Key takeaways
- The equipment is the collateral, which usually means lower cost than unsecured working capital.
- Terms typically run 24 to 72 months with fixed monthly payments.
- Credit matters more here than with an advance, but the collateral offsets a weaker profile.
- Used and private-party purchases can be financed, though terms differ from new dealer equipment.
How equipment financing works
A funder pays for the equipment, and you repay over a fixed term with interest. Because the machine secures the deal, the funder has something to recover if things go wrong, which generally means better pricing than an unsecured advance.
Two common structures: an equipment loan, where you own it from day one and the funder holds a lien, and an equipment lease, where you use it and often have a purchase option at the end. Which is better depends on how long you'll keep the machine and how your accountant wants it treated.
What contractors finance
- Work trucks and service vans
- Dump trucks and flatbeds
- Equipment and enclosed trailers
- Bucket trucks and boom trucks
- Excavators, skid steers, loaders
- Chippers and stump grinders
- Scissor lifts and boom lifts
- Trenchers and compactors
- HVAC recovery and charging equipment
- Hydro-jetters and camera systems
- Generators and welders
- Spray rigs and compressors
- Used equipment from a dealer
- Private-party purchases
- Auction buys (with conditions)
- Refinancing equipment you own
What a deal looks like
Say you're buying a $60,000 used excavator with a five-year term. These numbers are illustrative; your actual rate depends on credit, time in business, the equipment, and the funder.
| Equipment price | $60,000 |
| Term | 60 months |
| Rate (illustrative) | 12% APR |
| Monthly payment | About $1,335 |
| Total paid | About $80,100 |
| Cost of financing | About $20,100 |
The test is simple: if that machine lets you take on work that clears more than $1,335 a month after expenses, it pays for itself. If it sits half the year, it doesn't.
Equipment financing vs. working capital
| Equipment financing | Working capital | |
|---|---|---|
| Best for | Buying a specific machine | Payroll, materials, cash gaps |
| Secured by | The equipment | Typically unsecured, with a UCC filing |
| Payments | Fixed monthly | Daily or weekly |
| Term | 2–6 years | 3–18 months |
| Speed | Days to about 2 weeks | Often 1–3 days |
| Cost | Lower | Higher |
Comparing every option? Start with the complete contractor funding guide or MCA vs. business loan.
What you'll need
- A quote or invoice for the equipment, with the seller's details
- 3–6 months of business bank statements
- Driver's license and basic business information
- A down payment in some cases, commonly 0–20% depending on credit and the equipment
- Proof of insurance on the equipment before funding
Tax note: contractors often ask about writing off equipment in the year it's placed in service. Deduction rules and limits change, and whether it applies depends on your situation. Ask your CPA before you count on a deduction.
Need a machine to take the next job?
Send us the quote and your last few bank statements. We'll compare equipment financing against your other options and show you the full cost of each. Free to apply, no obligation.
Equipment financing FAQ
Can I finance used equipment or a private-party purchase?
Often yes. Age, hours, and condition affect the term and rate, and private-party deals usually need an inspection or appraisal. Auction purchases can work but have tighter conditions.
What credit score do I need?
There is no single cutoff. Equipment financing generally weighs credit more heavily than a merchant cash advance does, but the collateral helps. Weaker credit usually means a larger down payment or a higher rate.
How long does it take?
Often a few days, and up to about two weeks when an inspection or title work is involved. Faster than a bank loan, slower than working capital.
Can I get cash out of equipment I already own?
Sometimes, through a sale-leaseback or equipment refinance, if the machine is paid off or has meaningful equity. It's worth asking about when working capital is too expensive for what you need.
Is a lease better than a loan?
It depends on how long you'll keep the equipment, whether you want to own it at the end, and how your accountant treats each. We'll walk through both, and your CPA should weigh in on the tax side.
✓ Reviewed by the Funding Expansion contractor funding team · Last updated September 2026
Sources
- U.S. Small Business Administration, loan programs: SBA options for equipment purchases
- Internal Revenue Service: current rules on equipment deductions and depreciation
- California Secretary of State, UCC filings: liens recorded against business assets
- California Contractors State License Board: licensing requirements
General information only, not legal, tax, or financial advice. Examples are illustrative; actual rates, terms, and costs vary by funder and qualification. Funding Expansion is a commercial funding broker, not a lender. Funding is provided by third-party funding partners and is subject to qualification.