Equipment Financing 101
How to structure an equipment loan, what qualifies, how to compare financing vs leasing, and how to maximize the Section 179 tax deduction.
How Equipment Financing Works
Equipment financing is a loan secured by the equipment itself. The lender holds a lien on the equipment until the loan is repaid — similar to how a car loan works. You own the equipment from day one, use it to generate revenue, and repay the loan over 24–72 months. Because the equipment serves as collateral, approval is generally easier and rates are lower than unsecured business loans.
What Qualifies
- Commercial vehicles and work trucks
- Construction and heavy machinery
- Restaurant and commercial kitchen equipment
- Medical, dental, and veterinary equipment
- Manufacturing and industrial machinery
- Technology, computers, and servers
- Agricultural equipment
- Office furniture and fixtures
Both new and used equipment can be financed. For used equipment, most lenders will finance equipment up to 10 years old.
Finance vs Lease — How to Decide
The right choice depends on three questions:
- How long will you use it? If 7+ years, financing wins. If technology changes quickly (computers, medical imaging), leasing lets you upgrade without being stuck with obsolete equipment.
- What's the resale value? Equipment that holds value (commercial vehicles, heavy machinery) builds equity through ownership. Electronics depreciate to near-zero — leasing transfers that risk to the lessor.
- What's your tax situation? Financed equipment can be fully deducted in year one under Section 179. Leased payments are deducted over the lease term. Talk to your accountant.
Section 179 — The Tax Deduction Most Owners Miss
Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's placed in service — rather than depreciating over several years.
Example: You finance $150,000 in equipment in December. You only pay a few months of loan payments that year, but you can deduct the full $150,000 from your taxable income. At a 30% effective tax rate, that's $45,000 in tax savings. Consult your CPA to confirm your situation qualifies.
What Lenders Look For
- Credit score of 600+ (some lenders accept lower for well-collateralized equipment)
- 6+ months in business (some startup programs exist)
- Equipment invoice or quote showing make, model, serial number, and price
- Confirmation the equipment is for business use
How to Get the Best Terms
- Finance through a business lender vs the dealer — dealer financing is convenient but rates are often higher. Get a competing quote from Surge Financial before committing.
- Down payment: putting 10–20% down lowers your monthly payment and often improves approval odds.
- Term length: match the term to the useful life of the equipment — don't finance a 5-year piece of equipment on a 7-year term.
Ready to Finance Your Equipment?
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