Educational Guide
Equipment financing is the category of loans and leases used by businesses to acquire equipment—machinery, vehicles, technology, medical devices, and other assets. The equipment typically serves as collateral. Understanding how it works helps vendors, brokers, and advisors participate effectively.
Equipment financing helps businesses acquire assets without paying the full cost upfront. The equipment typically secures the financing, which can take the form of a loan or a lease.
Equipment financing is a subset of commercial finance. It is used by businesses for commercial purposes—acquiring machinery, vehicles, technology, medical equipment, construction equipment, and other assets. The structure may be a loan (ownership transfers at closing) or a lease (use of equipment for a term, with optional ownership at the end). Lenders evaluate the equipment type, useful life, resale value, and the borrower's credit and revenue.
Equipment loans transfer ownership to the borrower at closing. The borrower repays principal and interest over a set term. The equipment serves as collateral. At the end of the term, the borrower owns the equipment outright.
Equipment leases provide use of the equipment for a period. The lessor (lender) typically retains ownership. At the end of the lease, the lessee may have the option to purchase the equipment (capital lease) or return it (operating lease). Structure affects accounting treatment and cash flow. Businesses choose based on their needs and preferences.
Both structures follow the general commercial lending process: application, evaluation, closing, funding. Lenders consider credit, revenue, and equipment value.
Equipment vendors often participate in financing. Some offer in-house programs—direct relationships with lenders or captive finance arms. Others partner with external financing sources. When a vendor's in-house program declines a buyer, the vendor may refer the deal to a second look or alternative financing partner.
With a signed referral agreement, vendors can receive compensation when equipment financing deals fund. See can vendors get paid for referring financing and equipment vendor financing partners. Vendors who cannot offer financing in-house may refer buyers to external partners. Referral partners do not broker the loan—they introduce the opportunity; the financing partner evaluates and places the deal.
Credit requirements vary by lender and program. Some equipment financing programs consider borrowers with lower credit scores when the equipment collateral is strong and the deal structure supports the loan. Time in business, revenue, and industry also matter. Each deal is evaluated on its merits; approval is not guaranteed.
When a vendor program or primary lender declines an equipment deal, sending declined deals to a referral partner network may create options. Second look lenders may have different credit boxes. The referral agreement defines the process. The blog article on equipment financing vs. in-house vendor programs provides additional context.
Brokers who arrange equipment financing may work with multiple lenders. Referral partners—vendors, CPAs, consultants—introduce opportunities to financing partners. With a signed agreement, referral partners may receive referral fees when deals fund. See referral fee structures and when referral commissions are paid.
Equipment financing fits into the broader commercial finance landscape. The same process applies: application, evaluation, closing, funding. Referral partners who understand equipment financing can better serve clients and identify opportunities for the referral partner program.
FAQ
Equipment financing is the category of loans and leases used by businesses to acquire equipment—machinery, vehicles, technology, medical devices, and other assets. The equipment typically serves as collateral. Structures include loans, leases, and vendor programs.
Equipment loans transfer ownership to the borrower at closing. The borrower repays principal and interest over a term. Leases provide use of the equipment for a period; ownership may transfer at the end (capital lease) or the lessor retains it (operating lease). Structure affects accounting and cash flow.
Machinery, vehicles, technology, medical equipment, construction equipment, manufacturing equipment, restaurant equipment, and other business assets. Lenders evaluate the equipment type, useful life, and resale value. Eligibility varies by lender and program.
Vendors may offer in-house financing, partner with lenders, or refer buyers to financing partners. With a referral agreement, vendors can receive compensation when deals fund. Vendors who cannot offer financing in-house may refer to external partners.
Credit requirements vary by lender and program. Some programs consider borrowers with lower credit scores when equipment collateral is strong. Time in business, revenue, and deal structure also matter. Each deal is evaluated on its merits; approval is not guaranteed.
Equipment financing is a subset of commercial finance. It is used by businesses for commercial purposes. It follows the same general process as other commercial lending—application, evaluation, closing, funding. Brokers and referral partners can introduce equipment financing opportunities.
Have an equipment financing opportunity?
Review the referral agreement and submit declined or hard-to-place equipment deals.
