Banks and online lenders provide equipment financing, also called equipment loans, to help you acquire or upgrade essential equipment and machinery for your business. Equipment financing options may be available for startups and businesses with bad credit.
An equipment loan is designed to help you purchase or repair machinery and equipment for your business. Additionally, you can use other types of small business loans to finance equipment.
Equipment loans generally require regular payments with accruing interest. Payment plans vary by lender and loan type but can include daily, weekly, monthly, seasonal or deferred options.
Yes, some equipment lenders only require six months in business to qualify for equipment financing — and some don’t have any time-in-business requirements. This allows startups to finance any necessary equipment within their first year of business.
While some lenders accept minimum credit scores as low as 500, having a credit score of 670 or higher could help you secure lower interest rates and better terms.
Unfortunately, no-credit-check equipment loans aren’t an option. However, because the equipment acts as collateral to secure the loan, it’s generally easier to qualify for an equipment loan versus a traditional business loan, as the latter may have stricter business lending requirements. Because of this, borrowers with poor or bad credit may have better luck applying for small business equipment loans.
Equipment financing rates typically range from 3.49% to 28% or higher. Your specific interest rate for an equipment loan will depend on several factors, such as credit score, annual revenue, time in business and your type of industry.
However, every lender differs and will weigh your criteria differently.
Some loans for equipment have generous term lengths of up to ten years. Others may be as short as six months. Just keep in mind that a longer loan term will mean paying more interest over the life of the loan.