Business Loans For Equipment

Business Loans Equipment

When you own a business, you’ll likely need certain equipment to be successful. Computers, furniture, fixtures, machinery, electronic devices, and office equipment are some examples of equipment you may need while operating your business. Problem is, it can be quite difficult to afford using your own capital. Thankfully when businesses in Canada require funding for equipment, they have a variety of financing options available including, debt financing, leasing, equity, trade credit, and government financing

Types of Financing Used By Businesses in Canada

Equipment Financing 3
Sourced from the Government of Canada

As seen in the graph above, debt financing has become one of the key ways businesses have been financing their needs and expenses. Debt financing includes many forms of credit such as business loans, business lines of credit, merchant cash advances, and more. Of these, a business loan provides the greatest versatility and convenience. So if you’re looking to purchase new equipment to upgrade your current setup, increase your output or expand your product list, a business loan can be just what you need. 

Should You Get a Business Loan For Your Equipment?

No matter what type of business you operate, quality on-site equipment can be pretty expensive. Let’s say you’re trying to furnish your own restaurant, bar, or coffee shop. While you may be able to cover some expenses by yourself, most kitchen equipment (fridges, beverage dispensers, ovens, etc.) can certainly cost a pretty penny. And let’s not forget just how expensive manufacturing equipment can be. This is where a business loan can open so many doors for you and your company. With a business loan, you’ll be able to purchase the equipment you need to take boost your profit and sales.

Percentage of SMEs who used Debt Financing to Purchase Equipment 

How You Can Use Your Business Equipment Loan

When you’re a business owner, there are plenty of areas you can use your financing, including purchasing the right equipment to get the job done. Here are just some types of business equipment you can finance with a good business loan:  

Medical and Dental Equipment

  • Medical equipment for clinics, practices, hospitals. 
  • Dental equipment such as examination chairs/tables/lights, x-ray machines, and lab equipment. 

Photography Equipment

  • You can purchase professional photography equipment for your studio or freelance business such as cameras, tripods, lighting, backdrops, photo printers and more. 

Gardening Equipment

  • Landscaping companies can purchase lawn and garden care equipment such as riding mowers, electric or gas-powered hedge trimmers, and leaf blowers. 

Farming Equipment

  • Farmers can finance farming equipment such as tractors, ploughs, irrigation systems, balers and other agricultural equipment. 

Construction and Warehouse Equipment

  • Construction companies, contractors and roofers can purchase basic construction equipment such as power tools, ladders, and scaffolding. They can also purchase any safety equipment required like hardhats/helmets, steel-toed boots and protective goggles. 
  • Owners running a warehouse can use a business equipment loan to purchase forklifts, assembly lines, shelving units, pallet jacks and other warehouse equipment. 

Office Equipment

  • In order to run high-quality office equipment (computers, photocopiers, fax machines, printers, desks, etc.) 

Auto Repair Equipment

  • Other equipment you can purchase with an equipment business loan is mechanical equipment for auto repair or body shops such as 
    • Vehicle hoists
    • Pipe benders
    • Air tools
    • Air compressor
    • Pedestal drills
    • Tire changer and wheel balancer
    • Car jack
    • Transmission repair equipment
    • Frame machine 

Plumbing and Sewer Equipment

  • When running a plumbing business you’ll need plumbing and sewer equipment to do the job. With a business loan you can load your arsenal with air compressors, gas metres, water pumps, sewer cameras, lateral liners, drainage machines and other tools. 

Best Business Loan Providers For Equipment Financing

AmountAPRTerm (months)
SharpShooter Funding1k-300kFee-Based: Starting at 9%12- 60 Learn more
OnDeck5k-300k8% – 29% 6-18Learn more
Lending Loop1k-500k+5.9%3-60Learn more
Thinking CapitalUp to 300k8%-22%6-12 Learn more
Merchant Growth5k-500k-6-18Learn more
BDC100K +6.05% +60Learn more
IOU Financial5K-100k15%+12-18Learn more

Business Loans For Equipment v.s. Equipment Loans 

In addition to business loans, entrepreneurs and business owners can use equipment loans to finance their equipment. While both options provide the same solution, they work very differently.

Business Loans For Equipment

A business loan is a form of financing where you receive a lump sum of cash that you must repay with interest within a specified amount of time. Repayments are usually made bi-weekly or monthly. Business loans are extremely versatile and can be used to not only purchase equipment but it can be used to pay suppliers, improve cash flow, cover rent and more. Moreover, a business loan can come in two forms:

  • Secured: A secured business loan is backed by a business asset (i.e. real estate, vehicles, accounts receivable, inventory, etc) or a personal guarantee. This provides the lender security in the event you default on your loan. 
  • Unsecured:  An unsecured business loan is basically just a business loan where you provide no collateral. 

Equipment Loans

An equipment loan is a loan that is secured against the equipment that you are purchasing. Like a business loan, you’ll receive a lump sum of cash that you must repay with interest within a specified amount of time. However, unlike a business loan, most lenders will only finance 80% of your equipment price. As such, you’ll have to fund the other 20% yourself or use another form of credit to fund it.

Business Financing For Any Industry

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Importance of Qualify For an Equipment Business Loan 

Being able to qualify for a business loan is important as it can not only help you purchase equipment, but it can also help with cash flow problems, payroll, inventory, and other business expenses. According to a study conducted by the Government of Canada, businesses struggle to grow due to a number of factors including the rising costs of input, cash flow problems, debt problems, and inability to obtain financing. Small businesses with less than 100 employees particularly struggle to obtain the financing they need to grow their business.  

 1-4 employees5-19 employees 20-99 employees100-499 employees
% of businesses who’ve struggled to obtain financing8.5%10.6%8.8%4.5%
% of business who struggle with cash-flow or debt problems12.7%15.4%13%11.6%
% of businesses who struggle with input costs 14.6%18.9%19.3%16.9%

Documents Required For an Equipment Business Loan 

In order to help you qualify for the financing you need, we’ve listed common documents a lender will request when approving a loan. 

  • Personal credit score and business credit score Whether you own a young or old business, lenders will often check your personal credit score along with your business credit score to determine your creditworthiness. 
  • Business Details – In order to identify your business, your lender will ask for your business address, business name, business license number and more. 
  • Financial records – Before a lender approves your business for financing they will evaluate your business’s financial health through certain financial documents to see if you’re capable of repaying the loan. 
    • Tax returns and bank statements These documents will allow your lender to evaluate your monthly revenue and yearly earnings.
    • Revenue statements – Your business sales records and revenue statements will allow your lender to understand your business cash flow, which plays a big part in persuading your lender to lend to you. 
  • Personal financial recordsAt times, particularly when you’re providing a personal guarantee, a lender will ask for your personal bank statements to verify your creditworthiness.
  • Business plan – Start-ups and young businesses often have little to no financial information for a lender to evaluate. In such circumstances, lenders will request you provide a business plan. A business plan is a 2-3 page report that details why you need a loan and how you plan to use it to grow your business revenue. 

Frequently Asked Questions

Where can I apply for a business loan for equipment financing?

You can apply for a business loan for equipment financing with a bank, credit union, or an alternative lender. Depending on your personal and financial health, one will be a better option than the other. For example, if you have bad credit, a credit union or alternative lender that has flexible lending standards will be a more viable option. 

I have bad credit, what can I do to increase my odds of getting a business loan?

If you have bad credit, you should consider applying with an alternative lender due to their flexible lending standards. Unlike banks, they do not rule out applicants solely on bad credit. They use a variety of factors to evaluate your eligibility such as your debt level, assets, monthly sales, and other financial aspects of your business. You can also increase your odds of approval by reducing your lender’s risk by securing the loan with an asset or personal guarantee. 

How long can I finance equipment using a business loan? 

The length of your business loan term depends on your lender and how much you’re looking to borrow. For example, if your equipment costs $5,000, a lender may give you up to a year to repay it. However, if you require $25,000, a lender may give you a longer term. In general, business loan terms can be anywhere between a few months to 10 years.
APOLLO Business Insurance

How Loans Canada Can Help Your Business

While many types of equipment can eat into your business budget, that won’t be a problem when you choose us for your financing requirements. And, good financing isn’t the only benefit we can provide. In fact, there are plenty of other reasons to pick Loans Canada, including, but not limited to: 

  • A straightforward application that you can easily fill-out from home or work using your smartphone, tablet, laptop, or desktop computer
  • A repayment schedule that is simple to follow and won’t drain your savings
  • Competitive payment and interest rates that are financially advantageous
  • A less critical approval process that’s faster than with any bank, credit union, or other financial institution (financing can be received in as few as 2 days) 
  • The chance to spend more time focusing on the needs of your business, because your equipment is financed and ready for use

Remember, Loans Canada is here to help set you up with the best source of financing for your business equipment. All you need to do is apply below!     

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