Equipment Financing

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Definition

Equipment financing provides funding for companies looking to purchase equipment, but lack traditional funding sources to pay for the purchase. Typically with equipment financing loans, the cost of the equipment is spread out over the course of a payment plan which extends over a number of years. For these loans, the equipment is used as collateral to help secure the position of the lender and lower the interest rate on the loan.

Equipment financing is often used by growing companies to purchase necessary equipment, but may also be used by established companies to replace tired equipment or upgrade equipment to remain competitive. Some equipment financing companies require a business history of at least 3-years and rates may vary based on how long the company has been in operation.