Best Equipment Financing for Small Businesses

The Best Equipment Financing Options for Small Businesses in 2021

We’ve scoured the online lending industry to hunt down the platforms with the best rates, most generous terms, and highest borrowing limits. Take a look at our table below to get an idea of what to expect. 

The Best Equipment Financing Option Explained

1. Credibly - Best for Customizable Options

Established in 2010, Credibly is a solid business loan company. Its central purpose is to better the speed, choice, cost and experience of its clientele. After a short time in business they ranked number 35 on the Inc. 500 list, launched numerous programs, and achieved an A+ BBB accreditation. They have funded more than $1 Billion to more than 19,000 businesses throughout America. 

Features 

Credibly charges an origination fee of 2.5% of the total loan amount. They provide same day funding and their APR starts from just 1%. You can borrow amounts of up to as much as $400,000 and no borrowing fee will be incurred. However, you will need a credit score of at least 500, will need to prove at least 6 months in business, and a monthly income of $15,000. You don’t need to provide any collateral.

Our thoughts

During its time in business Credibly has shown itself to be a trustworthy and reliable small to medium-sized business fund provider. It offers customizable options with transparent and low rates. Credibly is dedicated to assisting small businesses with their growth and expansion. 

2. Fora Financial - Best for Flexible Requirements

Fora Financial is a direct lender that provides small business loans and merchant cash advances via an online platform. The company is based in New York and was established in 2008. The company provides approval in as little as 24 hours, funding in just three days. 

Features

Fora Financial tailors every small business loan to meet the requirements of your business. Loan terms, amounts, and requirements may differ. It offers loan amounts of between $5,000 to $5,00,000 and loan terms of up to 16 months. However, you will need to prove you have been in business for at least 12 months, that you have a minimum of $15,000 in gross sales, and that you have no open bankruptcies or dismissed bankruptcies within the past year. 

Our thoughts

Fora Financial is a top option as they offer loan amounts up to $500,000 and no obligation, a free quest so you can discover how much you can loan for your small business within minutes.

3. Fundbox - Best for Line of Credit 

Fundbox is an online lender that offers small business owners a line of credit. This provides them with the funding they require to develop and expand their startup business. Fundbox also currently provides a PPP loan funding program (Paycheck Protection Program).

Features

Fundbox does not charge interest on its line of credit, rather it charges a weekly fixed fee, which your business will have to pay on each withdrawal. You can receive an approximate figure of the minimum total cost of a withdrawal and minimum weekly payments by making use of a calculator on Fundbox’s website. Note that this is the minimum Fundbox charge for such terms. 

Our thoughts

Fundbox provides lines of credit with speedy funding, simple application, and flexible requirements. The total cost might be greater than a credit card, yet it is comparable to other products on the market. With easy repayment schedules and quick financing, Fundbox is a solid choice for your financing requirements. 

4. Fundera - Best for Short-Terms Loans

Fundera is a loan marketplace that has partnered with some of the biggest industry names in order to provide some of the best rates and terms in the business. 

Fundera Features

Fundera offers the lowest starting rates on our list at just 4%, although it’s likely you’ll need excellent credit to access this. That being said, those with bad credit are welcome to apply to see what’s available and there’s no hard pull to your rating if you feel like pulling out at any time before signing.  

Our thoughts

Fundera has one of the best industry reputations for equipment financing and it’s relatively easy to qualify for one of their loans. It’s definitely worth checking Fundera out. Read full Fundera review.

5. Lendio - Best for Long Repayment Terms

Lendio is a business loan marketplace that has an impressive network of more than 300 partner lenders. This greatly increases your chances of finding a good deal on equipment financing.

Lendio Features

Lendio has impressively long repayment terms of up to five years, which is rare for equipment financing. Plus, starting rates are a very respectable 7.5% and the flexible borrowing amounts mean businesses can cover small purchases right the way through to major expenditures.

Our thoughts

While Lendio has some of the best rates and terms around, you’ll need to meet some tough eligibility criteria and only 65% of applicants will be approved. If you have good credit, though, this should be your first port of call. Read full Lendio review.

6. GoKapital - Best for All-Around Financing Package

GoKapital is a relatively new alternative lender that puts flexibility and customer service at the forefront. Plus, no eligibility criteria are disclosed and the platform encourages all applications. 

GoKapital Features

GoKapital allows borrowers to purchase equipment up to the value of $5 million and has generous five-year repayment plans. Interest rates are better than you’d find at traditional banks and funding can be in your account within three days. 

Our thoughts

GoKapital might not be as transparent as some providers on our list but it makes up for this with top-notch customer service and a solid all-around equipment financing package. Read full GoKapital review.

7. Kapitus - Best for Well-Established Businesseses

Kapitus caters to an incredibly wide range of industries and just about any major equipment purchase you can think of will be covered here. It’s a little tough to find detailed information on rates, but the platform has built up a strong reputation over the last couple of years. 

Kapitus Features

Kapitus offers up to 100% financing on equipment loans, so the sky’s the limit in terms of what you’d like to purchase. Coupled with a simple application process and fast funding, you’re definitely on to a winner. However, keep an eye out for the strict eligibility criteria as only well-established businesses will be able to apply. 

Our thoughts

Kapitus is definitely worth a look, especially if you work in a niche industry and have struggled to get financing elsewhere. Read full Kapitus review.

What is Equipment Financing?

Equipment financing loans are used to purchase specific assets which are then used as collateral for the loan. Lenders cater to a huge range of small businesses and industries. Equipment purchases tend to cover quite large expenses, such as commercial ovens for restaurants, a fleet of vehicles for a delivery business, office furniture, fixtures and fittings, and industrial machinery. 

If you default on your loan, the provider will be able to seize the equipment purchased to cover the debt. However, this is still a little less risky for borrowers than taking out a standard working capital loan, as no other business assets are at risk. 

Who Qualifies for Equipment Financing?

Underwriting standards for equipment financing vary across lenders, but you’ll usually find some common themes:

• High credit requirements - For the most part, lenders are looking for borrowers with at least good credit, with scores of around 600 and above. Although bad credit options can be found, it’s not usually the norm 
• Time in business - You’ll often find platforms will require borrowers to have at least two years of business experience. This is because equipment purchases usually involve very large asset purchases and lenders want to know that you have the business acumen to repay it. This means it’s tough for brand new businesses to apply
• Minimum revenues - Minimum revenues are often actually lower than other types of borrowing. This is because the loan will be secured against the asset so your cash flows are less important. They’re often around $50,000 but could reach six figures at some lenders

How Does Equipment Financing Work?

Business equipment financing is usually viewed as a more cost-effective and lower-risk way to acquire machinery than other forms of financing. Plus, with heavy equipment financing, you get to maintain your cash reserves because you don’t need to purchase the item outright. Each lender that offers equipment financing and small business equipment loans will have different terms, but you can usually find a lender that will finance around 80% of the asset’s total purchase price. 

Generally speaking, you will need to pay the initial 20% of the cost and then repay your lender over the term of the agreement in regular payments. The amount you borrow will usually determine the length of the loan. 

Equipment Financing Rates

A lot of different factors go into determining your rates when applying for equipment financing. However, as a very rough guide, you can expect the following:

Of course, your credit rating, financial history, profit and loss information, and monthly revenue will all play big parts in the final terms you’re offered. In addition, lenders will apply other undisclosed criteria and platforms are very reluctant to share exactly how your final rates are calculated. Generally, the better your credit score and higher your income, the lower your final rate.

Opting for finance will almost always be more expensive than buying the asset outright, but it has a much smaller impact on your cash flow.

Equipment Financing Pros and cons

Pros

• Fast approvals - Since the asset is being used as collateral it’s usually much faster to arrange this type of lending. As you can see, most of the lenders on our list offer equipment financing within 24 hours of approval
• Spread the cost - Equipment purchases tend to be quite expensive. Financing is the perfect way to spread the costs over a long period of time so your cash flow doesn’t take a hit
• No additional collateral needed - Your other business and personal assets aren’t at risk if you default on a loan. Only the asset you’ve applied to secure a loan will be seized if you default
• Tax benefits - You can write off all of your loan repayments as tax-deductible expenses, helping you to minimize your total bill at the end of the year
• Fuel growth - For small businesses that might not have the capital to purchase large pieces of equipment, loans are a real lifeline. The injection of cash can prove an incredible boost to growth

Cons

• Tougher eligibility criteria - Most lenders are looking for applicants with good credit scores and strong business history. This is to ensure the funding is going to an experienced business that can handle the responsibility of large asset management
• Restricted applications - Your loan purpose is very strictly limited to the specific asset you want to purchase. Other types of working capital loans offer a lot more flexibility

See Our Additional Guides on Business Loan Types

• Business Lines of Credit
• Commercial Real Estate Loans
• Secured Business Loans
• Microloans
• Merchant Cash Advance
• Hard Money Loan
• Startup Business Loans

Final Thoughts

If you’ve got your eyes on a piece of gear that could help boost the sales of your business, there’s a good chance that equipment finance could work for you. There are now more top-quality providers than ever before on the market and the application process is incredibly straightforward. 

In many cases, you could receive your funding in as little as 24 hours and it’s a great way to spread the cost of a big expense. Some might find that equipment financing is a little restrictive or that eligibility requirements are a little strict, but this shouldn’t put too many customers off. If you’ve got a good credit score and a history of solid business performance, we highly recommend financing your next equipment purchase with a loan to stay on top of your costs.