Equipment financing is business debt secured by the equipment being purchased — the equipment serves as collateral, which lets lenders accept broader credit profiles and approve up to 100% financing. Typical terms 24-84 months matching equipment useful life.
Equipment financing is one of the most accessible forms of business debt because the equipment itself is the collateral. If the borrower defaults, the lender can repossess and sell the equipment to recover. This collateral structure lets equipment-finance lenders accept: - Lower owner FICO (down to 600 typical, 580 with strong revenue) - Newer businesses (6-12 months operating history sometimes accepted) - Higher LTV (up to 100% financing common) Two structures: equipment LOAN (you own the equipment, depreciate it for tax purposes) vs equipment LEASE (lessor owns; you have use rights, may have buyout option at end of term). Tax treatment differs — Section 179 + bonus depreciation are typically available for loans but limited on leases. Useful life matters. Lenders typically structure term to match expected useful life — heavy construction equipment (5-7 years), commercial vehicles (3-5 years), tech hardware (3 years). Terms outside useful life add risk to the lender and tighten approval. The SBA's 7(a) and 504 programs both permit equipment purchases (https://www.sba.gov/funding-programs/loans/7a-loans). The IRS provides Section 179 deduction rules for equipment placed in service (https://www.irs.gov/publications/p946), which govern the immediate expensing available to equipment loan borrowers.
Yes more often than for other business loan types — the equipment collateral reduces lender risk. 580-620 FICO is typically the floor for equipment financing (vs 680+ for SBA or bank term loans). Expect higher APR + larger down payment requirement (10-20% vs 0%).
Interest on equipment LOANS is fully tax-deductible as a business expense. Section 179 + bonus depreciation rules let you deduct a significant portion of the equipment purchase price in the year purchased (2026 §179 limit + bonus depreciation rules apply). Equipment LEASE structures have different tax treatment — payments are generally fully deductible but Section 179 may not apply.