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Equipment financing
Also called equipment loan, equipment finance.
Money advanced to acquire a specific machine, vehicle or system, secured by that asset, with the term set against how long the asset will keep earning.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
The collateral is the point. Because the funder can identify, value and repossess the asset, pricing and approval standards differ from unsecured working capital, and a business that cannot get a general-purpose loan can often finance a titled truck or a known-brand machine.
Structures
Loan, equipment finance agreement, or lease. All three produce a payment; they differ on ownership, tax treatment and what happens at the end.
What varies deal to deal
- New versus used, and whether the seller is a dealer, a private party or an auction, which changes appetite sharply
- Soft costs such as delivery, installation, training and extended warranty, which some funders finance and others cap or exclude
- Ticket size, which determines whether the file is application-only or needs full financials
- Vendor programs, where the manufacturer subsidizes the rate and the finance company books it as a lower yield
- Titled vehicles, which add lien recording through the state motor vehicle agency on top of any UCC filing
Where this one catches people
Financing an asset over a term longer than its working life leaves you making payments on equipment you have already replaced. It happens most with technology, restaurant equipment and high-mileage used trucks, and it is invisible in the quote because a vendor's finance sheet shows a payment and nothing else. Ask what the asset will be worth and whether it will still be in service at the final payment.
Where you will meet this term
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Equipment financing — common questions
What does equipment financing mean?
Money advanced to acquire a specific machine, vehicle or system, secured by that asset, with the term set against how long the asset will keep earning.
Where does equipment financing catch people out?
Financing an asset over a term longer than its working life leaves you making payments on equipment you have already replaced. It happens most with technology, restaurant equipment and high-mileage used trucks, and it is invisible in the quote because a vendor's finance sheet shows a payment and nothing else. Ask what the asset will be worth and whether it will still be in service at the final payment.
Is equipment financing the same as an interest rate?
Equipment financing is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does equipment financing apply to?
Equipment Financing.
Is there a worked example of equipment financing?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside equipment financing?
Equipment finance agreement, Equipment lease, Purchase-money security interest, Residual value, Soft costs.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.