Equipment Financing Guide: Business Equipment Loans Explained

What is Equipment Financing?

Equipment financing is a specialized loan that allows businesses to purchase or lease necessary equipment without paying the full cost upfront. The equipment itself serves as collateral, making this an accessible financing option for businesses of all sizes.

At Tesni LLC, we've helped thousands of businesses acquire over $500 million in equipment across every industry imaginable.

Types of Equipment Financing

1. Equipment Loans

Traditional installment loans where you borrow money to purchase equipment outright.

Key Features:

• Ownership: You own the equipment from day one
• Loan Amount: $5,000 to $5,000,000+
• Terms: 1 to 7 years (matches equipment useful life)
• Down Payment: 10% to 20% typical
• Interest Rates: 5% to 15%
• Tax Benefits: Depreciation and Section 179 deduction

2. Equipment Leasing

Rent equipment for a specified period with option to purchase at end of term.

Key Features:

• No Ownership: Lessor owns equipment during lease term
• Lower Payments: Typically 20-30% lower than loan payments
• Flexibility: Upgrade to newer equipment at lease end
• Terms: 2 to 5 years most common
• Down Payment: Often just first and last payment
• Tax Benefits: Full payment may be deductible

Types of Equipment Leases:

• Fair Market Value (FMV) Lease: Return equipment or buy at fair market value
• $1 Buyout Lease: Own equipment at end for $1 (similar to loan)
• 10% Option Lease: Purchase option at 10% of original cost

3. Sale-Leaseback

Sell equipment you already own to a leasing company, then lease it back.

Benefits:

• Free up cash tied up in equipment
• Improve cash flow without losing equipment use
• Convert owned equipment into working capital

Types of Equipment You Can Finance

Construction Equipment

• Excavators and bulldozers
• Cranes and forklifts
• Dump trucks and trailers
• Concrete mixers and pumps
• Scaffolding and lifts

Manufacturing Equipment

• CNC machines and lathes
• Industrial robots
• Assembly line equipment
• 3D printers and fabrication tools
• Quality control equipment

Restaurant Equipment

• Commercial ovens and ranges
• Refrigeration units
• Food prep equipment
• POS systems
• Furniture and fixtures

Medical Equipment

• MRI and CT scanners
• X-ray machines
• Ultrasound equipment
• Dental chairs and tools
• Laboratory equipment

Transportation Equipment

• Commercial trucks and vans
• Delivery vehicles
• Trailers and specialized vehicles
• Fleet vehicles

Technology Equipment

• Computer systems and servers
• Networking equipment
• Security systems
• Phone systems
• Software and licenses

Office Equipment

• Copiers and printers
• Furniture and fixtures
• Phone systems
• Security systems

Qualification Requirements

Business Requirements:

• Time in Business: 2+ years (some lenders accept startups)
• Annual Revenue: $250,000+ minimum
• Profitability: Positive cash flow preferred
• Industry: Most industries eligible

Credit Requirements:

• Credit Score: 650+ minimum, 680+ for best rates
• Credit History: No recent bankruptcies or major delinquencies
• Payment History: Consistent on-time payments

Equipment Requirements:

• Equipment Type: Must be business essential
• Useful Life: Must outlast the loan term
• Value: Equipment must have sufficient value as collateral
• Condition: New or used equipment accepted (usually under 10 years old)

Equipment Loan vs Lease: Which is Better?

Factor	Equipment Loan	Equipment Lease
Ownership	You own immediately	Lessor owns, you have option to buy
Monthly Payment	Higher	Lower (20-30% less)
Down Payment	10-20% typical	First and last payment only
Tax Benefits	Depreciation + Section 179	Full payment may be deductible
Flexibility	You're stuck with equipment	Can upgrade at lease end
Equity	Build equity in equipment	No equity building
Best For	Long-term use, stable technology	Rapidly changing technology

The Equipment Financing Process

Step 1: Determine Equipment Needs

• Identify specific equipment required
• Get quotes from multiple suppliers
• Calculate ROI and business impact
• Determine new vs used

Step 2: Choose Financing Type

• Loan vs lease decision
• Term length selection
• Down payment amount
• End-of-term options (for leases)

Step 3: Submit Application

Required documents:

• Equipment quote or invoice
• Business tax returns (2 years)
• Business bank statements (3-6 months)
• Personal credit authorization
• Business financial statements

Step 4: Approval and Documentation

• Credit decision typically within 24-48 hours
• Review and sign loan documents
• Equipment ordered from supplier
• Insurance certificate obtained

Step 5: Funding and Delivery

• Lender pays supplier directly
• Equipment delivered to your business
• Installation and setup completed
• First payment due 30-45 days later

Interest Rates and Terms

Current Equipment Financing Rates (2025):

• Excellent Credit (720+): 5% to 8%
• Good Credit (680-719): 8% to 12%
• Fair Credit (640-679): 12% to 20%

Rate Factors:

• Credit score (biggest factor)
• Time in business
• Equipment type and condition
• Down payment amount
• Loan term length
• Industry and business strength

Tax Benefits of Equipment Financing

Section 179 Deduction

• Deduct full purchase price in year of purchase
• Up to $1,220,000 deduction limit (2025)
• Applies to new and used equipment
• Phaseout begins at $3,050,000 in purchases

Bonus Depreciation

• Additional first-year depreciation
• Applies to new equipment
• Can be combined with Section 179

Standard Depreciation

• Depreciate over equipment's useful life
• Reduces taxable income each year
• Recovery periods: 3, 5, 7, or 15 years

Lease Payment Deductions

• Full lease payment may be deductible
• No depreciation schedule needed
• Simpler accounting

Common Equipment Financing Mistakes

1. Not Shopping Around: Compare multiple lenders and rates
2. Ignoring Total Cost: Look beyond monthly payment to total cost
3. Wrong Loan Term: Match term to equipment useful life
4. Insufficient Down Payment: Larger down payment = better rates
5. Not Reading Fine Print: Understand all terms and conditions
6. Overlooking Warranties: Ensure equipment is properly warranted
7. Forgetting Insurance: Adequate insurance is required

Tips for Equipment Financing Approval

1. Improve Credit Score: Pay bills on time, reduce debt
2. Prepare Documentation: Have all paperwork ready
3. Strong Business Plan: Show how equipment improves business
4. Larger Down Payment: Reduces lender risk and improves terms
5. Choose Established Equipment: Proven equipment with good resale value
6. Work with Specialists: Use lenders experienced in your industry

Why Choose Tesni LLC for Equipment Financing?

• Industry Expertise: Experience across all equipment types
• Multiple Lender Network: Access to 100+ equipment lenders
• Fast Approval: Decision in 24-48 hours
• Competitive Rates: Shop multiple lenders for your best rate
• Flexible Terms: Customize to fit your cash flow
• Simple Process: We handle the paperwork
• No Upfront Fees: Only pay when you close

Get Your Equipment Financed Today

Ready to acquire the equipment your business needs? Contact Tesni LLC at (281) 653-6760 for a free equipment financing consultation. Our specialists will help you choose the right financing option and secure competitive rates.

Fast approvals. Competitive rates. Expert guidance. Get the equipment you need today.