Equipment Loans & Financing: How They Work & Their Benefits

Access to reliable, up-to-date equipment is essential to keeping business operations running smoothly. But funding critical equipment replacements and upgrades can be challenging. Equipment financing can help businesses across industries, including agriculture, healthcare and transportation, invest in the tools they need to stay competitive while preserving working capital. 

Understanding business equipment financing

Equipment financing is a type of loan or lease companies seek from financial institutions to access tools and machinery without having to purchase them in cash. Companies get the equipment they need to do business right away while making manageable payments over time. 

Equipment financing is also versatile. It can fund purchases ranging from fleets of forklifts and service vehicles to large work boats and corporate aircraft.

Companies may consider equipment finance for small-dollar items such as laptops. But they typically find equipment financing attractive for larger purchases, starting at around $100,000, said David Feldser, East Region Sales Leader for Equipment Financing at J.P. Morgan. 

“There are also the very large pieces of industrial equipment, things that are used in the manufacturing space. Those could be anywhere from $3 million, to $20 million,” Feldser said.

Benefits of equipment financing

Equipment financing can help business owners: 

• Accelerate growth: Expanding into new markets, introducing new products or scaling to meet demand often requires investing in additional capacity. Equipment financing helps fund purchases that unlock growth.  
• Preserve working capital: Using liquidity to pay for equipment upfront has opportunity costs. Financing equipment purchases lets companies use working capital for other needs or invest in strategic initiatives. 
• Gain efficiency: New, high-quality equipment can increase process efficiencies, helping the company save on energy or increase productivity. “Those businesses can save and make more money than the interest they’re paying on the loan,” Feldser said. “Companies can get so much more out of what the asset can do for them than what the debt does.”