Equipment Financing

How does equipment financing work?

The equipment itself serves as collateral, making approval easier than unsecured loans. You receive funds to purchase specific equipment and repay over 2-7 years. Interest rates typically range from 4-20% depending on credit. At the end of the term, you own the equipment outright. Some programs offer $0-down options for well-qualified borrowers.

How does equipment financing work?

Equipment financing uses the purchased equipment as collateral, enabling up to 100% financing with no additional security required. The lender holds a lien on the equipment until the loan is repaid. Terms typically match the equipment's useful life (3-7 years for most equipment, up to 20 years for real property improvements). Because the equipment secures the loan, approval requirements are more lenient than unsecured loans.

Equipment leasing vs buying: which is better?

Leasing preserves cash and lets you upgrade to newer equipment at lease end — ideal for technology that depreciates fast. Buying (with financing) builds equity and is typically cheaper long-term for equipment with long useful lives. The break-even depends on the lease rate, equipment lifespan, and your tax situation. Section 179 deduction can make buying more attractive by allowing immediate expensing of the full purchase.

How does Section 179 interact with equipment financing?

Section 179 allows businesses to immediately deduct the full cost of qualifying equipment in the year purchased, rather than depreciating it over several years. Importantly, you can take the Section 179 deduction even if you financed the purchase — you don't need to pay cash. For 2025, the deduction limit is $1,220,000. This can dramatically reduce your net tax cost of acquiring equipment.