Running a business often means making big purchases, especially when it comes to the tools and equipment you need to work efficiently. But a delivery van, commercial kitchen gear, or updated tech for your home office isn’t always affordable. That’s why many business owners explore how to finance equipment. Instead of paying everything upfront, equipment financing helps you spread out the cost while still getting what you need to keep your business moving.
To move forward, it helps to understand the basic equipment loan requirements and the best way to finance equipment for your specific needs.
Key Takeaways
- Equipment financing lets you get your much-needed business tools now while spreading out the cost over time.
- To qualify for an equipment loan, lenders usually look at your credit score, revenue, time in business, and the equipment itself.
- Choosing between a loan or a lease depends on how long you’ll use the equipment and whether ownership or flexibility matters more.
- Being prepared with documents like financial statements and a vendor quote can speed up the approval process and help you get better terms.
- Smart loan management, like matching your term to the equipment’s lifespan and staying in touch with your lender, can save money and open future funding opportunities.
How Do Equipment Loans Work?
In simple terms, equipment financing helps you pay for business-related gear without covering the full cost upfront. Instead, you get the equipment you need now and repay the lender over time in manageable chunks.
There are two main ways businesses can get the equipment they need without paying the full cost upfront:
Equipment Loans
You borrow a specific amount to buy the equipment you need. In most cases, the equipment itself serves as collateral, so if you fall behind on payments, the lender can take it back. Repayment terms usually range from one to several years, depending on the cost and the lender. Once the loan is paid off, the equipment is yours to keep.
This is the basic answer to how do equipment loans work, and it’s often seen as the most straightforward approach for businesses that plan to use the equipment long-term.
Equipment Leasing
Leasing could be a better option if you're not quite ready to buy. Instead of purchasing the equipment, you rent it for a monthly fee. At the end of the lease, you might return it, renew the lease, or buy it outright—it all depends on your agreement.
What Do You Need to Qualify for Equipment Financing?
Before getting approved, lenders want to make sure your business is financially stable and capable of handling the loan. Think of it as a quick check-up—they’re looking at the health of your business to decide if lending to you makes sense.
Here’s what most lenders check when reviewing your application and what you can do to improve your odds of qualifying based on typical equipment loan requirements.
1. Your Credit Score (Both Personal and Business)
Your credit score is one of the first things lenders look at. If your business is new, your personal credit score will carry more weight. If your company already has its own credit profile, that’ll be considered too. A solid credit score can help you qualify for better terms, like lower interest rates or longer repayment periods.
Tip: Check both your personal and business credit reports before applying. Fix any errors or pay off lingering debts that could hurt your chances.
2. Time in Business
The longer your business has been running, the more confident lenders feel. Most traditional lenders prefer at least two years in business, since that shows some level of stability.
If you’re only six to twelve months in, don’t count yourself out. Some lenders specialize in newer businesses and have more flexible equipment loan requirements, though you might see higher interest rates or shorter loan terms as a tradeoff.
Tip: If your business is still in its early stages, come prepared with extra documentation, such as recent bank statements, revenue reports, or a signed personal guarantee.
3. Annual Revenue
Lenders want to see consistent income. Most banks prefer businesses earning between $100,000 and $250,000 annually. Online lenders, though, may work with businesses making as little as $50,000.
Tip: Use tax returns, accounting software, or bank statements to clearly show your income. It’ll make the application process faster and easier.
4. Equipment as Collateral
In most cases, the equipment you’re financing acts as collateral. That lowers the risk for lenders, but they’ll still want to know its value and purpose.
Tip: Bring a quote or invoice from the vendor and include any basic specs that explain the equipment and how it will support your business.
5. Down Payment
While some lenders offer 100% financing, it’s much more common for them to require a down payment of 10% to 20%.
Putting money down reduces the lender’s risk and shows that you’re financially invested in the purchase. It also lowers the amount you need to borrow, which can help you secure a lower monthly payment or shorter loan term.
Tip: A larger down payment can improve your chances of getting approved, lower interest rates, and longer repayment periods.
Picking A Financing Route for Your Business Gear
When it comes to getting the equipment your business needs, you’ve got a few different equipment financing options to choose from. And to know the best way to finance equipment depends on how long you’ll need the equipment, how much flexibility you want, and what kind of monthly payments you’re comfortable with.
Why Equipment Loan Can Work
Getting a loan is often the best way to finance equipment you plan to keep for the long haul. When you own the gear, you’re building long-term value without worrying about lease return policies or restrictions. Plus, there may be tax benefits, like deducting interest payments or depreciating the equipment over time.
What to Consider:
Monthly payments on equipment loans are usually higher than leasing, since you’re covering the full cost of the item (plus interest). Also, depending on your industry, the gear might be outdated when you’ve paid it off. If you work in a fast-changing space, owning the equipment could leave you stuck with old tech.
Best for:
Businesses buying durable equipment they’ll use for years, like vehicles, heavy machinery, or kitchen appliances.
Why Equipment Lease Can Work
Leasing can be a smart option if your credit isn’t perfect or your business is still fairly new. It’s often easier to qualify for than a traditional loan, and lower monthly payments help preserve your cash flow. If you’re in a fast-moving industry like IT, video production, or healthcare, leasing also gives you the flexibility to upgrade as newer models roll out.
What to Consider:
Unless you buy the equipment at the end of the lease, you won’t actually own it. Some leases also come with fees for wear and tear or penalties if you miss payments. And if you end up using the same gear for several years, leasing might cost more in the long run than just buying it upfront.
Best for:
Businesses in fast-paced industries or those looking to keep upfront costs low and stay flexible.
How to Get Ready for Your Equipment Financing Application
Before applying, a little prep goes a long way. Getting organized speeds up the process and can improve your chances of approval with better rates and terms.
Here’s a step-by-step guide to help you feel confident and fully prepared when figuring out how to get an equipment loan:
Step 1: Know What You Actually Need
Start by clarifying your goals for the equipment you're planning to buy. Are you replacing outdated tools, upgrading a key machine, or expanding into new services?
Make a list and research the full cost, not just the sticker price. Don’t forget to include:
- Delivery and installation fees
- Warranties or service plans
- Maintenance and repairs
- Software or licensing (if needed)
Building a realistic budget shows lenders you’ve done your homework and helps you decide how to finance equipment more effectively.
Step 2: Review Your Financial Snapshot
Before lenders evaluate your business, take a look at the following.
Credit
Pull your personal and business credit reports. Fix any errors and get a sense of how strong your credit looks. Lenders often weigh your personal credit heavily, especially if your business is still young.
Cash flow
Can you handle monthly loan payments without hurting your day-to-day operations? Sketch out your expected income and expenses over the next 6–12 months.
Before lenders take a look at your business, you should take a look first.
Step 3: Gather All the Paperwork You’ll Need
Most lenders will ask for:
- Personal and business credit reports
- Profit & loss statement and balance sheet
- Business tax returns
- A quote or invoice for the equipment
- A short note on how the equipment will help your business
Some might also request a simple business plan or cash flow forecast. If you're applying online, be sure to have all your files saved and ready to upload.
Step 4: Submit Your Application
Once everything’s in, wait to hear back. If it’s been a few days, don’t hesitate to follow up.
Need help covering other business costs while you wait? Giggle Finance offers quick cash advances to help you stay on track. It's a flexible option while you're figuring out how to finance equipment or waiting for full approval.
Need a quick boost while you wait for your loan? Apply now with Giggle Finance and get funded fast.
Pro Tips to Help You Succeed with Equipment Financing
Once your financing is in place, your work’s not over. Making smart decisions along the way can help you stay ahead financially and may even open the door to better loan options later.
1. Match Your Loan Term to the Life of Your Equipment
One common mistake most people make is financing equipment long after it’s become outdated. If you're replacing a laptop every three years, it doesn’t make sense to stretch payments across five.
Pick a loan term that matches how long you’ll actually use the equipment. This keeps you from paying off gear that’s no longer useful.
2. Use High-Revenue Months Wisely
When cash flow is strong, consider making extra payments on your loan. Even small extras here and there can reduce your interest and help you pay off the loan early.
3. Stay in Touch With Your Lender
If your business slows down or something unexpected happens, don’t wait until you’re behind on payments. Reach out early.
Most lenders want to help, not punish. They may adjust your schedule, extend your term, or offer a temporary pause if needed. Staying proactive shows you're serious and can help protect your standing.
4. Always Compare Offers
Not all financing options are equal. Before signing anything, get quotes from a few lenders and compare more than just the interest rate. Look at fees, repayment terms, flexibility, and customer support.
Bonus tip: Ask upfront about prepayment penalties. Some lenders charge extra if you pay off the loan early, which can wipe out your savings.
5. Use Templates and Tools to Plan Ahead
A clear plan helps you and your lender. Use a free business plan template to map out how your new equipment will improve efficiency or boost revenue. Include your expected income, costs, and how the equipment fits into your bigger goals.
This kind of prep shows lenders that you’ve thought through your investment and helps you stay on track, too.
6. Build a Relationship with Your Lender
Don’t treat the loan as a one-and-done deal. Keep your lender in the loop with business updates and maintain that connection.
When you need funding in the future—for expansion, renovations, or another big purchase—it’ll be easier if someone already understands your business. Relationship banking can also lead to better terms, priority service, or exclusive financing options.
Get the Equipment You Need Without the Headache
Qualifying for equipment financing doesn’t have to feel like a maze. With the right prep and a clear understanding of how to get an equipment loan, you can improve your chances of getting approved—and do it on your terms.
If one option doesn’t work out, don’t stress. There’s more than one answer to how to finance equipment, and what works best depends on your goals, timeline, and budget.
Looking for a simple, flexible option? Giggle Finance offers cash advances of up to $10,000—perfect for business owners who need fast funding without all the red tape. Apply online, get a quick decision, and use the funds to buy equipment or handle other expenses—no long wait times or complicated equipment loan requirements.
Big plans for your business? Get the tools you need to make them happen. Apply for a cash advance with Giggle Finance today and keep things moving.
Disclaimer: Giggle Finance provides Revenue-Based Financing programs for business purposes only. Any mention of any loan product(s), consumer product(s), or other forms of financing is solely for marketing and educational content purposes and to help distinguish Giggle Finance’s product from other comparable financing options available in the markets.