A loan is easier to get when the lender can point at the thing it bought.
That is the whole logic of equipment financing. The oven, the van, the camera package, the CNC machine, the dental chair. The asset secures the debt, so approval hinges less on your credit story and more on the equipment itself.
Lobi Space is not a lender. This is a plain guide to how the product works, part of our small business funding series.
Loan or lease
Equipment loan. You borrow, you buy, you own it. The lender holds a lien until you finish paying. Usually a down payment, often a term that roughly tracks the useful life of the asset.
Equipment lease. You pay to use it for a term. At the end you return it, renew, or buy it out depending on the lease type. Lower payments, less or no down payment, and you may not own anything at the end.
The honest test is how long the asset stays valuable to you. Machinery you will run for a decade favors owning. Technology that will be outdated in three years often favors leasing.
Tax treatment differs between the two and depends on your situation. Ask your accountant before you choose, not after.
What lenders look at
- The equipment. What it is, whether it holds value, new or used, and whether there is a resale market.
- Time in business and revenue, though thresholds are often gentler than unsecured products.
- Personal credit of the owners and usually a personal guarantee.
- The vendor quote or invoice. Lenders commonly pay the seller directly.
- Down payment, frequently a percentage of the purchase price.
Because the asset carries part of the risk, this is one of the more accessible products for businesses that get declined elsewhere.
When it beats a general loan
- The purchase is a single identifiable asset with a real market value.
- The asset produces revenue you can forecast.
- You want to keep your line of credit free for operations.
- You would rather not pledge everything else you own.
When it does not fit
- Soft costs. Installation, training, permits and delivery are sometimes excluded or only partly financed.
- Fast depreciating or highly specialized gear with no resale market.
- Situations where you actually need working capital and are dressing it up as an equipment purchase.
Run the math on the asset, not the payment
Salespeople quote monthly payments because payments sound small. Do this instead.
1. Total cost of the financing in dollars, including fees and down payment.
2. Additional monthly profit the equipment produces, conservatively estimated.
3. Months until the asset pays for itself.
4. Whether you still want to own it at that point.
If the asset does not clear its own payment inside its useful life, it is not an investment. It is a cost with a schedule.
Get your file straight first
Equipment lenders verify the business, the vendor and the asset. Clean, consistent records move faster. One business address across your filings, your bank and your application avoids the verification back and forth, which is one of the quieter reasons businesses use our virtual office in Chicago.
When Lobi Capital opens, you will be able to describe what you are buying and see which paths may fit. Join the launch list to hear when it does.
Frequently asked questions
Can I finance used equipment?
Often yes, though lenders care about age, condition and resale value. Terms on used assets can be shorter and down payments higher than on new equipment.
Do I need a down payment for equipment financing?
Frequently, yes. Many lenders ask for a percentage of the purchase price, and stronger applicants sometimes qualify for less. Leases often require little or nothing up front.
Is leasing or buying equipment better?
It depends on how long the asset stays useful to you and how the tax treatment works for your business. Long lived assets usually favor owning, fast changing technology often favors leasing. Ask your accountant.
Will equipment financing show on my personal credit?
The application usually involves a personal credit check and a personal guarantee. Whether the account itself reports to consumer bureaus varies by lender, so ask before you sign.
