Best Sources for Small Business Equipment Financing

The best source for small business equipment financing can depend on how much equipment you need for your business and whether you want to buy or lease it. It may be better to purchase the equipment outright if the terms are more favorable than a lease's. You should check with several potential sources of financing before you make your final decision.

Equity and Assets

If you are unable to use available cash to buy the equipment you need for your business, consider putting up an asset as collateral for a secured loan. For example, if you have some built-up equity in your home, you can likely get a favorable interest rate from a second mortgage lender. You could either obtain a fixed amount of cash or set up a home equity line of credit if you think you may need additional funds later.

You can also pledge other assets such as securities or land you own that is free and clear. Call your bank to find out what terms they offer for secured loans using the type of assets that you have available to secure a loan.


The lending institution you use depends on whether you decide to buy or lease your equipment. If you lease, many times, you will not have to put any money down when you acquire the equipment. When the lease term is up, you can then turn in the equipment and upgrade to the latest version, by signing another lease or purchasing the equipment if that is viable. Leasing also has favorable tax incentives since you can usually write off the entire amount of the equipment, instead of just the interest that you paid on a traditional loan.

Ask your lender to provide you with the financing terms for both a lease and a purchase. If you are unsure which to choose, you can always contact a tax professional for help.

Friends and Family

This is a popular choice for many small business owners because the process is usually far less complicated than financing with a lender. The biggest decision you will have to make when using a friend or family member is whether to make her a full partner or just obtain her funds for your equipment purchase. You could make her a partner until the loan is paid off if you stipulate that in the loan agreement.

Private Investors

Sometimes, private investors are referred to as angels, or angel investors. There are many such investors who are willing to help a small business owner finance equipment. If you are unable to find any through word-of-mouth, ask your local bank if they know of any private investors with cash available to lend.

You can also search online for private investors. Make sure you do a thorough check of any private investor before you agree to his financing terms. Ask for references from clients he has helped in the past and contact them to verify that the investor’s reputation is sound.