Equipment Loans for Startup Businesses: How to Get Funded Before You’re Profitable

Key Takeaways

Startup-friendly lenders exist. Traditional banks? Not so much. But alternative lenders, fintechs, and even equipment vendors are open to new businesses.
Collateral is your best friend. The equipment itself often secures the loan.
Credit score matters. Your personal credit is often the star of the show.
Down payments may be required. But some lenders offer 100% financing.
Equipment financing ≠ equipment leasing. Know the difference to choose what fits your cash flow.

What Is an Equipment Loan for Startups?

An equipment loan is a type of financing used to purchase tangible business assets—machinery, tools, vehicles, or technology—that help your business operate. These loans are typically secured, using the equipment itself as collateral. This makes them more accessible to startups that might not have significant business credit or cash flow yet.

You get a fixed loan amount, often with a fixed interest rate and set repayment term. Once you’ve repaid the loan in full, you fully own the equipment. It’s one of the most straightforward ways for startups to build operational capacity without draining working capital.

Startup Challenges: Why It’s Hard (But Not Impossible) to Qualify

Let’s not sugarcoat it — startups are risky bets for lenders. With no cash flow, little-to-no business credit history, and zero proof of repayment ability, it’s easy to get denied.

But here’s how to stack the odds in your favor:

Strong personal credit score (680+)
Detailed business plan with equipment ROI projections
Down payment (10–20%)
Vendor invoice or equipment quote
Proof of industry experience or licenses

Top Equipment Financing Options for Startups

Depending on your needs and profile, these are the most common startup equipment financing routes:

SBA 7(a) Loans: Low rates and long terms, but time-intensive and hard for startups to qualify.
Dealer Financing: Financing straight from your distributor or dealer. Convenient but sometimes limited in flexibility or inflated pricing.
Equipment Leasing Companies: Ideal for keeping cash flow flexible, but no ownership.
Revenue-Based Lenders: Suitable if you already have some incoming cash flow.

💡 Pro Tip: If your startup is already generating sales, revenue based financing could get you approved faster than a traditional loan—often in 24 to 48 hours.

Equipment Rentals: A Flexible Option for Startups

If you’re not ready to commit to a loan or lease, equipment rentals offer short-term flexibility without the long-term debt.

No large upfront investment. Pay only for the days, weeks, or months you need the equipment.
Perfect for seasonal or project-based work. Renting lets you match your equipment needs to specific jobs or busy seasons.
Maintenance included. Most rental providers handle repairs, saving you time and money.
Try before you buy. Renting helps you test out models before committing to a purchase.

Best Short-Term Equipment Rentals for Startup Flexibility

• Ryder Truck Rental – Ideal for startups in delivery, logistics, and moving services. Daily and long-term commercial truck rentals with nationwide availability.
• Sunbelt Rentals – A go-to for construction, landscaping, and industrial startups. Rent everything from skid steers to scaffolding with flexible pickup or delivery options.

💡 Pro Tip: Rental payments are usually fully tax deductible as a business expense, giving you an edge if you’re bootstrapping your startup.

SBA Equipment Loans for Startups

The SBA 7(a) and SBA Microloan programs both support equipment purchases, but there’s a catch—most early-stage businesses without revenue are unlikely to qualify unless the founder has strong personal credit, a detailed business plan, and possibly a cosigner.

If you check those boxes, though, the upside is huge:

Longer repayment terms (up to 10 years)
Lower interest rates than online lenders
Flexibility to combine with working capital financing

Equipment Loan vs Equipment Leasing: Which One Is Better?

Feature	Equipment Loan	Equipment Lease
Ownership	You own it	Lessor owns it
Upfront Costs	May need down payment	Lower initial cost
Tax Benefits	Full depreciation (Section 179)	Lease payments deductible
End of Term	You keep the asset	Return or purchase option
Cost Over Time	Lower (if held long-term)	Higher (due to interest & fees)

💡 Pro Tip: Not sure which makes sense? Here’s a side-by-side comparison in our leasing vs financing guide.

Tax Benefits of Equipment Loans

One major advantage of financing equipment is the potential tax savings. The IRS offers several incentives that let you reduce your business’s taxable income:

Section 179 Deduction

This allows you to deduct 100% of the equipment purchase cost in the year the equipment is placed into service—up to $1,220,000 for tax year 2024.

Even if you finance the equipment, you get the full deduction as long as the asset is in use by December 31. Read more about Section 179.

Bonus Depreciation

If you exceed the Section 179 limit, you may still qualify for bonus depreciation, which lets you deduct a significant portion of the remaining cost in the first year.

MACRS Depreciation

If you don’t claim Section 179 or bonus depreciation, you can depreciate the equipment over 5 or 7 years depending on its type using the Modified Accelerated Cost Recovery System (MACRS).

Loan Interest Deduction

The interest portion of your equipment loan payments is tax deductible as a business expense, just like your car loan interest if it’s used solely for business.

💡 Pro Tip: Work with a CPA to time your equipment purchases before year-end to take full advantage of deductions.

How to Apply for an Equipment Loan as a Startup

Here’s your application roadmap:

Request a detailed quote from your equipment vendor.
Check your personal credit score (aim for 680+).
Create a business plan with cash flow and ROI projections.
Gather supporting docs: ID, EIN, licenses, recent bank statements.
Compare lenders for rates, terms, and flexibility.

💡 Pro Tip: Use our equipment loan calculator to get a ballpark estimate of your monthly payment

FAQs About Startup Equipment Loans

Can I get an equipment loan with bad credit?

Yes. Some lenders work with credit scores under 600, but expect higher interest and stricter terms.

Check out equipment financing with bad credit.

Do I need to personally guarantee the loan?

Yes, in most startup scenarios. This adds security for the lender.

What’s the difference between leasing and financing equipment?

Leasing is like renting. You return or buy the item later. Financing gives you ownership upfront (and the tax perks to match).

Can I combine an equipment loan with other funding?

Absolutely. Consider stacking it with a business line of credit or short-term working capital.

How long are typical repayment terms?

Usually 1 to 5 years, depending on loan size, equipment life, and lender policies.

Final Thoughts: Start Smart, Grow Faster

You don’t need revenue to get results. With the right paperwork, strategy, and funding partner, you can equip your startup with what it needs to succeed from day one. Whether you’re hauling gravel or brewing espresso, the right tools + financing can fuel your growth.

Apply Now