It’s normal to want to pay upfront, but don’t feel bad if you can’t – very few small businesses are in a position where they can fork over the full cost of pricey equipment all at once. It’s stressful to pay $5,000 one time at the cost of struggling to make ends meet for several months. That’s why equipment financing is important to consider.

But the idea of financing can sound stressful, too. All those payments? All that interest? Ultimately, financing isn’t an end-all, cure-all when it comes to your finances. When you use it correctly, however, it can help to maximize what you get out of your business. Want to know what we think the benefits of equipment financing are? Go ahead, keep reading.

Maximize Cash Flow with Equipment Financing

What does it truly mean to maximize cash flow? There are so many variables when it comes to using your working capital and revenue, but equipment financing can be a step you can take toward that financial nirvana of “maximizing cash flow.” 

PNC Bank says this is the “most attractive benefit of leasing,” and we have to say we agree. Leasing and financing let you keep your cash coming in and still benefit from the equipment you need. If you spread out a large purchase into several smaller payments, it gives your company room to grow from the purchase, and not suffer from a large, one-time payment.

Say you’re grossing $10,000 per month from your business, but you need a piece of equipment for $10,000. If you use that entire month’s earnings to purchase it upfront, it would set you behind on several other bills and expenditures. If you split that purchase into 24 payments of $417 (plus interest, of course, which will vary by lender and financial history),  it keeps your cash flow open for other opportunities, and you don’t have to stress about catching back up to the money you spent all at once. It also gives you a way to plan for the expense as opposed to just roughing it, and that can help make your cash flow more manageable.

Tax Incentives

That’s right, the government likes it when you finance. Payments could be tax-deductible, and you could write them off as an operating expense under the Financial Accounting Service Board’s (FASB) Statement 13. FASB 13 establishes what qualifies as an operating lease, and you can read more about if your lease would qualify here

Make sure you always consult your accountant or tax professional when it comes to tax deductions, though. 

Conservation of Capital

Equipment financing conserves existing capital for other payments, and doesn’t use up your credit card or line of credit. That means all these resources are reserved for other expenses or emergencies. Even if you have the existing cash to purchase a large piece of equipment, that cash could be better spent on another investment, or saved for an unexpected emergency purchase. 

Fast Financing

Equipment financing tends to be a faster way to fund purchases than a loan or line of credit, especially if you apply online through the lending marketplace. You can get approved for a maximum in minutes. 

Building Credit

And perhaps one of the most important reasons to get any type of financing is that it helps you build business credit. Unlike personal credit, your business credit doesn’t acquire automatically –  you have to personally report your credit to a business credit agency. So, if you’re not doing that, you don’t have any business credit built up. If you’re not receiving any financing, you don’t have a way to report and build that business credit, and that can be a problem later on. If you can separate your personal and business funds, it will be easier in the future to get a loan on behalf of your business. 

Use equipment financing to build your business credit by making on-time payments. This way, you can have a better chance to get a lower-interest loan in the future, or refinance for a lower interest rate. 

Looking for equipment financing? FaaSfunds has you covered. We match your business with the best financing options based on your financial history, instantly. Check us out below.

Equipment financing is used specifically for large equipment purchases – like industrial kitchens, company vehicles or even party inflatables. Getting an equipment loan is usually the most convenient way to purchase new equipment for your business. Usually, it’s an inevitable purchase – if your equipment is outdated you need to update it, or if you’re starting a business, you certainly need equipment. Getting a loan makes those purchases just a little bit easier.

You use equipment financing loans the same way an individual would use a car loan. You receive the sum of the loan upfront and then pay it back via monthly payments. New equipment can help your business bring in more revenue – whether it be a van to help deliver catering or another oven to meet higher demand. Handing over the cash for these purchases can set you back significantly, and that’s what makes equipment financing an attractive option for expanding, starting or updating a business.

If you’re going to a large equipment vendor, like John Deere, they’ll usually offer in-store financing for your business. Smaller or less-broad vendors will not, so you have to go through a bank or other lender to get the funds you need to pay the vendor up-front.

Do You Qualify for Equipment Financing?

Most businesses in good standing can qualify for equipment financing loans. Since the equipment you’re financing acts as the collateral, these loans can be easier to secure if your credit is less than stellar. Lenders are interested in securing a loan, so when you’re financing equipment, they’re often not as concerned with your borrowing history because if you can’t pay the loan back, they’ll just seize the equipment. This way, they don’t lose any money, so they’re more likely to be a little generous with their lending. The details of how much the loan will be for and for how long depends on the type of equipment and how much it costs. If you plan on investing in a piece of equipment that will retain its value with time, then lenders will often be willing to work with you, even if you don’t have the best finances.

Be aware that the term length depends on the type of equipment and its expected lifetime. Most lenders will not extend the loan payments past the lifetime of the equipment – they want it to be a tangible asset that’s worth something should they have to repossess it.

How to Apply

Like most loans, you’ll need to provide the financial health of your business along with your credit score. Most equipment lenders will also ask for information about the equipment you’re looking to buy and a quote of how much it will cost. The documents you’ll need are:

  • Driver’s License
  • Voided business check
  • Bank statements
  • Business tax returns
  • Credit score
  • Equipment price quote

What’s the Difference Between Equipment Financing and Equipment Leasing?

Some equipment sellers offer the option to lend equipment directly to their customers and charge a monthly rental fee, much like renting an apartment. With this option, you can only use the equipment while you’re paying for it, and no matter how long you use and pay for the equipment, you don’t own it. This is a good option if you only need equipment – like a forklift or a van – for a shorter period of time.

If you chose to finance equipment with a loan, you’ll own the equipment when you’re done paying for it. If you know your business will need the equipment for a while, financing with a loan is usually a better investment.

What Will Equipment Financing Cost You?

The appeal of equipment financing is that it doesn’t require you to pay the steep price for equipment upfront. It gives you a way to pay it off in increments. Because of the interest generated by getting a loan, you inevitably end up paying more for the equipment than it actually costs. Part of this is an investment – if you choose to finance the equipment you really need, then you’ll receive more output and money because of it. Part of it, however, is the fee you have to pay for convenience – lenders are making this money more accessible to you, and expect you to pay them for it.

To help break equipment financing down, here’s an example: Let’s say your restaurant needs a new set of dining-room furniture. The expected price of this new furniture is around $12,000 total for all the tables, chairs and booths. After you get approval from a lender, you use that money to purchase the furniture and agree to pay 12% interest back to the lender, along with the money from the loan. Because technology doesn’t improve very quickly when it comes to dining furniture (like it does with computers), the value of the furniture isn’t expected to depreciate significantly over the next few years, so the lender gives you five years to pay the loan off.

$13,440 is the total amount you’ll have to pay back, making your monthly payments $224 for five years. After it’s paid off, you own all the furniture.

Things to Consider

In order to know if equipment financing is the best option for your business, you have to understand your business financials and opportunity costs. If you planned for these costs or have the money on hand,  sometimes it’s worth it so you don’t have to pay the extra money in interest. It’s also an option to wait and save the money, but if you need the equipment immediately, saving isn’t really an option. For many new or small businesses, handing over $12,000 in full isn’t a possibility. It will set them behind significantly, and hinder their ability to start or grow their business.  

This can all sound very overwhelming, but that’s why we’re here. When you sign up with FaasFunds, we analyze your business needs and finances and figure out if equipment financing is the best option for you. We’ll also link you up with an industry expert to help you through tough financial decisions. Navigating the financial world is tough, so make it easier with FaasFunds.


To join our FREE platform fill out the form below and a Funding Specialist will be with you shortly to get you started! 

FaaStrak, LLC and affiliate FaaSfunds are software providers that exist to facilitate funding and help you make financial decisions for your business. The views, reviews, recommendations and suggestions expressed in our articles aren’t in any way affiliated with certain products or companies, and are based on the view of our editorial team alone, not FaaStrak, LLC as a whole. We do not take endorsements from products or companies mentioned above. We give advice based on research and industry knowledge, but the finance world is vast and variable, so we do not claim to be experts at everything within it. We are here to guide and provide direction, but are not here to enforce our knowledge as fact. We cannot be held liable for decisions made by you or your business. Under no circumstances should FaaStrak, LLC or any of its affiliates be liable for any indirect, incidental, consequential, or exemplary damages or loss of profits arising out of or in connection with your access of our site or software.