Funding Options for Equipment-Intensive Businesses
Equipment-intensive businesses—construction, trucking, manufacturing, medical practices, restaurants—face unique financing challenges. Your equipment is both essential for generating revenue and expensive to acquire, maintain, and replace. Making the right financing decisions can mean the difference between growing profitably and getting buried under debt payments.
This guide covers the funding options available to equipment-heavy businesses. You'll learn about equipment financing versus other loan types, how to leverage equipment as collateral, strategies for managing equipment costs, and what lenders look for when evaluating equipment-intensive companies.
Whether you're replacing aging machinery, expanding your fleet, or purchasing your first major piece of equipment, understanding your options helps you make smarter financial decisions.
Industries That Rely on Equipment
Equipment-intensive businesses share common challenges regardless of industry. Here are some of the sectors where equipment financing plays a critical role:
Construction & Trades
Excavators, loaders, cranes, concrete equipment, specialized vehicles
Trucking & Transportation
Semi-trucks, trailers, delivery vehicles, fleet management
Manufacturing
CNC machines, production lines, packaging equipment, robotics
Healthcare & Dental
Imaging equipment, dental chairs, diagnostic tools, patient equipment
Types of Equipment Funding
Equipment Loans
A traditional loan specifically for purchasing equipment. The equipment itself serves as collateral, often allowing better rates than unsecured loans. You own the equipment from day one.
Advantages:
- • Own the equipment immediately
- • Fixed rates and payments
- • Equipment secures the loan
- • Can finance up to 100% of value
Considerations:
- • May require down payment
- • Equipment depreciates over time
- • Responsible for maintenance
- • Harder to upgrade mid-term
Equipment Leasing
Rent equipment for a set period with options to purchase, return, or upgrade at the end. Preserves cash and keeps equipment current.
Advantages:
- • Lower upfront costs
- • Easier to upgrade regularly
- • Payments may be tax-deductible
- • Off-balance-sheet (some structures)
Considerations:
- • Higher total cost than buying
- • Don't own at the end (unless buyout)
- • Locked into term
- • Usage restrictions possible
Sale-Leaseback
Sell equipment you already own to a financing company and lease it back. Unlocks cash tied up in existing assets while continuing to use the equipment.
Advantages:
- • Immediate cash injection
- • Keep using the equipment
- • No new debt on books
- • Works with used equipment
Considerations:
- • Give up ownership
- • Ongoing lease payments
- • Equipment must have value
- • May cost more long-term
SBA 7(a) and 504 Loans
Government-backed loans that can be used for equipment purchases. Offer the best rates and longest terms but require more documentation and time.
Advantages:
- • Lowest interest rates available
- • Terms up to 10-25 years
- • Lower down payments
- • Can include working capital
Considerations:
- • 2-4 week approval process
- • Extensive documentation required
- • Personal guarantee needed
- • Good credit required (680+)
Working Capital with Equipment as Collateral
Use existing equipment to secure a line of credit or working capital loan. Provides flexible access to cash without selling assets.
Advantages:
- • Keep ownership and use
- • Better rates than unsecured
- • Flexible use of funds
- • Faster approval than SBA
Considerations:
- • Equipment at risk if default
- • Valuation may be less than expected
- • May have liens recorded
- • Limited to equipment value
How to Qualify for Equipment Financing
Equipment financing is often easier to qualify for than unsecured loans because the equipment serves as collateral. However, lenders still evaluate several factors:
Time in Business
Most lenders want 1-2+ years for equipment loans. Startups may need higher down payments or owner guarantees.
Credit Score
600+ for many equipment financing options. 680+ for SBA loans and the best rates. Below 600, you may still qualify with larger down payments.
Revenue and Cash Flow
Lenders want to see that revenue can support the new payment. Most look for debt service coverage ratio (DSCR) of 1.25x or higher.
Equipment Type and Value
Standard equipment with good resale markets (trucks, construction, medical) is easier to finance than specialized or custom machinery.
Down Payment
Many equipment loans require 10-20% down. Some offer 100% financing for strong applicants. Used equipment often requires higher down payments.
Documentation You'll Need
- Business bank statements (3-6 months)
- Business tax returns (1-2 years)
- Personal tax returns for owners
- Equipment quote or invoice
- Business financial statements
- Equipment schedule (existing assets)
- Business license and formation docs
- Driver's license/government ID
Common Mistakes to Avoid
- Financing equipment you don't need: Just because you can finance something doesn't mean you should. Make sure the equipment will generate enough additional revenue to cover its cost.
- Ignoring total cost of ownership: The purchase price is just the start. Factor in maintenance, insurance, storage, fuel, and eventual replacement when calculating ROI.
- Taking the vendor's financing without shopping: Dealer financing is convenient but rarely the cheapest. Always compare against independent lenders.
- Mismatching term length to equipment life: Don't finance a 5-year piece of equipment over 10 years. You'll still be paying after it's worthless.
- Overleveraging your fleet: Having debt on every piece of equipment leaves no flexibility. Try to own some assets outright.
How Goodlane Group Helps Equipment Businesses
Goodlane Group works with over 50 lenders, including specialists in equipment financing for construction, trucking, manufacturing, and healthcare. This network means we can find options tailored to your specific equipment and industry.
We understand the unique challenges equipment-intensive businesses face. Whether you need to finance a single piece of equipment, expand your fleet, or restructure existing equipment debt, we can present you with multiple competitive options.
Our team helps you compare not just rates, but total cost, down payment requirements, and terms—so you can make the decision that best fits your cash flow and growth plans.
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