Compare Small Business Loans
To help your business have the right equipment to succeed, we’ve compiled a list of the best equipment loans for a range of business needs. Many banks, credit unions and online lenders offer equipment loans you could use to obtain computers, office furniture, machinery, vehicles and more. Though banks and credit unions typically offer the lowest rates and most generous terms, online lenders offer equipment financing quickly and, in general, with more lenient credit requirements. Equipment loan rates start around 5.49%, and loan amounts can be as high as $5.5 million.
- Best equipment loans for small businesses
- Best equipment loans for lower credit scores: Currency
- Best equipment loans for good credit: SBA 7(a) and SBA 504 loans
- Best equipment loans for small purchases: SBA microloans, CIT
- Best equipment loan for fast funding: National Funding
- What to consider when getting an equipment loan
- Equipment loan FAQs
Best equipment loans for small businesses
We’ve summarized some of the best equipment loans based on your particular needs.
|Currency||Lower credit scores||Starting at 7.5% APR||2 to 5 years|
|SBA 7(a) and 504 loans||Good credit scores||Starting at 2.25% + prime rate; see below for 504 rates||Typically 10 years|
|SBA microloan||Small purchases||Maximum of 8.50% + intermediary’s costs||7 years|
|CIT||Small purchases||Starting at 5.49%||6 to 72 months|
|National Funding||Getting funds quickly||Factor rates starting at 1.09||2 to 7 years|
Best equipment loans for lower credit scores: Currency
Currency is an online lender specializing in small business equipment loans that are typically funded within one to three business days. At Currency, you may be able to borrow from $10,000 up to $100,000, with equipment loan APRs between 7.5% - 12.5%. Financing and lease agreements are available for 2 to 5 years.
You don't need a down payment to secure financing, though putting money down can result in lower monthly payments. You will, however, need a minimum credit score of 625 and at least two years in business.
Best equipment loans for good credit: SBA 7(a) and SBA 504 loans
If you’re planning to make an equipment purchase for your business, loans from the U.S. Small Business Administration (SBA) offer some of the best rates available for borrowers with strong credit. The SBA has several small business loan programs, though the 7(a) and 504 loans are among the most popular. These loans offer financing up to $5.5 million and some of the most competitive interest rates you can find anywhere.
To qualify for these loans, you must:
- Own a for-profit business within the U.S.
- Have equity to invest
- Use personal assets or other alternatives first
- Have a good credit score — a score of 680 or higher can strengthen your application
- Meet any other requirements as specified by the lender (e.g., time in business, annual revenue, etc.)
Here’s a closer look at each program.
SBA 7(a) loans
The flagship program for the SBA, 7(a) loans are available for up to $5 million and can be used for equipment financing and other business purposes. Maximum interest rates can be fixed or variable, ranging from 5.50% to 11.25% based on a prime rate of 3.25%. Terms usually stretch up to 10 years, though they can go up to 25 years if the equipment will be useful for that long.
SBA 504 loans
Also known as CDC loans, 504 loans are designed to help small business owners finance real estate or long-term equipment purchases. Because of their high loan amounts — up to $5.5 million — and low interest rates, they are an attractive option for business owners making a serious investment in equipment. Borrowers should understand that they’ll be making two loan payments: One is paid to a certified development company (CDC) that is backed by the SBA, while the other is paid to a third-party lender like a bank or credit union. The maximum rate for the CDC portion of a 10-year equipment loan is 2.687%, as of September 2021. Banks set their own rates but are capped at 9.25%, as of November 2021.
One downside to both 7(a) and 504 loans is the longer processing time. SBA loans can take several weeks or even months to process, so they aren’t ideal for business owners in a pinch — in that case, you may want to consider a 7(a) Express loan or a standard bank loan instead.
Best equipment loans for small purchases: SBA microloans, CIT
If you need to purchase equipment under $50,000, we’ve rounded up some of our top picks below for different types of borrowers.
Aside from the popular 7(a) and 504 loan programs, SBA microloans are a great choice for relatively inexpensive equipment purchases, particularly for new business owners seeking working capital or financing for supplies or equipment. They are available through intermediary lenders for up to $50,000, though the average loan amount was just $14,434 in FY2020. The maximum term is seven years with maximum rates set at 8.50% plus the intermediary’s costs.
The business lending arm of CIT Bank, CIT offers equipment financing between $5,000 and $500,000 ($1 million with additional documentation) with terms between six and 72 months. Rates start at 5.49% with the possibility of funding within one business day after approval. CIT requires a minimum personal credit score of 620.
One of CIT’s biggest perks is flexibility — it funds loans large and small with a wide range of terms. For businesses that need to make a capital expenditure, such as acquiring or upgrading a plant or multiple pieces of equipment or technology, CIT funds projects between $3 million and $100 million.
Best equipment loan for fast funding: National Funding
Business owners can obtain an equipment loan from National Funding in amounts ranging from $5,000 to $150,000. Both new and used equipment is eligible for financing. Terms are available from two to seven years and follow a monthly repayment schedule. There is no down payment required. Unlike other lenders that charge interest rates, National Funding uses factor rates on its equipment loans. With factor rates starting at 1.09, you would multiply the factor rate by the total loan amount to determine your loan cost.
To qualify for National Funding, you would need only a 575 minimum credit score and at least six months of time in business. An additional perk of financing with National Funding is there is no annual revenue or collateral requirement and no restrictions on the age or mileage of the equipment being financed. National Funding can respond to your loan application in as little as 24 hours, and you could receive funding just 24 hours after approval.
What to consider when getting an equipment loan
Equipment loans work differently than standard business term loans. Because equipment loans are secured by the equipment you’re purchasing, they can have more lenient requirements. Down payment requirements vary by the lender with some lenders not requiring any money down at all — you can expect the loan to cover as much as 80% to 100% of the equipment price. A response to your application may come as quickly as the same day, and lenders offer convenient monthly payment schedules.
If you’re considering an equipment loan as a way to finance your next purchase, here are a few things to keep in mind.
Company needs. Before getting equipment financing, it's important to assess whether you truly need the equipment. Are you replacing a crucial piece of machinery that has broken? Do you need to buy the equipment to stay competitive? Is this new equipment going to cut costs or increase revenue? These are the questions you should ask yourself before pursuing an equipment loan.
How long you’ll use the equipment. If your financing agreement exceeds the amount of time you plan to use the equipment, financing may not be the right option — instead, leasing might be better. If financing is the only option, search for a lender with shorter or more flexible terms.
How quickly you need funds. Some lenders will be able to fund approved requests in as little as one day. In other cases, you may need to wait several weeks to receive funds. Even if you’re in a hurry, it’s important to shop around for your best rate.
Requirements vary between equipment financing companies, but most look at your:
- Time in business
- Annual revenue earned
- Credit score
It’s a good idea to identify each lender’s basic requirements before applying for financing.
Interest rates and overall cost of financing
Equipment loan rates aren’t the only cost factor to consider. Some lenders may tack on additional fees and/or require a down payment. Always ask a potential lender about charges such as origination fees and other upfront costs.
Equipment loan FAQs
How does an equipment loan work?
Equipment loans are commercial loans that allow you to access the equipment you need without paying for it up front. If approved for an equipment loan, you’ll be able to use the funds to cover the cost of the equipment and, in some cases, associated soft costs. Then you’ll need to make regular payments until the loan is paid in full, at which point you’ll own the equipment.
How can I get an equipment loan?
Equipment loans are made available by banks, credit unions and online alternative lenders. You must apply for the loan and meet all requirements as outlined by the lender and/or the SBA if applying for an SBA loan.
Can I get an equipment loan with bad credit?
Equipment financing options are available for borrowers with less-than-perfect credit. Equipment loans are secured loans that use the equipment itself as collateral — as such, small business owners may find it easier to get a secured loan, like equipment financing, when compared to unsecured commercial lending options.
Is it better to lease or buy equipment?
The decision to lease or buy depends entirely on your unique situation. Leasing may be a better option if the equipment is prone to becoming outdated (e.g., technology purchases) or you’re hoping to keep payments or maintenance costs lower. Buying, on the other hand, may be a good option for equipment you plan to use for a longer period, or if you don’t want to be locked into potential use restrictions associated with a lease. Some leases do give you the option to buy the equipment at the end of the lease, though it might be more expensive in the long run.
To make choosing the right equipment financing easier, we've looked at more than 20 top industry leaders to compile a list of the best loans available right now. Our recommendations are based on the credit score required, time-in-business requirements and maximum loan amounts and interest rates. Our choices are not influenced by our advertisers.