Equipment Financing for Small Business: Rates, Terms, and Requirements

Equipment financing is a secured loan that uses the equipment itself as collateral, which is exactly why it's one of the more forgiving categories of business credit: the lender has a repossessable asset behind every dollar, so it can approve faster and cheaper than an unsecured product would. The market moves roughly $1.2 trillion a year and finances close to two-thirds of all business equipment purchased in the U.S. — vehicles, machinery, restaurant equipment, medical devices, and technology all run through this same financing structure.

The two lenders that anchor this market

Both require roughly two years of business operation under current ownership. Crest Capital's published minimum sits at 650 FICO; National Funding goes lower, to 600, which makes it the fallback when a business is younger or the owner's score hasn't fully recovered — at the cost of a wider, higher effective APR range.

Why equipment financing beats a general business loan for this specific need

A business term loan or line of credit is unsecured or blanket-secured against the business broadly, so the lender prices in more risk and often caps amounts lower. Equipment financing narrows the collateral to one specific, valuable, resellable asset — the truck, the CNC machine, the imaging equipment — which is why approval odds run higher and rates run lower than comparable unsecured financing at the same credit tier. The trade-off: the money can only go toward that equipment purchase, not payroll, marketing, or general working capital.

Lease vs. loan: the choice most guides skip

Equipment financing splits into two structures that get quoted interchangeably but work differently:

• Equipment loan: you own the asset from day one, it depreciates on your books, and you build equity as you pay down principal — the better choice for equipment with a long useful life relative to the loan term (a delivery van, industrial machinery).
• Equipment lease: you pay for use, not ownership, often with a lower monthly payment and easier qualifying, and at the end you return the equipment, buy it at a set price (a "$1 buyout" or fair-market-value lease), or upgrade. Leasing suits equipment that ages out of usefulness fast — computers, medical imaging tech, anything with a short competitive lifespan.

Crest Capital and most equipment lenders offer both structures under the same application; the right one depends on whether you want to own aging equipment at the end of the term or roll into newer gear.

What actually drives your rate

1. Credit score sets your baseline tier — 650+ opens Crest Capital's better pricing; sub-650 pushes you toward National Funding's wider 15–35% range.
2. Time in business. Two years is the common threshold both lenders cite; less than that narrows your options to a smaller pool of startup-friendly equipment lenders, often at a rate premium.
3. Equipment type and resale value. A delivery van or standard CNC machine holds resale value well and finances cheaper than a niche or fast-depreciating asset, because the lender's downside (repossession and resale) is smaller.
4. Down payment. Most equipment loans don't require one, but offering 10–20% down measurably improves your rate, since it lowers the lender's loan-to-value exposure — the same mechanic as a mortgage down payment.

The tax angle that changes the math

Equipment financed with a loan typically qualifies for Section 179 depreciation, which can let a business deduct the full purchase price in the year the equipment is placed in service — up to the annual IRS limit — rather than depreciating it over several years. That deduction applies whether you paid cash or financed the purchase, which is the detail that makes financing equipment often smarter than paying cash outright: you keep working capital liquid and still take the full-year deduction. Confirm current-year Section 179 limits and eligibility with a tax professional before assuming this applies to your situation.

Sale-leaseback: raising cash from equipment you already own

A less commonly discussed option fits businesses that already own valuable equipment outright and need cash rather than new equipment: a sale-leaseback involves selling owned equipment to a financing company, then immediately leasing it back for continued use — you get a lump sum of cash upfront (typically based on the equipment's appraised value) while keeping full operational use of the asset, and make lease payments going forward instead of owning it outright. This works well for a business with meaningful equity in equipment but a genuine need for working capital, since it unlocks capital tied up in an owned asset without disrupting operations the way selling and replacing the equipment would. The trade-off mirrors any lease: you no longer own the asset at the end, and the total cost over the lease term typically exceeds what the equipment was worth when sold, similar to how a cash-out refinance trades ownership equity for liquidity. It's a specific tool for a specific situation — a business with equity locked in equipment and no better financing option available — not a first choice when other financing at better terms is accessible.

Red flags in equipment financing offers

• "No credit check" equipment financing at low rates doesn't really exist — if a lender skips your credit entirely, expect factor-rate-style pricing similar to a merchant cash advance, not the 650-credit-tier rates in the table above.
• Balloon payments buried in a lease. Some fair-market-value leases carry a large payment at term end to keep the equipment — know that number before signing, not when the term ends.
• Blanket liens beyond the financed equipment. A clean equipment loan secures only the asset purchased; some lenders attach a broader UCC-1 lien across all business assets. Ask specifically, and negotiate it down to the equipment itself if you can.

If your equipment need is small enough to fit on a card, a business credit card for a new LLC is simpler and faster for purchases under a few thousand dollars. For larger, well-qualified purchases, SBA 7(a) financing can also fund equipment at a lower rate than either lender above — at the cost of a much slower approval timeline.

Frequently Asked

Questions readers ask

01Can I finance used equipment, or only new?+

Both — most equipment lenders, including Crest Capital and National Funding, finance used equipment as long as it has verifiable resale value and a reasonable remaining useful life. Used equipment sometimes carries a slightly tighter loan-to-value ratio than new, since resale value is harder to pin down precisely.

02What happens if I default on equipment financing?+

The lender repossesses the financed equipment, since it's the collateral securing the loan — this is the core trade-off that makes equipment financing cheaper than unsecured credit. If the resale value doesn't cover the remaining balance, you (or your personal guarantee) typically remain liable for the shortfall.

03Is equipment financing available for a business under two years old?+

It's harder but not impossible — the two-year threshold cited by Crest Capital and National Funding is their standard, not a universal rule. Startup-focused equipment lenders exist at a rate premium, and a larger down payment or a personal guarantee from a well-qualified owner can offset thin business history.

04Should I lease or buy equipment for my business?+

Buy (loan) when the equipment holds its value and usefulness over the loan term and you want to build equity — vehicles and durable machinery are typical cases. Lease when the equipment ages out of competitiveness quickly, like computers or medical imaging technology, where you'd rather upgrade at term end than own outdated gear.