Loan, lease or vendor financing
A loan finances ownership, a lease finances use, and vendor financing is offered by the seller. Each fits a different situation.
- Equipment loan. You own the equipment, usually with the equipment as collateral. Good when the asset will last many years and you plan to keep it.
- Equipment lease. You pay to use the equipment, often with a buyout option at the end. Good for technology that ages fast or when you want lower payments.
- Vendor financing. The dealer or manufacturer arranges financing. Convenient, but compare it with outside offers, since the equipment price and the finance terms are bundled.
Lease structure matters. A true lease and a lease with a one-dollar buyout are treated differently for taxes and accounting. Ask your accountant, and read our guide to equipment leasing before choosing.
What to compare across offers
Compare down payment, term, total repayment, end-of-term options, insurance requirements and prepayment rules.
- Down payment. Some deals cover most of the cost; others require a sizeable share up front.
- Term versus asset life. The term should not outlast the equipment's useful life.
- Total repayment. Add all payments and fees, then subtract any residual value you keep.
- End-of-term options. Buyout price, return conditions, renewal or upgrade.
- Insurance and maintenance. Who must insure, and to what value.
- Used equipment. Some funders limit age or require an appraisal.
- Speed. A funded deposit to the seller can decide whether you win a price or a delivery slot.
Payback math on a piece of equipment
Judge the purchase by how fast the machine earns back its cost, then see whether the payment fits inside that new income.
Here is an illustrative example. A print shop buys a $60,000 press that adds $4,500 per month in gross profit. Financing it over 48 months with a total repayment of $72,000 gives a monthly payment of $1,500.
| Measure | Value |
|---|---|
| Equipment price | $60,000 |
| Total repayment over 48 months | $72,000 |
| Monthly payment | $1,500 |
| New monthly gross profit | $4,500 |
| Monthly surplus after payment | $3,000 |
The machine covers its payment three times over, so even a slow ramp-up works. If it added only $1,200 a month, the payment would exceed the new income, and you would be funding it from existing profit. The page on equipment payback period shows how to run this for your own purchase.
Qualifying and bad-credit situations
Because the equipment secures the financing, lower credit does not always block approval, though it raises cost and down payment.
Funders typically review time in business, revenue, the equipment type and its resale value. Common, resalable equipment such as trucks, kitchen equipment or machine tools is easier to finance than custom or highly specialized gear.
If credit is a concern, read about equipment financing with bad credit. A larger down payment is the most reliable way to improve terms.
Note that many funders restrict certain industries, including long-haul trucking and residential remodeling. If your equipment serves those, expect fewer options, and do not assume approval.
Timing, taxes and the paperwork you will need
Prepare early and ask specific questions, because the details decide whether the deal works.
Line up the quote from the seller early. Funders usually need an invoice or quote showing the make, model, price and delivery details, and for used equipment they may want serial numbers or an inspection report. Having these ready is often the difference between funding in days and waiting weeks.
Talk to your accountant before choosing between a loan and a lease. Tax treatment of equipment purchases changes over time, and the right structure for your tax situation may differ from the one with the lowest payment. We do not give tax advice, and rules change, so check current limits and rules with a professional.
Also plan for the costs that sit outside the financing: delivery, installation, training, insurance and maintenance. A machine that arrives but cannot run until you spend another $8,000 on setup has a higher real price than the quote. Add those to your payback math before you commit.
Get equipment financing through ROI Funder
ROI Funder places equipment financing, typically funded in 2 to 7 days, and compares options across its network of funders.
Apply online in a few minutes with a soft credit pull, then add three months of business bank statements and the equipment quote. We match your file to funders that finance your type of asset and show total cost, payback period and monthly-equivalent payment before you sign. See the main page on equipment financing.
ROI Funder considers 500+ FICO, 6+ months in business and $20,000+ monthly revenue, with funding from $5,000 to $5,000,000. If the equipment is small, working capital funded the same business day may be quicker, although it is shorter-term and may cost more.
Frequently asked questions
Can I finance used equipment?
Often yes, though funders may limit the age or require an inspection or appraisal. Terms are usually shorter than for new equipment.
Is a lease cheaper than a loan?
Monthly payments can be lower on a lease, but total cost depends on the buyout and end-of-term rules. Compare total dollars paid, not only the payment.
Do I need a down payment?
Some structures need none, others ask for a share of the price. A larger down payment usually improves the rate or approval odds.
How long does equipment financing take?
Through ROI Funder, equipment financing is typically funded in 2 to 7 days, depending on the asset and documentation.