3 Options to Get Equipment Loans for Startup Businesses

How to Get an Equipment Loan for a Startup Business

When you’re in startup mode as a new business, you’re almost always looking for something to help ramp up your growth—and, usually, that comes down to money. If you can’t find access to lump-sum capital at the beginning of your business lifecycle, you might want to explore equipment loans for startup businesses.

New business equipment financing is a great idea. Often, in the beginning, you need to invest in a piece—or many pieces—of equipment, to get momentum going for your startup. And one of the best ways for new business to access much-needed capital is through equipment loans for startup businesses.

Before you dive into applying for new business equipment financing, though, it’s crucial to get to know the subject a bit and explore your best options for equipment financing for startup businesses.

Defining Equipment Loans for Startup Businesses

When we talk about equipment loans for startup businesses, we’re really referring to a type of small business loan product called equipment financing. This type of secured funding is an ideal option for new businesses that need capital specifically to invest in equipment.

With equipment financing, a lender will typically advance you up to 100% of the cost price of a specific piece or pieces of equipment. So, here, you’re applying to finance a very specific purchase. You’ll get a quote in advance that either you or a loan specialist with whom you’re working will submit to the lender. That’ll be part of your approval process along with your other financial documentation.

Here, the equipment financing company is less scrupulous about your credit profile and business history—and that’s because they’re as concerned with the equipment that’s securing the loan as your borrowing history. That’s because another really important part of equipment loans for startup businesses is that a lender will take the very equipment you use the loan to buy as collateral for the loan itself. That’s the big thing here—and one of the reasons that this type of funding is an option for startups. Allowing the machinery or whatever it is to collateralize the loan makes equipment financing more accessible.

That’s why equipment loans for start a business, a form of self-secured funding, is one of the very best funding options for new businesses that need access to capital.

→Too Long; Didn’t Read (TL;DR): Equipment loans are loans specifically for buying equipment that will, in turn, act as collateral for the very loan used to buy it. That makes these accessible, and a good choice for new businesses.

3 Reasons Why Equipment Loans for Startups Could Fit Your Business Needs

Equipment financing for startups is a great fit for new business operations. If approved, equipment loans for startups provide the ability to get the gear you’re looking for at a price that won’t bury your startup business. Or, realistically, get what you need at all We’re sure you know that it’s often difficult to get small business funding as a startup.

Frankly, nearly everything about new business equipment financing lines up with startup business needs. But there are three main pillars to what makes equipment loans for startup businesses work so well:

1. It’s hard to afford equipment as a startup business.

Regardless of whether you’re looking into buying a couple of laptops or a coal-fired oven, your startup business will likely run into a period during which you’ll need to invest in some equipment. After all, the early stages of a new business are about getting your product and your name out there, and then growing.

It’s expensive to set up a startup—and you shouldn’t feel like you’re doing something wrong if you can’t find the liquidity to pay for a forklift out of pocket. Most new businesses can’t, which is why startup equipment financing exists. (If everyone could, do you think it would? That’s what we thought!)

Since starting a new business involves considerable up-front investment, equipment loans for new businesses make a good deal of financing that possible.

2. Equipment loans for startups are easier to qualify for than other, unsecured loans.

Remember how we talked about the self-secured equipment loan being the perfect match for a startup business? Here’s a little more convincing on exactly why.

With a secured loan vs. an unsecured loan, a lender has guaranteed, high-value collateral that they’re able to seize from the borrower in the event of a default. That’s good for the lender, because they see the business loan as less risky—which creates a higher chance of approval, and the potential for better terms, too. Remember, as a borrower, you always want to lower the bank’s potential for risk!

So, if you apply for an equipment loan as a startup business, the odds are more stacked in your favor with this secured loan than they would be with a traditional unsecured business loan. By nature, equipment loans for startup businesses are less risky for the lender, since they have that form of tangible collateral baked into their definition—the equipment itself.

Plus, as a startup business, you’re likely going to need all of the help you can get. Lenders often hesitate to work with new businesses, simply because their lack of tenure proves to be a liability in some cases. Having the equipment collateral automatically tied to equipment loans for startup businesses makes them that much more accessible for startups that aren’t necessarily the ideal borrowers for most lenders.

3. Equipment loans for startups grant access to more affordable rates.

The less credit history you have as a borrower, the riskier you look to a lender. And, as you might expect, and as we mentioned above, more risk equals a more expensive small business loan. Especially with unsecured financing.

But! The structure of equipment financing for startup businesses allows new businesses to secure financing with more affordable terms than they’d normally be able to access otherwise. It all relates back to that self-secured loan type, lowering the risk for the lender. Because equipment financing is chancy, or risky, for lenders, startup businesses can access more affordable interest rates and lengthier repayment terms through equipment loans for startup businesses.

→TL;DR: Equipment loans for startup businesses are so ideal because their lenders see them as lower risk, so they’re easier to qualify for, and can allow for better terms than unsecured business loans.

Your Top Options for Equipment Loans for Startup Business

If you think startup equipment financing seems like the right move for your new business, you’ll want to look a little closer at the options. Here are the top equipment financing lenders, and what equipment financing for startup businesses looks like in practice:

    Currency Capital Equipment Financing

    Currency Capital is a marketplace for equipment financing options. When you fill out a single application for equipment financing with Currency, they will then send that app out to their network that consists of more than 100 top lenders.

    Although Currency offers a variety of funding solutions, they really specialize in connecting businesses with equipment lines of credit. So, if you’re searching for equipment loans for startup businesses, then Currency might be a strategic first stop for you.

    Balboa Capital Equipment Financing

    Balboa Capital is a direct lender that provides equipment financing. If your startup has more than a year of business history, along with at least $300,000 of annual revenue, then it could be eligible for Balboa Capital’s equipment financing for startup businesses.

    With Balboa, you can apply online to their automated underwriting process. In as little as a day, they’ll be able to tell you if your application qualifies you for Balboa startup equipment financing.

    eLease Equipment Financing

    Finally, eLease equipment financing will be your third top option to consider as you look for equipment loans for startup businesses.

    eLease has been providing small businesses with startup business equipment financing for more than 20 years. Even if your startup doesn’t necessarily have tons of experience to go off of, eLease can draw from its years of providing equipment loans for startup businesses to help you find the best funding solution possible.

You can also see if you qualify for equipment financing from all of these lenders at once.

See If I Qualify for These Lenders

→TL;DR: The top equipment financing lenders on the market are Currency Capital, Balboa Capital, and eLease.

Options Beyond Equipment Loans for Startup Businesses

Although equipment loans for startup businesses are slightly easier to qualify for than their unsecured counterparts, that doesn’t necessarily mean that they’ll be accessible to your startup. Especially when your business is less than a year old, there’s a good chance that even equipment loans for startup businesses will be out of reach until you’ve laid the foundation of your business with a little more time and growth.

In the meantime, though, you do have some options. These can be perfect contingency plans if you can’t qualify for equipment loans for startup businesses. Or, at least, not yet.

Option 1: If you have capital tied up in outstanding invoices, look to invoice financing.

Cash flow can be a headache, especially if you have sporadic invoicing. If your startup already has a few outstanding invoices that you’re patiently (or, maybe, not-so-patiently) awaiting, then invoice financing might be your perfect path to entry for business funding.

Just like equipment loans for startup businesses, invoice financing is a form of self-secured funding. Through this form of financing, a lender will advance you up to 90% of the worth of your business’s accounts receivable.

Depending on how many weeks you’ve had these invoices outstanding, the lender will collect a certain amount of interest, plus the advance amount, when the invoices are paid in full—and leave your business with the remaining sum.

The main advantage to invoice financing over equipment loans for startup businesses is simply its accessibility. Many invoice financing lenders—like BlueVine, for instance—will only require a minimum of three months in business.

See If I Qualify for Invoice Financing

Option 2: If you have strong personal credit, try a 0% intro APR business credit card.

Your business might not be tenured enough to access equipment loans for startup businesses or invoice financing. In which case, you should turn to 0% intro APR business credit cards as your funding solution.

This is especially true if you’re working with good to excellent personal credit yourself, as the main qualification that business credit card issuers consider when looking at applications is personal credit, regardless of the business’s age.

With 0% intro APR cards—like the American Express Blue Business Plus, for instance—you get an extended intro period for carrying an interest-free balance from month-to-month. For this card, you can invest in a big-ticket item and pay it off gradually over 15 months without accumulating a cent of interest. This intro period won’t last forever, of course—after the 15 months, the APR will set in at a rate that will depend on your creditworthiness and the market prime rate, so be sure to check in with the issuer for the latest rates.

However, as long as you make your minimum monthly payments every month during this intro period, your business will be able to pay down all balances gradually without having to worry about accumulating interest.

See My 0% Intro APR Card Options

→TL;DR: If you can’t qualify for equipment financing, invoice financing and 0% intro APR cards are perfect funding options to tide over your startup in the meantime.

Finding Equipment Loans for Startup Businesses

It takes money to make money. (You know, you know.) You should be in good shape to sift through the options for equipment loans for startup businesses, and know that:

  • Equipment loans  for startups are self-secured loans meant specifically for buying equipment that, in turn, acts as collateral for the loan
  • And that this structure makes equipment loans for startup businesses ideal
  • Younger startups should consider invoice financing, by accessing advances for outstanding invoices, or 0% intro APR cards, which let you carry interest-free balances during your first months with the card

By looking to these two alternatives sources of capital that will be even more accessible to young companies than equipment loans for startup businesses, you can tide your business over until your business age opens up more funding possibilities in the future.

Founding Editor and VP at Fundera at Fundera

Meredith Wood

Meredith Wood is the founding editor of the Fundera Ledger and a vice president at Fundera. 

Meredith launched the Fundera Ledger in 2014. She has specialized in financial advice for small business owners for almost a decade. Meredith is frequently sought out for her expertise in small business lending and financial management.

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