Equipment financing is underwritten mainly on the equipment itself rather than on years of tax returns. The machine is the collateral, so a lender can look at a business that a bank would decline: under two years old, a thin credit file, one bad year, or a balance sheet that has not caught up with the order book.
That is why these deals move quickly. Smaller tickets are frequently approved application-only, with no full financial package, and funding in two to five business days is normal rather than exceptional.
Nearly every equipment quote is one of three structures. Dealers usually quote you a monthly payment, which hides the difference between them. The difference is real money.
$1 buyout. You own the equipment at the end for a single dollar. Highest monthly payment, lowest total cost, and it behaves like a loan. This is what you want when the equipment will still be useful when the term ends, which is most equipment.
Fair market value (FMV) lease. Lowest monthly payment. At the end you hand the equipment back, renew, or buy it at whatever it is then worth, often 10 to 20 percent of the original price. Good when the equipment genuinely goes obsolete, such as some technology. Expensive when you were always going to keep it, because you pay the buyout on top of every payment you already made.
10 percent PUT. Purchase Upon Termination. A fixed 10 percent buyout agreed at the start, so the payment sits between the other two and there is no end-of-term surprise. A reasonable middle when cash flow is tight now but you intend to keep the asset.
A $200,000 machine, 60 month term, at an indicative 9 percent. Rounded to whole dollars.
| Structure | Monthly | 60 payments | End payment | Total to own |
| $1 buyout | $4,152 | $249,120 | $1 | $249,121 |
| 10% PUT | $3,887 | $233,220 | $20,000 | $253,220 |
| FMV lease | $3,600 | $216,000 | $30,000* | $246,000* |
*The FMV buyout is not fixed. It is whatever the equipment is worth at the end, which is the whole point of the structure and the whole risk of it. At 15 percent of original cost the total is $246,000. At 25 percent it is $266,000, and you have paid more than the $1 buyout while owning nothing until you write that final cheque.
The trap is the payment comparison. FMV looks $552 a month cheaper than the $1 buyout. Over five years that is $33,120 of apparent saving, and then an unfixed buyout takes most or all of it back. Ask for all three quoted side by side before you sign anything.
Equipment salespeople lean hard on the tax deduction, and the rules for 2026 are genuinely favourable. Section 179 lets a business deduct up to $2,560,000 of qualifying equipment, with the benefit phasing out once purchases pass $4,090,000 and disappearing at $6,650,000. Separately, 100 percent bonus depreciation applies to equipment placed in service during 2026, on both new and used property with a recovery period of 20 years or less.
Here is the part the sales pitch skips. A deduction is not a rebate. Deducting $200,000 does not save you $200,000. It reduces taxable income by $200,000, so at a 24 percent effective rate you save roughly $48,000 in tax. Useful, not free.
Two conditions decide whether it helps you at all. You need taxable income to shelter, because a deduction against income you do not have is worth nothing this year. And the equipment must be placed in service, not merely ordered, before year end.
Where it does get genuinely powerful is combined with financing: you can deduct the full purchase price in year one while paying for the machine over sixty months. That timing difference is the real benefit. Confirm the treatment with your accountant before you buy, particularly on an FMV lease, where you generally do not own the asset and so the deduction works differently.
Under roughly $150,000 to $250,000, most lenders are application-only: a one page application and a credit pull, sometimes three months of bank statements. Above that, expect two years of business and personal returns, a current profit and loss, a balance sheet and a debt schedule.
Either way, have the invoice or quote from the vendor ready. The equipment specification, the price and the seller are what the lender is actually underwriting.
Startups under two years old. Credit scores in the 600s and sometimes lower with a larger deposit. Owners with no proof of income. Used equipment bought privately rather than from a dealer. Businesses that have already been declined by their own bank, which is the most common reason people call us.
Rate varies enormously across those profiles. Strong credit on new equipment from a dealer prices very differently from a startup buying a used machine at auction, and anyone quoting you a single rate without asking which one you are is guessing.
A $1 buyout means you own the equipment at the end of the term for one dollar. It carries the highest monthly payment and the lowest total cost, and it behaves like a loan. An FMV lease has the lowest monthly payment, but at the end you return the equipment, renew, or buy it at fair market value, which is commonly 10 to 20 percent of the original price and is not fixed in advance. If you intend to keep the equipment, the $1 buyout is almost always cheaper overall.
Often yes. Equipment financing is secured by the equipment, so lenders weigh the asset and its resale value alongside your credit. Startups under two years old, scores in the 600s, and owners without conventional proof of income are all financeable, usually with a larger deposit or a shorter term. Rate rises accordingly, but approval is realistic where an unsecured loan would be declined.
Application-only deals, generally under $150,000 to $250,000, are commonly approved same day or next day and funded in two to five business days once the vendor invoice is in hand. Larger transactions requiring full financial packages typically take one to three weeks.
Section 179 allows a deduction of up to $2,560,000 of qualifying equipment in 2026, phasing out above $4,090,000 of purchases, and 100 percent bonus depreciation applies to equipment placed in service during 2026 on new and used property. But a deduction is not a rebate. Deducting $200,000 at a 24 percent effective tax rate saves roughly $48,000, not $200,000, and only if you have taxable income to offset. The equipment must be placed in service, not just ordered, before year end. Confirm your specific position with your accountant.
Dealer financing is convenient and sometimes subsidised on new equipment, which can genuinely be the cheapest option. It is worth comparing because the dealer is quoting one lender's paper and normally quotes a monthly payment rather than a total cost. Ask the dealer for the structure, the term, the buyout and the total of payments, then compare like for like.
Yes. Used equipment is financed routinely, including private party and auction purchases, though terms are usually shorter and advance rates lower because resale value is harder to predict. Age limits vary by equipment type. Titled vehicles and specialised machinery are treated differently, so send the specification early.