Should You Get an Equipment Loan or an Equipment Lease?

2 min read • Mar 08, 2012 • Dan Bischoff

The majority of those looking for small business loans through Lendio need working capital to purchase equipment.

It’s really not close, either.

We took a sample of more than 25,000 loan requests over the last year, and about 4,000 of them were for equipment loans. In second place, 1,500 people said they needed business financing for “working capital.” Commercial real estate was in third place at 943 requests.

For many that need money to get equipment — whether that’s a tractor, an x-ray machine, fleet vehicles, computers, printers, ovens for a restaurant, or anything else — they might not understand the difference between getting an equipment loan or an equipment lease.

To help you understand which one to pursue, below are some differences in easy bullet points. There are some similarities to a recent guest post about the differences between a business loan and a line of credit.

Related post: 8 Differences Between a Business Loan and Line of Credit

If you have any questions, please ask in the comment section below. There are two general solutions for equipment financing: loan or lease.

Equipment Loan

This option is closer to a traditional business loan. The borrower applies for a specific loan amount at a traditional bank, which requires traditional lending documentation. A down payment is usually required. Other assets are at times needed for collateral. The borrower then uses the money borrowed to purchase the needed piece of equipment.

Requirements for equipment loans up to $100,000:

  • Down payment amount is about 30%
  • Tax returns
  • Personal financial statements
  • Interim financial statement
  • Usually requires two expenditures during the first payment period; a down payment at the beginning and a loan payment at the end.

Equipment Lease:

Here a leasing company (Lessor) purchases the equipment and then leases it out to the business owner. A lease is generally easier to obtain than a line of credit. Most people using Lendio seek a lease amount of less than $100k, which can be obtained with little or no documentation.

Requirements up to $50,000:

  • 2 years in Business
  • Clean credit report for best terms
  • Clean D&B report (we partner with Dun and Bradstreet Credibility for this report)
  • Down payment from 0% to 15% depending on strength of file

Requirements from $50,001-$150,000:

  • 4+ years in business
  • Clean credit report
  • Clean D&B
  • Bank checking account with a minimum balance of $10,000
  • Down payment from 0% to 15% depending on strength of file

Your Turn

Do you have any more questions about equipment loans or leases? If you’ve secured an equipment loan or lease, what experiences have you had?

Looking for Equipment Financing
Find an Equipment Loan for Free


Dan Bischoff