Buying equipment outright can tie up capital a growing business needs elsewhere, which is why equipment financing remains one of the most practical borrowing tools available in 2027. Because the equipment itself typically serves as collateral, these loans often come with more competitive terms than unsecured alternatives. Business Loans IQ connects owners with equipment financing lenders across a wide range of industries.
This guide covers how equipment financing works in 2027, what to expect during the approval process, and how to decide between financing and leasing.
How Equipment Financing Works
A lender provides funds to purchase specific equipment, and that equipment serves as collateral for the loan, which typically results in a lower rate than an unsecured product of similar size.
Financing vs Leasing
Equipment Loans
You own the equipment once the loan is paid off, which makes sense for equipment expected to remain useful well beyond the loan term.
Equipment Leasing
You pay for the use of equipment over a set period, often with an option to purchase, upgrade, or return it at the end of the term, which can make sense for equipment that becomes outdated quickly.
A Simple Way to Decide
If the equipment will still be valuable and functional well after the financing term ends, buying generally makes more financial sense than leasing over the long run.
What Lenders Look at for Equipment Financing
- The type, age, and expected useful life of the equipment
- Business revenue and time in operation
- Down payment amount, which can significantly affect approval and rate
- Personal and business credit history
A Cost Saving Tip
A larger down payment on equipment financing often results in a meaningfully lower rate, since it reduces the lender’s exposure if the equipment depreciates faster than expected.
Comparing Equipment Financing Options
Use the loan calculator to compare monthly payments across different terms, and visit our equipment financing page for a full breakdown of how these loans are structured.
Our guide to equipment financing versus leasing is worth reading before you decide, and National Funding is one lender that specializes in this category.
The Bottom Line
Equipment financing continues to be one of the more cost effective borrowing tools in 2027 for businesses that need machinery, vehicles, or technology to operate or grow, precisely because the collateral built into the structure keeps pricing competitive.
Frequently Asked Questions
What can equipment financing be used for?
Equipment financing can typically be used for machinery, vehicles, technology, and other tangible business equipment, though eligible categories vary by lender.
How much down payment is required for equipment financing?
Down payments vary by lender and equipment type, though a larger down payment generally improves both approval odds and the rate offered.
Does equipment financing require a personal guarantee?
Many lenders still require a personal guarantee even though the equipment serves as collateral, particularly for newer or smaller businesses.
Can I finance used equipment?
Yes, many lenders finance both new and used equipment, though the age and condition of used equipment can affect approval terms and rate.
What happens if I cannot make payments on financed equipment?
Because the equipment serves as collateral, the lender can repossess it in the event of default, in addition to pursuing any personal guarantee in place.
Is equipment financing faster than a traditional bank loan?
Online equipment financing is generally faster than a traditional bank, often approving within a few business days rather than several weeks.
Can startups qualify for equipment financing?
Some lenders will finance startups, particularly with a solid down payment, though terms and rates are often less favorable than for an established business.
Is leasing or financing better for taxes?
This depends on your specific tax situation and how the equipment is used, so it is worth speaking with an accountant to compare depreciation and deduction treatment between leasing and financing.
