Equipment financing is purpose-built for asset purchases — the equipment serves as collateral, enabling lower rates and longer terms. A term loan gives you cash you can use for any business purpose. Both are valid options for buying equipment; the best choice depends on the asset type, your credit, and how you want to structure repayment.
| Financing type | Business Financing |
|---|---|
| Typical amounts | Term loans $25K–$2M; equipment financing $10K–$500K |
| Decision time | As fast as 24 hours |
| Credit | All credit profiles considered; soft credit pull to start |
| Cost to apply | Zero cost to apply |
| Who we are | A business financing broker. We compare offers from our lender network; we are not a direct lender. |
Both can pay for equipment. They differ in what the money can be used for and what secures it.
| Comparison point | Equipment financing | Term loan |
|---|---|---|
| What the money is for | Physical assets: vehicles, machinery, technology, trailers, medical devices | Any business need: equipment, inventory, hiring, renovations |
| Collateral | The equipment itself | No specific collateral |
| Rates | Lower, because the equipment reduces lender risk | Slightly higher |
| Typical amounts | $10K–$500K | $25K–$2M |
| Typical terms | 24–84 months | 12–60 months |
| Minimum credit score | 580+ FICO | 580+ FICO |
In detail
Equipment financing is structured specifically for purchasing physical assets — vehicles, machinery, technology, trailers, medical devices. The equipment itself is the collateral, which typically means lower rates and longer repayment terms (up to 84 months) compared to unsecured products. At the end of the term, you own the asset outright.
In detail
A term loan gives you cash that can be applied to equipment, but also to inventory, hiring, renovations, or any other need. Because there is no specific collateral, rates are slightly higher and terms are shorter (12–60 months for most). Best when you want flexibility or when the purchase includes multiple categories.
In detail
Equipment financing almost always has a lower effective rate for pure asset purchases because the collateral reduces lender risk. However, a term loan may be better if the equipment is already owned or if you are combining the purchase with other business needs. Always compare total repayment amount, not just monthly payment.
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Equipment financing
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Yes. Most lenders finance new and used equipment. Used equipment over 10–15 years old may have lower LTV (loan-to-value) limits, and some lenders cap financing on older equipment at 80% of appraised value.
Financing results in ownership at the end of the term. Leasing is a rental arrangement — you return the equipment or pay a residual to buy it at lease end. Financing is generally better when you plan to keep the asset long-term; leasing is better for technology that needs frequent upgrades.
Not always. Many lenders offer 0% down for creditworthy borrowers. Some may require 10–20% down for higher-risk applicants or for equipment with low residual value.
Written by lendfloCapital Editorial Team · Last updated
lendfloCapital is a business financing broker, not a lender. This page is general information, not financial, legal or tax advice. Rates, amounts and terms depend on the lender and your business.
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