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What equipment financing is
Equipment financing is a loan or lease used to acquire a specific piece of business equipment, where that equipment secures the agreement. A bakery financing an oven, a contractor financing an excavator, a clinic financing imaging hardware: in each case the lender's protection is the machine itself, which it can recover and resell if the payments stop.
That structure is what makes it distinct from a general business loan. You are not borrowing working capital and choosing to spend it on equipment; you are financing an identified asset, and the asset's characteristics shape the terms. The equipment loans market prices exactly that.
Why the asset changes the approval
Because the equipment secures the loan, the lender's first question is about the machine rather than about you. What is it worth today, what will it be worth in three years, is there a resale market, and how easily could it be recovered. A CNC machine with a deep secondary market is easier to finance than a custom fit-out with no resale value, even for the same business.
The practical effect: equipment financing is often available to businesses that would be declined for unsecured lending. Newer businesses, thinner credit files and seasonal revenue all get further here than they would on a term loan, because the security carries part of the risk.
What lenders check
- The asset. Make, model, age, condition, and whether the vendor is established. New equipment from a dealer finances more easily than a private used purchase.
- Monthly revenue. Most equipment lenders want to see the business generating enough to carry the payment comfortably, verified through bank statements.
- Time in business. Six months opens some of the market, a year opens most of it. Newer businesses can still qualify when the asset is strong and a deposit is offered.
- The deposit. Ten to twenty percent down is common and it moves both the approval and the rate. On a strong asset a lender may finance the full amount.
- Personal credit, where a guarantee applies. Most small-business equipment financing carries a personal guarantee, so your own file affects the price. It rarely decides the approval on its own when the asset is sound.
Financing against leasing
Financing means you own the equipment at the end. Leasing means you use it for a term and then return it, renew, or buy it out at a residual value. Neither is better in general.
- Finance when the equipment holds its value and you will use it well beyond the term. Trucks, trailers, industrial machinery, most heavy equipment.
- Lease when the asset dates quickly or you need to replace it on a cycle. Technology, diagnostic hardware, anything where being three generations behind costs you work.
- Watch the residual. A lease with a low monthly payment and a large buyout is a financing agreement wearing a lease's clothes. Compare total cost to ownership, not the monthly.
What it costs
Rates depend on the asset, the term, the deposit and the business, and terms usually run to the equipment's useful life, commonly two to seven years. The two costs worth checking before signing are the documentation or origination fee, which is often a flat charge rather than a percentage, and any prepayment penalty, which matters if you expect to refinance once the business is stronger.
A $60,000 machine with 10 percent down, two terms
| Route | Monthly payment | Total cost |
| 60-month term | $1,200.93 a month for 60 months | $18,055.64 interest (11.99% over 60 months) |
| 36-month term | $1,793.31 a month for 36 months | $10,559.33 interest (11.99% over 36 months) |
The longer term costs $7,496 more interest for the same machine, roughly 1.7 times the shorter term, so match the term to how long the equipment will actually earn rather than to the payment that looks easiest.
Illustrative only. A $60,000 purchase with 10 percent down, financing $54,000 at 11.99% over each term. The rate is an example chosen to show how term length behaves, not an offer.
To price your own purchase, the personal loan calculator handles any amount, rate and term.
What qualifies as equipment
Broadly, anything durable the business uses to operate: vehicles and trailers, construction and agricultural machinery, manufacturing and shop equipment, commercial kitchen and refrigeration, medical and dental hardware, computing and production gear. Farming equipment has its own lenders and its own seasonal terms, covered on our farming loans page. Trucks and trailers likewise, at truck loans.
What generally does not qualify: leasehold improvements, software licences, and anything that cannot be separated from the premises and resold.
Lenders to compare
| Lender | Amount | Rate | Revenue needed | Time in business | |
|---|---|---|---|---|---|
| Armada Credit Group | $5,000 to $50,000,000 | 5.5% APR | $10,000 a month | 12 months | See if you qualify |
| Bizcap | $5,000 to $5,000,000 | 9.99% APR | $20,000 a month | 12 months | See if you qualify |
| StriveX Financial | $15,000 to $50,000,000 | 5.5% APR | $10,000 a month | 24 months | See if you qualify |
| Breeze Capital | $10,000 to $1,500,000 | 7.99% APR | $10,000 a month | 6 months | See if you qualify |
| CanaCap | $5,000 to $500,000 | 9.99% APR | $10,000 a month | 6 months | See if you qualify |
| Capital for Market | $5,000 to $50,000,000 | 7% APR | $8,333 a month | 12 months | See if you qualify |
| Nexus Finance | $2,500 to $1,000,000 | 7.5% APR | $10,000 a month | 6 months | See if you qualify |
One application shows which equipment lenders will finance your asset and on what terms.
Frequently asked questions
Can a new business get equipment financing in Canada?
More easily than it can get an unsecured loan, because the equipment carries part of the risk. Under six months of trading it is still difficult; a larger deposit, a strong asset with a clear resale market, or a personal guarantee are what open it.
Do you need a down payment for equipment financing?
Often ten to twenty percent, though full financing exists on strong assets with an established business behind them. A deposit lowers both the rate and the decline risk, so it is worth offering one if the cash is available.
Is it better to lease or finance equipment?
Finance when you will use the equipment beyond the term and it holds value. Lease when the asset dates quickly or you replace it on a cycle. Compare the total cost to ownership, including any lease buyout, rather than the monthly payment.
Can you finance used equipment?
Yes, though age limits apply and rates run higher. Lenders care about remaining useful life and resale market, so a well-maintained machine from an established vendor finances more readily than a private sale of the same model.
Sources
- Criminal Interest Rate Regulations (SOR/2024-114). Worth knowing rather than reassuring. The criminal rate was lowered to 35 percent APR, but these regulations exempt business borrowing from it on three conditions together: the borrower is not a natural person, the purpose is business or commercial, and the amount is more than $10,000. Between $10,000 and $500,000 the ceiling becomes 48 percent APR. Above $500,000 there is no rate ceiling at all. If you borrow as a sole proprietor rather than through a corporation, you are a natural person and the 35 percent cap still protects you, whatever the loan is for. Verified 2 September 2026.
Related reading: how to qualify for a business loan and secured versus unsecured business loans.
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The Smarter Loans Editorial Team produces in-depth, original content to help Canadians navigate borrowing, credit, and personal finance with confidence.
