Bank vs. Online Lender: Where Should You Get Your Equipment Financing?

For small businesses in the US looking to acquire costly equipment, choosing the right financing partner is critical. From traditional banks to equipment leasing companies for small businesses, there are multiple options to fund a new machine, vehicle, or technology. Each route—bank loans, online alternative lenders, or specialized leasing firms—has its own advantages and drawbacks.

This comprehensive guide will compare banks vs. online lenders for equipment financing, while also exploring the role of equipment leasing companies. We’ll break down how these options differ in cost, speed, and requirements so you can make an informed decision on where to get your equipment financing.

Understanding Equipment Financing Options

Equipment financing refers to obtaining capital to purchase or lease business equipment. Unlike unsecured loans, equipment financing is secured by the equipment itself, which serves as collateral. This built-in collateral lowers risk for the lender and often makes equipment loans easier to obtain than other loans.

In fact, nearly 8 in 10 U.S. companies (79%) use some form of financing when acquiring equipment, whether through loans, leases, or lines of credit. According to a 2024 Federal Reserve survey, 68% of small business equipment loan applications are approved, the highest approval rate of any loan type.

This means small businesses have a good chance of securing financing for equipment, provided they choose the right lender.

Types of equipment financing providers: In general, there are three main avenues for equipment finance in the US:

Traditional banks and credit unions: These include national banks, regional banks, and local community banks that offer business loans.
Online or alternative lenders: FinTech companies and non-bank lenders that often operate online and specialize in faster, more flexible funding.
Equipment leasing companies and specialists: Independent finance companies or manufacturer-affiliated lenders that focus on equipment leases and loans (also known as equipment financing companies).

Each of these caters to different business needs. Traditional banks currently account for over half of equipment financing volume in the U.S., but alternative lenders and leasing companies fill important gaps in serving small businesses. The following sections will dive into each option.

Traditional Bank Equipment Loans

Banks have long been a go-to source for small business financing, including equipment loans. A bank equipment loan is a lump sum loan used to buy equipment, with the equipment as collateral. If you prefer to eventually own the equipment and want potentially lower interest rates, a bank is an attractive option.

Interest rates and loan terms: Traditional banks generally offer the lowest interest rates and competitive terms on equipment loans, thanks to their low cost of capital. For well-qualified borrowers, bank equipment loan APRs might start around the mid-single digits.

For example, some banks advertise rates as low as ~6–7% for established businesses with strong credit. Repayment terms are often longer as well—commonly 3 to 7 years—and certain programs like SBA 504 loans can extend up to 10 years. Banks can typically finance larger loan amounts too, making them suitable if you need to buy expensive machinery.

Eligibility and requirements: The trade-off for low rates is stricter qualification criteria. Banks typically require:

Good to excellent credit – Often a personal credit score ~700+ is needed for approval. The business and owners should have clean credit histories.
Established business history – Banks prefer at least 2 years in business with financial records. For instance, Bank of America requires a minimum of two full years in business and $100k+ annual revenue for an equipment loan.
Financial documentation – You’ll be asked for detailed financial statements, tax returns, and a solid business plan. The process is documentation-heavy and can take time.
Down payment – Many bank loans require a down payment, typically 10–20% of the equipment cost. This means you may need to invest some cash upfront (though some banks offer 100% financing for very qualified borrowers).
Personal guarantee – Almost all bank loans will require the business owner to personally guarantee the debt, further securing the loan.

Because of these requirements, bank financing is generally available only to strong, established businesses. Traditional banks are conservative and have a lower risk appetite, so they tend to prioritize larger, well-established companies over startups. Small businesses with weaker credit or limited history often struggle to get approved by banks.

Speed and convenience: Another consideration is the speed of funding. Banks have a more rigorous underwriting process, so approval and funding can be slower. It’s not uncommon for a bank equipment loan to take weeks (or even a couple of months) from application to funding.

You’ll likely need to visit a branch or speak with a loan officer, submit extensive paperwork, and wait for credit approval. One advantage, however, is that equipment loans are secured, so banks may process them a bit faster than unsecured loans. Even so, online lenders typically move much faster (as we’ll see below).

Bankrate notes that while online lenders might fund an equipment loan within 1–2 days, banks may take up to a week or more to approve funding. If you value face-to-face service and already have a relationship with a bank, this route can feel more reassuring, but it requires patience.

Pros of getting equipment financing from a bank:

Lowest interest rates – You’ll generally pay less in interest with a bank loan than with other lenders. This lowers the overall cost of financing.
Longer terms & larger amounts – Banks can offer multi-year repayment schedules and significant loan amounts (often suitable for heavy equipment purchases).
Potential SBA programs – Banks can provide SBA-backed loans (like the SBA 504 or 7(a)), which have capped interest rates and favorable terms for equipment purchases.
One-stop banking – You might consolidate your business accounts, loans, and services at one institution. Traditional banks offer a “one-stop shop” (deposits, loans, merchant services, etc.) along with in-person support.

Cons of bank financing:

Strict approval criteria – High credit score and long business history are a must in most cases. New or credit-challenged businesses will find it difficult.
Slow process – The application and underwriting process is lengthy and paperwork-intensive. Not ideal if you need equipment quickly.
Possible down payment – You may need to put 10–20% down in cash, which can strain a small business’s savings. (Not all banks require this, but many do for small firms.)
Personal guarantee required – Puts the owner’s personal assets on the line, which increases risk to you if the business can’t repay.
Less flexibility – Banks often have less flexible terms or lease options. They typically offer standard loan structures; if you need creative financing (like seasonal payments or specialized leases), a bank might not accommodate that.

Online Lenders and Alternative Equipment Financing

Over the past decade, online lenders (also known as alternative lenders or fintech lenders) have become popular for equipment financing, especially among small businesses that don’t qualify at banks.

These lenders operate via digital platforms and aim to provide fast, accessible funding. Many online providers also act as equipment financing companies specializing in this niche. They may offer both equipment loans and leases, and some are even marketplaces connecting businesses to multiple lending partners.

Speed and ease of application: One of the biggest advantages of online lenders is the streamlined application and quick approval. Applications are typically done online with minimal paperwork, and approval decisions can be very fast – sometimes within hours.

For example, some alternative lenders advertise approvals in under 24 hours and even same-day funding for equipment loans. In general, online lenders can fund an equipment purchase in a matter of days, whereas traditional loans might take weeks. This speed is crucial if you need to seize an opportunity or replace broken equipment urgently.

Credit flexibility: Online and alternative financing companies often have a higher risk tolerance than banks. They focus on underserved segments like small businesses, startups, or those with imperfect credit. As a result, their eligibility requirements are more lenient:

Lower credit scores accepted: While banks want ~700+, some online equipment lenders accept personal credit scores in the mid-600s, or even around 550 in certain cases. This opens the door for business owners with subprime credit to get financing.
Shorter time in business: Many online lenders only require 6 months to 1 year in business, and a few will work with startups just a few months old. For instance, some startup-friendly lenders require just 3–6 months of operating history and modest revenue (e.g. ~$100k/year) to qualify. This is a stark contrast to banks’ 2+ year requirement.
Cash flow focus: Alternative lenders often consider business cash flow, revenue trends, or the value of the equipment more heavily in underwriting. They may ask for bank statements to evaluate your ability to make payments, rather than relying solely on credit scores. This can help newer businesses get approved even without a long credit history.

In short, if your business can’t meet bank standards, an online lender is likely your next best bet. These lenders are essentially filling the gap for borrowers who are strong enough to afford a loan but don’t fit the banks’ strict mold.

Loan products and flexibility: Alternative equipment financing comes in various forms. Some online lenders offer standard equipment loans, similar to banks but with higher rates. Others provide equipment leases, hire-purchase agreements, or even sale-leaseback options. They tend to be innovative and can tailor financing to specific needs.

For example, certain lenders might structure seasonal payment plans (useful if your business is cyclical) or allow financing of used equipment that banks might not finance. Many also finance 100% of the equipment cost, meaning no down payment required, which can be a lifesaver for a cash-strapped small business.

It’s not uncommon for alternative lenders to cover soft costs (installation, delivery, taxes) in the financing amount as well, something a bank might limit. In fact, some top equipment financing companies will finance up to 125% of the equipment’s value to include related costs.

However, this flexibility comes with a price. Interest rates from online and alternative lenders are typically higher than bank rates. The exact rate depends on your credit and the lender’s model, but expect to see anything from around 7–8% APR on the low end up into the double digits.

In some cases, short-term financing from fintech lenders can carry very high effective rates. Bankrate notes that interest rates on equipment financing can range from ~5% on the low end to “triple digits” in the worst cases. While triple-digit financing would be extreme (likely only if structured as a merchant cash advance or similar), it highlights that you must carefully review the cost.

Most online equipment loans will not be anywhere near that maximum, but it’s common to see rates in the teens or higher for borrowers with blemished credit. Always compare offers and be wary of financing that uses a “factor rate” instead of a standard APR, as factor rates can obscure the true cost.

Other potential drawbacks of online lenders include:

Shorter terms: Some alternative loans might have shorter repayment periods (e.g. 1–3 years), which means higher monthly payments. There are online lenders offering up to 5 or even 7-year terms, but shorter-duration loans are common if credit is lower.
Higher fees: Watch for origination fees (often 1–3% of the loan), processing fees, or documentation fees. These can add to your cost. Always ask for an APR or total cost breakdown.
Frequent payments: Certain fintech lenders require weekly or even daily repayments (this is more typical for working capital loans, but equipment loans to weaker credit borrowers might use more frequent ACH debits). Ensure your cash flow can handle this if applicable.
Lack of personal relationship: If you value in-person guidance, online lenders may not provide that. However, many do offer phone support and a more personal touch within their niche.

Pros of online/alternative equipment lenders:

Fast approval and funding – You can often apply in minutes and get funding in 1–5 days, which is much faster than a bank.
Easier to qualify – Lower credit score and younger businesses have a chance. Lenders consider alternate criteria and have higher approval rates for small businesses.
No or low down payment – Most alternative lenders offer 100% financing (you finance the full equipment cost). If you don’t have 20% to put down, this is a major benefit. Often you’ll just pay the first and last month’s payment at lease signing, or a small origination fee.
Flexible and innovative terms – Can finance used equipment, include soft costs, and structure leases or loans creatively. For example, some leasing companies allow a sale-leaseback, where you sell them equipment you already own for cash and then lease it back – raising cash without losing the equipment’s use.
Specialized industry knowledge – Many alternative providers focus on equipment financing, so they understand the value and resale market of the gear you’re buying. This can lead to more willingness to finance niche equipment than a generalist bank.

In fact, because banks are generalist lenders, equipment financing is often not their primary focus, whereas an equipment finance company may better grasp the asset’s worth and lifecycle.

Cons of online/alternative lenders:

Higher interest rates – You pay for convenience and leniency through higher rates or fees. It’s common for alternative loans to have interest costs several points above bank loans. Always calculate the total cost.
Potentially shorter repayment – Shorter terms and frequent payments can strain cash flow if not managed carefully.
Varied credibility – Stick with well-reviewed or recommended lenders. The alternative lending space has many reputable companies, but also some predatory ones. Research and compare offers. (Tip: Look at the annual percentage rate (APR), not just monthly payment, to compare true costs.)
Less overall financial benefit – Unlike a bank, an alternative lender won’t be providing you other bank services (checking accounts, etc.) or the prestige of a bank loan. This may not matter to many, but for some businesses having a bank loan can build credibility. Also, alternative lenders almost always require a personal guarantee as well (unless explicitly stated otherwise).

Equipment Leasing Companies for Small Businesses

In addition to banks and online lenders, equipment leasing companies provide another important avenue for financing. These are specialized companies (sometimes independent, sometimes affiliated with equipment manufacturers or banks) that lease equipment to businesses.

Instead of lending you money to buy the asset, a leasing company buys the equipment and rents it to you for a period of time. Leasing can be ideal for small businesses that want to minimize upfront costs and keep their equipment up-to-date.

How equipment leasing works

When you lease equipment, you’ll make regular lease payments (monthly, typically) to use the equipment, but you don’t own it during the lease term. At the end of the lease, you may have options: for example, return the equipment, renew the lease, or buy the equipment at a predetermined price. There are different types of leases:

An operating lease (or fair market value lease) works like a rental; you use the equipment for a few years and return it or buy it at market value at lease end.
A capital lease (e.g. $1 buyout lease or 10% buyout) is closer to a loan; you agree upfront to purchase the equipment for a token amount (like $1 or 10% of cost) at lease end. This effectively means you will own it, and such leases have higher payments than pure rentals.

Leasing companies often offer both structures. Small businesses frequently choose operating leases for things like technology or vehicles that they plan to replace every few years, and capital leases when they intend to keep the item long-term but want to spread payments out.

Advantages of leasing for small businesses:

Little or no upfront cost: Most equipment leases offer 100% financing with no down payment. Typically, you might just pay the first and last month’s payment at signing. This preserves your cash. By contrast, buying with a loan might require a 20% down payment.
Lower monthly payments: Lease payments often end up lower than loan payments for the same equipment, because you’re not paying for the full cost (unless it’s a $1 buyout lease). You’re essentially paying for the depreciation and use of the equipment during the term. This can help with cash flow, allowing you to use the equipment to generate revenue while paying less per month.
Manage obsolescence: With fast-changing technology, leasing lets you avoid owning outdated equipment. You can upgrade or replace equipment more easily by leasing for a shorter term and then getting new gear. The risk of the equipment’s value dropping is on the lessor, not you.
Tax benefits: Lease payments are generally tax-deductible as a business expense. In the U.S., an operating lease keeps the liability off your balance sheet and the full lease payments can often be expensed. For finance leases, you may deduct depreciation and interest like a loan. Either way, there are tax advantages to financing equipment.

(Note: purchasing with a loan also has a tax break via Section 179 expensing – allowing you to deduct the full purchase price in year one – so consult your accountant on which is more beneficial for your situation.)
Flexible terms and structures: Top equipment leasing companies offer a variety of lease structures to suit business needs. For example, some provide fair market value leases, $1 buyout leases, “10% PUT” leases, wrap leases, and even sale-leaseback arrangements.

This flexibility means you can often negotiate a structure that fits your budget and plans for the equipment. Lease terms can range from short (12–24 months) to long (5–7 years), depending on the asset’s life and your needs.
Including soft costs: Leasing is very useful if the equipment purchase involves significant “soft costs” (installation, training, shipping). Many leasing companies will finance 100% of soft costs as part of the lease.

For example, installation and operator training expenses can be rolled into the lease payments, meaning zero out-of-pocket expense to get the equipment up and running.
Easier approval than banks: Like other alternative lenders, leasing companies often have high approval rates (some advertise approvals for ~95% of applicants who meet basic criteria) and application-only programs up to certain amounts.

For instance, a leasing company might approve leases up to $150k or $250k with just a simple application and no financials, as long as your credit is decent. This makes leasing accessible to many small businesses.

That said, the credit requirements can vary: some lessors only require ~600+ credit for smaller deals, while larger leases ($250k, $500k+) may still need financial statements and good credit (often 650+ and 2 years in business). Overall, it tends to be easier to get a modest lease than a bank loan for the same equipment.

Drawbacks of leasing:

Despite its benefits, leasing isn’t always the best choice. Some cons include:

No ownership (in operating leases): If you lease, you don’t build equity in the equipment. After making payments for years, you have to pay extra to buy the asset or else you walk away with nothing owned.

For equipment that retains value and long useful life, this can be less cost-effective than buying. As Bankrate points out, leasing is like renting – you might have lower payments, but you won’t own the equipment at the end unless you have a buyout option.
Potentially higher total cost: Over a long period, leasing can cost more than purchasing. Lease rates (often expressed as a “money factor” or implicit interest rate) can be higher than loan rates, especially once the lessor’s profit margin is included.

If you end up buying the equipment at lease-end, the total paid (lease payments + buyout price) might exceed what you would have paid with a loan. It’s important to compare the total cost in a lease vs a loan scenario.
Contract restrictions: Leases may include terms like usage limits (e.g., mileage limits on vehicle leases), maintenance requirements, or penalties for early termination. You need to adhere to the contract terms to avoid extra fees.
Credit requirements still apply: Reputable leasing companies do check credit and business history. While more flexible than banks, you generally need at least fair credit (~600+ FICO) to lease equipment on decent terms. Very bad credit businesses might still have trouble, or face higher monthly payments/security deposits.
Obligation for the entire term: If your business no longer needs the equipment or can’t afford payments, getting out of a lease can be tough. You usually must pay the remaining balance or negotiate, which can be costly.

Leasing vs. Financing (Buying)

The decision often comes down to how long you need the equipment and your financial situation. If owning the asset is important or it will be useful for a long time (longer than the loan term), a loan/ownership could be better.

If the equipment might become obsolete quickly or you prefer lower short-term costs, leasing could be smarter. Many small businesses lease things like IT equipment, vehicles, or specialized machinery they plan to upgrade often, and buy things that hold value like real estate or durable machinery.

Below is a quick comparison of key differences between leasing equipment and buying with a loan:

Aspect	Equipment Loan (Buy & Own)	Equipment Lease (Rent then decide)
Ownership	You own the equipment after loan is paid off.	You do not own during the lease; may have option to buy at end.
Upfront Cost	Often requires 10–20% down payment plus loan fees.	Usually no down payment; just first/last payment or a small deposit.
Monthly Payments	Higher monthly payments (paying off total cost + interest).	Typically lower payments (covering depreciation + interest).
Total Cost	Likely lower in the long run if you keep the equipment for years (you pay principal and interest, then you have an asset).	Could be higher if you end up buying the equipment after leasing (total of rents + buyout). But if you return it, you pay only for what you used.
Flexibility	Harder to upgrade or dispose early – you must sell the equipment if you no longer need it (but you keep any sale proceeds).	Easy to upgrade at lease end – you can return old equipment and lease new tech. Good for avoiding obsolete assets. Early termination can be costly though.
Balance Sheet Impact	Shows up as debt on balance sheet; equipment becomes a depreciating asset owned by you. You can take depreciation deductions or Section 179 expensing.	Operating leases can be off-balance-sheet (no increase in recorded debt); lease payments fully expensed as operating cost (simple accounting).
Maintenance & Repairs	Your responsibility entirely, since you own the equipment (warranties can help).	Depends on lease – often, you handle maintenance, but some leases or rental agreements can include maintenance packages.
End of Term	When loan is done, you own equipment free and clear – you can continue using it with no payments, sell it, or trade it in.	At lease end, options include: return equipment with no further obligation, renew the lease, or purchase the equipment (e.g. for a fixed price or fair market value).

Both options have pros and cons, and it’s not one-size-fits-all. Many small businesses use a mix of leasing and financing across their assets to optimize cost and flexibility.

Features of Top Equipment Leasing Companies

While we aren’t listing specific companies by name, it’s useful to know what the top equipment leasing companies in the market tend to offer. Leading leasing providers often differentiate themselves with customer-friendly features and a focus on small business needs:

High approval rates and quick processing: Top lessors often boast fast turnaround – sometimes approval within hours and funding within a day or two for smaller transactions. They also maintain high approval rates by catering to a range of credit profiles (though you still must meet minimum criteria).

For example, some leading firms offer an “application-only” process for leases up to a certain amount (e.g. $150k or $250k) where no extensive financial documents are required. This speedy, minimal-paperwork approach is very appealing to small businesses.
Flexible lease structures: The best equipment leasing companies provide multiple leasing options. Expect offerings like Fair Market Value leases, $1 buyout leases, 10% purchase option leases, step payment leases, and master leases for bundling multiple items.

This flexibility allows businesses to customize the financing. For instance, wrap leases can consolidate multiple pieces of equipment under one lease for convenience, and sale-leaseback programs convert owned equipment into working capital (you sell equipment to the lender for cash and then lease it back).
Financing of used and new equipment: Top lessors will finance new, used, or even third-party vendor equipment purchases. They often have no issues with pre-owned equipment, whereas some banks shy away from financing used assets or have age limits. This is crucial for businesses buying used vehicles or second-hand machinery to save money.
100% financing including soft costs: As mentioned, leading companies frequently cover soft costs up to 100% of the equipment price. Taxes, delivery, installation, training, and even maintenance contracts can be rolled into the lease. This truly makes it a zero-down solution – you get to start using the equipment without paying anything out-of-pocket beyond the regular lease payment.
Competitive rates (for those who qualify): While leasing rates are higher than bank loan rates, top companies keep them competitive within the leasing industry. For well-qualified borrowers, lease factor rates can equate to interest rates in the high single digits or low teens.

Smaller or riskier leases will be higher, but reputable lessors are transparent about costs. They often use a “money factor” to quote rates, which you can multiply by 2400 to roughly get an equivalent APR. For example, a money factor of 0.0030 is about ~7.2% APR. Always compare those numbers.
Industry expertise: Many top equipment finance companies specialize in certain industries – e.g., medical equipment leasing, construction equipment, IT equipment, etc. They often have deep knowledge of the gear, resale values, and industry cycles.

This expertise can manifest in better service (guiding you on equipment choices or resale markets) and more willingness to finance niche equipment because they understand its value. Some of the largest leasing companies in the U.S. have decades of experience and are backed by banks or financial institutions, giving them stability and resources to fund big deals (into the millions).
Strong customer support: Leading lessors pride themselves on good customer service – assigning dedicated account managers, providing clear communication, and handling end-of-lease transitions smoothly (like coordinating equipment returns or upgrades). As a small business owner, having a leasing partner that offers one-on-one support and transparency is invaluable.

In evaluating equipment leasing companies, small businesses should compare factors like lease terms, rates, fees (documentation fees, early payoff terms), and reviews from other customers. Avoid any lessor that has convoluted terms or poor transparency.

The top companies tend to be highly rated, with A+ BBB ratings or positive reviews, and they’re clear about their approval requirements (e.g. minimum credit score, time in business) so you know where you stand.

Bank vs. Online Lender vs. Leasing: Side-by-Side Comparison

To recap the differences among the main options, the table below compares traditional banks, online lenders, and equipment leasing companies on key factors:

Criteria	Traditional Banks (Equipment Loans)	Online Lenders (Equipment Loans & Financing)	Equipment Leasing Companies (Leases & Loans)
Interest Rates & Cost	Typically lowest interest rates (e.g. starting around 6–8% APR for well-qualified borrowers). Banks have cheap capital, so cost of borrowing is lower.	Generally higher interest rates to offset risk. Can range from high single digits to double digits. Less qualified borrowers may see very high costs (some short-term financing can equate to 20%+ APR or more).	Lease rates vary; effective costs often a bit higher than bank loans. However, top lessors keep rates competitive. Leases use a money factor instead of APR; well-qualified lessees might see equivalent of high single-digit to low-teen APRs. Less creditworthy will pay more.
Speed of Funding	Slow to moderate. Application and underwriting can take days to weeks. Funding often in a few weeks (faster if all paperwork is in order). Banks are thorough but slower, possibly 1-4+ weeks total.	Fast. Many online lenders offer approval within 24-48 hours and funding in a few days. Excellent for quick needs. Digital process speeds things up significantly.	Fast for small leases, slower for large. Many leasing companies offer instant quotes and approvals in <1 day for deals under a certain amount. Funding can occur within a couple of days. Larger or more complex leases may take longer (a week or more) for due diligence.
Credit & Eligibility	Strict. Requires strong credit (often 700+) and established business (2+ years). Comprehensive financials needed. Banks favor stable, profitable businesses and may decline newer companies or those with credit issues.	Flexible. Will consider fair or even poor credit (some lenders accept ~550+ credit) and short time in business (6–12 months). They focus on cash flow and collateral value. Startups and less-qualified borrowers have a higher chance here than at a bank.	Moderate. Many leasing firms require at least fair credit (~600–650+) for small leases, and 1–2 years in business for higher amounts. Approval rates are high for those who meet basic criteria, and application-only programs make it easy up to certain dollar limits. New businesses or weaker credit might still get approved if the equipment has strong value, but possibly with higher payments or additional guarantees.
Down Payment	Often required – roughly 10-20% down is common for bank loans (though a few banks finance 100% for top-tier clients). Prepare to invest some cash or equity.	Not usually required. Most online lenders offer 100% financing, meaning no down payment. You might need to pay an origination fee, but not a large upfront sum. This is favorable for businesses without spare cash.	Not required in most leases. Standard leases are zero down; you typically just pay first (and sometimes last) month’s rent at signing. This makes leasing very cash-flow-friendly for small businesses.
Loan/Lease Terms	Lengths: 3-7 year terms common; SBA loans up to 10 years. Amounts: Banks can finance large amounts (hundreds of thousands or millions) if the business qualifies. They often cover new equipment; some have limits on used equipment age.	Lengths: 1-5 year terms are common (some extend to ~7 years). Shorter options available for those who want to pay off fast or have weaker credit. Amounts: Many online lenders cap loans around $250k-$500k for newer businesses, but some can go higher (even $1M+) with solid financials. They often finance new and used equipment; policies vary by lender.	Lengths: Very flexible – you can often choose 2, 3, 5, or 7-year lease terms to match the equipment’s useful life. End options: return, renew, or buy equipment. Amounts: Top leasing companies handle both small tickets (under $100k) and large tickets ($1M+). Some specialize: e.g., one might handle up to $500k on application-only, beyond that require financials. Overall, leasing can accommodate a wide range of financing sizes.
Advantages	– Lowest cost financing (low rates) – Longer repayment = lower monthly burden (if you qualify) – In-person service and a relationship with a bank (could help for future needs) – Can bundle with other bank services; convenience of one banking partner. – Access to SBA loans via banks for even better terms (government-guaranteed programs).	– Fast access to funds – crucial when you need equipment ASAP. – Easier approval for small businesses and startups; lenders consider subprime credit and short history. – No heavy paperwork – often just an online form and basic documents (ID, bank statements, equipment quote). Simplified process compared to bank’s lengthy application. – 100% financing common – preserve cash by borrowing the full amount (no down payment). – Innovation – may offer varied products (loan, lease, line of credit) and accommodate non-traditional needs.	– Minimal upfront cost – truly conserve cash; typically no down payment, just periodic rent. – Lower monthly payments than a loan (when structured as true lease), aiding cash flow. – Flexibility to upgrade – ideal if you need to refresh equipment regularly; avoid being stuck with obsolete gear. – Covers soft costs and used equipment – more inclusive financing (e.g., can finance installation, training, and pre-owned machines). – High approval odds – as long as you meet basic credit criteria, chances of approval are strong; quick, “application-only” decisions for smaller amounts make it hassle-free.
Drawbacks	– Hard to qualify – stringent requirements exclude many small firms. – Slow process – not suitable if you need equipment immediately; lots of paperwork and waiting. – May require collateral & PG beyond just the equipment (banks sometimes file blanket liens on business assets). Definitely requires personal guarantee in most cases. – Less flexible – standard loan structure, no built-in upgrade/return options (you have to sell equipment yourself if you don’t need it). – Down payment ties up capital.	– Higher interest cost – you’ll pay more in financing charges than with a bank. This can significantly increase the total cost of the equipment over time. – Shorter terms/frequent payments – which can mean higher periodic payments and potential strain if revenue dips. – Varied lender quality – need to vet the lender. Some online offers (e.g. merchant cash advances or certain fintech loans) can be very expensive; ensure you understand the terms fully. – Personal guarantee likely required here as well; defaulting could put personal assets at risk. – No relationship/local presence – purely transactional; you might miss out on advisory support a banker could provide.	– No equity gained (if you only lease) – after years of payments, you don’t own the asset unless you pay a buyout. – Overall cost can be higher – leasing convenience and flexibility come at a price; if you end up keeping the item long-term, leasing might cost more than buying in the first place. – Contract obligations – you must keep up lease payments for the full term even if you stop using the equipment, unless you can negotiate an exit (which often costs extra). – Credit still matters – a lease is not a free pass on credit; very poor credit may get declined or face steep rates. – Complex terms – need to pay attention to lease clauses (like return conditions, mileage limits, wear-and-tear charges on certain equipment, etc.). There’s a bit more fine print than a simple loan note.

As shown above, each option—bank, online lender, or leasing company—serves a different profile and need. If your business has strong finances and you prioritize low cost and eventual ownership, a bank loan is likely the best.

If you need speed or have less-than-perfect credentials, an online lender or alternative financing company can bridge the gap. And if conserving cash and flexibility is your goal, an equipment lease from a specialized company might be the optimal route.

Frequently Asked Questions (FAQs)

Q: Is it better to get an equipment loan from a bank or an online lender?

A: It depends on your qualifications and urgency. Banks generally offer lower interest rates and longer terms, so they’re better if you can qualify (good credit, 2+ years in business, solid financials) and if you don’t mind a slower process.

Online lenders, on the other hand, are easier to get and much faster – they can approve loans for businesses with shorter histories or lower credit, sometimes within a day or two. If you need equipment quickly or can’t meet bank requirements, an online lender is likely better despite a higher interest rate.

If you do qualify for a bank loan and can wait a bit, the cost savings make banks a great option. In short, use a bank when cost matters most and you fit their criteria; use an online/alternative lender when speed or accessibility is the priority.

Q: What are equipment leasing companies, and should my small business use them?

A: Equipment leasing companies are specialized financing firms that purchase equipment and rent it to businesses under a lease agreement. Instead of borrowing money to buy the asset, you pay a monthly lease payment to use the equipment. Small businesses might use leasing companies if they want to avoid large upfront costs and keep monthly payments low.

Leasing is especially useful for equipment that might become outdated (computers, tech, vehicles) because you can upgrade at the end of the lease term. If your business is tight on cash or you prefer flexibility, leasing companies can be a smart choice – you often get 100% financing with no down payment, and approval is relatively easy if you have decent credit.

However, remember that with a standard lease you won’t own the equipment unless you pay to buy it at the end. So, if owning the asset is important and you plan to use it for a long time, a loan might be preferable. Many small businesses use a mix: lease some items and buy others. The decision comes down to cash flow, the importance of ownership, and how quickly the equipment technology changes.

Q: Can I get equipment financing with bad credit or as a startup?

A: You have options, but likely not through a traditional bank. Banks generally require strong credit (often personal FICO 700+) and a couple of years in business. However, many alternative lenders and equipment leasing companies work with fair or even poor credit.

Some online equipment financing providers accept personal credit scores in the 600s or high-500s. They offset the risk with higher interest rates or shorter terms. If your credit is bad, you might also be asked for a down payment or collateral beyond just the equipment to secure the deal.

Startups (businesses under a year in operation) also typically can’t get bank loans but may get approved by an online lender or leasing company, especially if the owners have decent personal credit or other financial strengths. Note that a personal guarantee will almost always be required when credit is weak – meaning you’re personally on the hook if the business fails to pay.

It’s wise to improve your credit if possible (or bring on a co-signer) to get better terms. But yes, even with bad credit or a startup, you can often find equipment financing through alternative channels; just expect to pay a higher rate. Always ensure the projected income from the new equipment justifies the cost of an expensive loan or lease.

Q: What interest rates can I expect on an equipment loan or lease?

A: Interest rates on equipment financing vary widely based on the lender and your qualifications. For a bank equipment loan, well-qualified borrowers might see rates around 5–8% APR (as of mid-2025). SBA-backed equipment loans can also be in that lower range due to government guarantees.

For online lenders and alternative financing, rates are often higher – common ranges might be 8–20% APR, depending on credit and term. Some short-term or high-risk financing can even exceed that; in fact, sources note interest rates can start around 5% but range into the double or even triple digits in extreme cases.

(Triple-digit rates would usually correspond to very short-term advances or leases for high-risk borrowers – most standard equipment loans won’t be that high.)

For equipment leases, you won’t get an APR quoted the same way; instead, you have a lease factor. However, you can ask the leasing company for the implicit interest rate or compare the total payments to the equipment cost.

Generally, leases might equate to interest rates in the high single digits to mid-teens for good credit customers, and higher for less qualified. The key point is that banks are cheapest, leasing/alternative financing is higher. Always shop around and get quotes. If one lender is offering a much lower rate than another for the same profile, find out why (are there hidden fees? is it a promotional rate?).

And be sure to calculate the total cost over the loan/lease term – sometimes a slightly higher rate with a shorter term could cost you less overall than a lower rate over a very long term. Use online calculators or ask the lender for amortization details to fully understand what you’ll pay.

Q: Do I need a down payment to finance equipment?

A: Not necessarily; it depends on the lender and financing method. Traditional bank loans often do require a down payment – about 10-20% of the equipment’s purchase price is common. This means if you’re buying a $100,000 machine, the bank might ask you to put $10–20k down, and they’ll finance the rest.

The down payment lowers the loan amount and is a way for banks to ensure you have “skin in the game.” On the other hand, many online lenders and equipment finance companies offer 100% financing, which means no down payment.

You borrow the full amount (though you might pay an origination fee). Equipment leasing typically does not require a significant down payment – usually it’s just the first month’s lease payment (and sometimes last month’s) up front, but not a big lump sum. Some leases might even defer the first payment for 30-60 days.

Keep in mind, even when a lender advertises no down payment, there could be other upfront costs: for example, you may need to pay for insurance on the equipment, or there could be a small documentation fee. But these are minor compared to a hefty down payment. If you cannot afford a down payment, consider leasing or alternative lenders as your first choice.

If you can afford it, a down payment at a bank could not only help you qualify (reducing the bank’s risk) but also reduce your monthly payments and total interest (since you’re financing a smaller principal amount). Always ask the lender what the minimum down payment is, and if none, confirm that 100% financing truly means all costs financed.

Some banks, for instance, might finance 80% of the cost and expect you to cover the rest – which is effectively a required down payment. In summary: banks – usually yes, you’ll need some down payment; alternative lenders – often no; leases – generally no. Always verify with the specific lender.

Q: Should I lease equipment or buy it outright with a loan?

A: This decision comes down to the nature of the equipment and your business goals. Ask yourself a few questions:

Do I want to own the equipment long-term, or is it something that might need replacing or upgrading in a few years?
Can my business afford the down payment and higher monthly cost of a loan, or do I need the lower payments and upfront savings of a lease?
Will the equipment likely hold its value, or will it become obsolete or worn out relatively soon?

If the equipment has a long useful life and you want to build equity in it, buying (financing with a loan) is usually better. Owning means once the loan is paid off, you have an asset with residual value on your books.

For example, if you’re acquiring something like a commercial oven or a piece of manufacturing machinery that you expect to use for 10+ years, a loan can be more cost-effective in the long run. You’ll also benefit from depreciation tax deductions or Section 179 expensing when you buy, and you’re free to sell the equipment later and recoup some money.

On the flip side, if the equipment is likely to become outdated (tech, computers, medical devices that evolve quickly) or if cash flow is really tight, leasing is attractive. With a lease, you avoid a big cash outlay and you can simply give back the gear and upgrade when the lease ends, keeping your operations using newer technology.

Leasing also keeps the debt off your balance sheet in the case of operating leases, which some businesses prefer to maintain a stronger reported financial position.

A handy rule of thumb some use: if the equipment will retain value and you’ll use it beyond, say, 3-5 years, lean towards buying. If it’s going to need replacement or you’re unsure you’ll need it long-term, lean towards leasing.

Also, consider usage: if you tend to really use equipment hard and reduce it to little value, leasing might save you from being stuck with a worn-out asset (you can return it). But note, excessive wear and tear on a leased asset could incur charges, so match the lease terms to your usage expectations.

Conclusion

So, where should you get your equipment financing? The answer depends on your business’s situation and priorities:

Go with a bank if you qualify comfortably – i.e. you have a good credit score, a few years in business, and can afford any required down payment. You’ll benefit from the lowest rates and a longer-term relationship.

For large equipment purchases that you plan to keep for a long time, bank loans (or SBA loans via banks) often provide the lowest overall cost of ownership. Just be prepared for the process to take a while and ensure you have the financials to meet their standards.
Choose an online/alternative lender if speed or accessibility is a top concern. If you need the equipment urgently or your business is newer or credit isn’t top-notch, online lenders are usually the fastest path to approval.

They can be a lifeline for small businesses that cannot wait or would get turned down by banks. Keep an eye on the interest rate and terms, and consider refinancing later if you improve your qualifications. Alternative financing might cost more, but it enables you to get the equipment now and generate revenue with it – which can be well worth it.
Consider equipment leasing companies if your goal is to minimize upfront expenses and maintain flexibility. Leasing is especially attractive for small businesses that don’t want to sink cash into equipment or that deal with equipment that needs frequent updating.

By working with a top leasing provider, you can get near-immediate use of the equipment with little money down, lower monthly payments, and options to upgrade or return gear as your needs evolve.

Just remember, if ownership and long-term cost are more important, a loan could be better. Many businesses actually start by leasing critical equipment when cash is tight, and later on, they might buy equipment outright or via loans once they have more capital.

In many cases, a combination strategy works: for example, finance some essential long-life equipment via a bank or term loan, but lease other rapidly-depreciating equipment. The key is to align the financing method with the nature of the asset and your business’s financial profile.

Finally, always compare multiple quotes and read the fine print. Whether it’s a bank term sheet, an online lender’s offer, or a lease agreement, understanding the terms (interest rate, fees, term length, any personal guarantee, collateral, and conditions) is crucial. This ensures you truly know the cost and obligations before signing.