advance rates (up to 100%) due to strong resale markets.
Construction: Excavators, loaders, cranes, compactors. 80–100% LTV from specialist lenders.
Manufacturing: CNC machines, lathes, presses, industrial robots. 70–90% LTV; rates vary by age and specialisation.
Medical: Diagnostic imaging, dental chairs, surgical equipment. Specialised medical equipment lenders offer 90–100% LTV.
Technology: Servers, workstations, networking equipment. Shorter terms (24–48 months) and lower advance rates (60–80%) due to rapid depreciation.
Restaurant: Commercial ovens, refrigeration, dishwashing equipment. 75–90% LTV from lenders familiar with hospitality.
What typically does not qualify: Software (unless bundled with hardware), intangible assets, inventory, assets with no established resale market.
Who Qualifies for Equipment Financing?
Equipment financing is more accessible than most business loans because the equipment itself limits the lender’s risk. However, requirements vary significantly between lenders.
Strong Qualification Profile
Strong qualification profile:
- Personal credit score of 650+
- 2+ years in business
- Annual revenue of $150,000+
- Clean business and personal credit history
Accessible to Challenged Credit
Accessible to challenged credit:
- Scores from 580–640 qualify with specialist lenders (higher rates apply)
- Startups (less than 1 year in business) may qualify for up to $50,000 with strong personal credit and a 20% down payment
- Recent bankruptcies discharged 2+ years ago may qualify with some lenders
Factors That Hurt Your Application
Factors that hurt your application:
- Credit scores below 550
- Bankruptcies less than 2 years old
- Significant outstanding tax liens
- Revenue less than $100,000 annually
- Equipment that is highly specialised with no resale market
Equipment financing is more accessible than most business loans because the financed asset limits lender risk — but credit score, time in business, and equipment type remain the three factors that most directly determine your rate and advance amount.
Section 179 and Bonus Depreciation — 2026 Update
Section 179 of the US tax code allows businesses to deduct the full purchase price of qualifying equipment in the year it is placed in service, rather than depreciating it over several years. For 2026, the Section 179 deduction limit is $1,220,000 (phase-out begins at $3,050,000 in total equipment placed in service; verify with your tax adviser as this figure adjusts annually for inflation).
For 2026, bonus depreciation is phased down to 20% (reduced from 100% in prior years). Consult a tax professional before making equipment purchase decisions based primarily on depreciation strategy.
Why this matters for financing: If you finance equipment and take the Section 179 deduction, your tax savings in Year 1 can substantially reduce the net cost of the financing. A $100,000 equipment purchase at a 25% effective tax rate generates a ~$25,000 tax saving — offsetting a significant portion of first-year interest costs. The IRS guidance on interest expense deductions covers the deductibility of interest paid on business equipment loans.
The Section 179 deduction and bonus depreciation rules make the effective cost of financed equipment substantially lower than the stated interest rate — but the rules change annually, so verifying current limits with a tax adviser before closing is essential.
The Application Process — What to Prepare
Equipment financing applications are faster than bank loans. Most fintech lenders decide in 24–48 hours. Expect to provide:
- Equipment details — invoice or quote from the seller, including make, model, year, and purchase price
- 3–6 months of business bank statements
- Most recent business tax return (may be waived for amounts under $100,000)
- Business formation documents (LLC operating agreement, articles of incorporation)
- Driver’s licence (for personal credit check)
For amounts over $250,000, lenders typically require full financial statements and may request an equipment appraisal.
Equipment Financing vs. SBA 7(a) Loan
| Equipment Financing | SBA 7(a) | |
|---|---|---|
| Speed | 24 hours – 5 days | 30–90 days |
| Rates | 5.5–18% APR | 9.5–12% APR |
| Max amount | $2–5M (lender dependent) | $5M |
| Collateral | Equipment only | May require additional collateral |
| Down payment | 0–20% | 10–20% |
| Credit requirement | 580+ (varies) | 680+ |
| Best for | Speed + flexibility | Lowest rate on large purchases |
The SBA 7(a) route typically saves 2–5 percentage points in rate but adds 30–60 days to the process. For established businesses with strong credit on purchases over $150,000, the SBA route is worth the wait.
For faster access or lower credit scores, equipment lending from a fintech lender is the practical choice. The SBA’s loan programs page lists all current 7(a) and 504 equipment loan options.
See Best Equipment Financing Companies of 2026 for our ranked lender comparison.
Frequently Asked Questions
Can I finance used equipment?
Yes. Most lenders finance used equipment up to 10 years old (some extend to 15–20 years for certain asset classes like construction equipment). Advance rates on used equipment are typically 10–20% lower than on new, and some lenders require a formal appraisal. Interest rates on used equipment are generally 1–3% higher than on comparable new equipment.
Do I need a down payment for equipment financing?
Not always. Many lenders offer 100% financing on equipment with strong resale value (trucks, certain construction equipment). Lenders typically require a 10–20% down payment for equipment with limited resale markets or for borrowers with credit below 620.
What is a fair market value (FMV) lease?
In a fair market value lease, you make monthly payments to use the equipment, and at the end of the lease you can purchase the equipment at its then-current fair market value, renew the lease, or return the equipment. FMV leases offer the lowest monthly payments of any equipment financing structure but provide no guaranteed path to ownership.
Does equipment financing affect my ability to get other loans?
Equipment financing appears on your credit report and contributes to your total debt load. It is structured as a secured loan, which creditors view more favourably than unsecured debt. Unlike a blanket lien (common with working capital loans), equipment financing liens are typically filed only against the financed asset — leaving your other assets unencumbered for future financing.
What happens if I need to sell or trade in financed equipment before the loan is paid off?
You can sell financed equipment, but the loan must be paid off at closing. If the sale price covers the outstanding balance, the transaction is straightforward. If the sale price is below the outstanding balance (negative equity), you must cover the difference. For rapidly depreciating equipment (computers, certain vehicles), check your loan balance versus the equipment's likely resale value before committing to a term.
Can a startup get equipment financing?
Yes, though options are more limited. Startups (under 1 year in business) typically qualify for up to $50,000 through specialty startup equipment lenders, often with a 20% down payment and a personal guarantee. Some lenders (Taycor Financial, TimePayment) explicitly serve startups. Rates will be at the higher end of the range (12–20% APR).
A commercial landscaping company purchases a $120,000 skid steer loader using equipment financing at 8% APR (annual percentage rate) over 60 months. Monthly payment: approximately $2,433. Total interest paid over the term: approximately $25,980. If the owner takes the Section 179 deduction in Year 1 at a 25% effective tax rate, the tax saving is approximately $30,000 — nearly covering the entire interest cost. Rates based on lender-published schedules as of May 2026.
Who this is for: Businesses with 1+ year in business, $100,000+ annual revenue, and a need to acquire a specific piece of equipment that has an established resale market. Credit scores as low as 580 can qualify with specialty lenders.
Who should look elsewhere: Businesses needing cash for operating capital (not equipment), companies purchasing highly specialised equipment with no resale market (rates will be at the high end or financing may be unavailable), or businesses with tax liens that complicate lien priority.
For regulatory context on small-business equipment financing agreements, the Federal Reserve’s Small Business Credit Survey tracks equipment financing approval rates and terms across lender categories annually.