Situation
I need a truck or a machine
The asset secures the deal, which makes this one of the easier things to finance — and the easiest to overpay for.
Because the equipment itself is collateral, this is among the easier things to get approved. Use equipment financing or a lease for the asset, and keep your working capital and your line of credit for working capital. Paying for a seven-year machine out of a short-term facility is the common and expensive error.
The decision in one line
Will you still want this asset at the end of its finance term? If yes, buy it. If it dates quickly, or you need to swap it regularly, lease it.
The four routes
| Route | Fits | Watch for |
|---|---|---|
| Equipment financing | Buying a long-lived asset. The asset secures the loan, so approval leans on it rather than only on you. | Still usually a personal guarantee. Check the term is not longer than the asset's useful life. |
| Equipment lease | Technology and anything that dates fast, or when you want the payment low and the swap easy. | The end-of-lease terms are where leases get expensive. Read the buyout and the return condition clauses. |
| SBA 504 | Heavy, long-lived equipment, often alongside property. Long fixed rate with no balloon. | Slow, and built for larger projects. |
| SBA 7(a) | Mixed projects — equipment plus working capital plus something else, in one loan. | Slower than a dealer or specialist lender. |
| Dealer or manufacturer finance | Convenience, and sometimes a genuinely subsidized rate on new equipment. | Compare it properly. Subsidized rates are often paired with a higher price. |
What to check before signing
- Term against useful life. A five-year loan on a three-year asset means paying for something you have already replaced.
- The real total. Add the down payment, every fee, and the final payment or buyout. Compare totals, not monthly payments — a lower payment over a longer term is usually more money.
- What the lien covers. Some agreements take a blanket lien over all business assets, not just the equipment. That can block later borrowing. See collateral and personal guarantees.
- Maintenance and insurance obligations, which the agreement will usually require and which are a real running cost.
- Whether a used machine works. Often dramatically cheaper, and many lenders will finance used equipment with an inspection or valuation.
Does the machine pay for itself?
The question that should decide this, and frequently is not asked.
- What additional revenue or saved cost does it produce per month?
- What is the monthly payment, all in?
- If the first number does not comfortably exceed the second, the purchase is a bet on growth rather than a financed asset. That can be the right call, but name it.
- Add the running costs — fuel, maintenance, insurance, the operator.
If you are buying a vehicle specifically, a business loan to buy a truck covers the particulars.
Questions people actually ask
Is it better to lease or buy equipment?
Buy what you will still want at the end of the term; lease what dates quickly or needs regular replacement. Leasing usually has a lower monthly payment and a higher total cost, and the end-of-lease terms are where the real economics sit.
Can I get equipment financing with bad credit?
More readily than unsecured borrowing, because the asset secures the deal and can be repossessed. Expect a larger down payment and a higher rate. See bad credit business loans.
Should I use my line of credit to buy equipment?
Generally no. A line of credit is short-term, often variable, and callable, while equipment is a multi-year asset. Using the line ties up the facility you need for working capital and mismatches the term.