When equipment starts slowing down your business, an upgrade can be an investment in your future. New machinery may help reduce downtime, increase production, improve efficiency, or expand the services you offer.
The next question is how to pay for it.
Many business owners begin by comparing online lenders vs. banks for equipment financing. Both can provide financing options, but an equipment financing company offers another path worth considering.
An equipment financing specialist focuses on helping businesses acquire the equipment they need. That experience can be valuable when you want to understand your payment options, coordinate with an equipment seller, and choose a financing structure that fits your business.
Key Takeaway: Banks, online lenders, and equipment financing companies can all help businesses fund equipment purchases. Compare the complete financing offer, but also consider the provider’s experience with equipment transactions and the support available throughout the process.
How Do Online Lenders Compare With Banks for Equipment Upgrade Loans?
Banks and online lenders may both offer financing that businesses can use to purchase or upgrade equipment. The differences depend on the provider and the specific product.
A bank may offer equipment loans alongside other business banking services. An online lender may provide a digital application process and offer several types of financing, including general business loans or equipment financing.
An equipment financing company focuses on helping businesses acquire commercial equipment. Depending on the provider, options may include equipment loans, leases, and equipment finance agreements.
One important distinction: Applying online does not necessarily mean you are working with an online-only lender. Many banks and equipment financing companies also offer digital applications.
Bank vs. Online Lender vs. Equipment Financing Company
| What to Consider | Bank | Online Lender | Equipment Financing Company |
|---|---|---|---|
| Primary focus | Business banking and a range of financial services | Online business financing, which may include several loan products | Financing commercial equipment purchases |
| Application process | May be online, in person, or through a banking representative | Often begins with an online application | May offer a digital process and support from an equipment financing specialist |
| Financing options | May include equipment loans, leases, or SBA-backed loans | Vary by provider and may include general business loans or equipment financing | May include equipment loans, leases, and equipment finance agreements |
| Equipment experience | Varies by bank and representative | Varies by provider and product | Focuses on equipment transactions |
| Decision and funding time | Varies by lender and transaction | Varies by provider and financing product | Varies by equipment, documentation, and transaction |
Financing options, requirements, and timelines vary by provider and transaction. Compare the complete terms of each offer before making a decision.
Why Consider an Equipment Financing Company for an Upgrade?
When you purchase equipment, you are making more than a borrowing decision. You are investing in something your business will rely on, whether that is manufacturing machinery, a commercial oven, construction equipment, or an automotive lift.
An equipment financing company focuses on these types of purchases. A specialist can help you understand available financing structures, discuss the equipment transaction, and identify what information is needed to move forward.
Depending on the provider and transaction, an equipment financing company may offer:
- Financing for eligible new and used equipment
- Options for a single equipment purchase or a larger equipment package
- Different financing structures, including loans, leases, or equipment finance agreements
- A digital application process and electronic documentation
- Support coordinating financing with the equipment seller
Available options vary by provider and are subject to approval. The advantage is working with a team that understands equipment purchases and can help you explore a solution based on your transaction.
What Are the Benefits of Financing an Equipment Upgrade?
Paying cash is one way to purchase equipment, but financing gives businesses another way to manage a significant expense.
Preserve Working Capital
Equipment can represent a substantial upfront investment. Financing allows you to spread the cost over time, keeping more cash available for payroll, inventory, maintenance, and other operating needs.
Replace Equipment When Your Business Needs It
Waiting until you have saved the full purchase price may mean continuing to deal with repair costs, downtime, or equipment that no longer meets your needs.
Financing gives you another option to explore when you are ready to upgrade, subject to approval and funding requirements.
Plan Around Scheduled Payments
A financing agreement can turn a large purchase into scheduled payments that you can incorporate into your budget.
Before signing, review the payment schedule, any upfront requirements, and the total amount payable over the agreement.
Invest in New Capabilities
An equipment upgrade may help your business increase capacity, improve efficiency, or offer additional services.
Consider both the potential benefits and the full cost of the equipment. Estimate conservatively, and make sure the payment remains manageable if results take longer than expected.
How Does a Bank Equipment Loan Compare?
Your bank may be a natural place to start, especially if you already have an established relationship. Banks can offer equipment loans and other financing products, and some participate in SBA-backed loan programs.
For example, the SBA 7(a) loan program can be used for eligible machinery and equipment purchases through participating lenders. Eligibility and terms depend on the program and lender.
Requirements vary by lender and transaction. You may need to provide financial statements, tax returns, equipment details, or other documentation as part of the application.
When comparing a bank offer with an equipment financing company, look beyond the advertised rate.
Ask each provider:
- How much of the purchase can be financed?
- What amount is required upfront?
- What is the total amount payable over the agreement?
- Are there fees or early payoff charges?
- Can eligible delivery or installation costs be included?
- What documentation is required?
- What steps must be completed before funding?
- Could the financing affect my existing bank credit facilities?
An equipment financing company gives you another offer to consider, along with a perspective focused on your equipment purchase.
How Does an Online Lender Compare?
Online lenders may offer a convenient way to start an application from your computer or phone. However, the term “online lender” covers a wide range of providers and financing products.
One lender may offer an equipment loan, while another may offer a general business loan or a different financing product. Each may have different repayment schedules, fees, and requirements.
Before applying, ask whether the financing is designed for an equipment purchase and whether the proposed terms fit your business.
Review the following before accepting an offer:
- The type of financing being offered
- The payment amount and frequency
- The total amount payable, including applicable fees
- Any upfront payment or deposit requirements
- Whether the equipment serves as collateral
- Whether a personal guarantee is required
- When your business will own the equipment
- How early payoff is calculated
A convenient application is helpful, but it is only one part of the decision. Make sure you understand the agreement and have someone available to answer your questions.
What Should You Look for in an Equipment Financing Partner?
The right financing provider should help you understand your options and provide clear information about the process.
Experience With Your Equipment Purchase
Ask whether the provider finances the type of equipment you need. Requirements may differ for new equipment, used equipment, specialized machinery, or equipment purchased from certain sellers.
Share the details early so you can determine whether your planned purchase may be eligible.
Clear Financing Terms
Request a complete explanation of the payment schedule, upfront costs, fees, and total amount payable.
If you are comparing a loan with a lease or equipment finance agreement, ask how ownership works and whether any payment or purchase option applies at the end of the term.
A Process That Fits Your Timeline
Equipment delivery, installation, and financing all need to come together. Ask what information is required, how the review process works, and what must happen before the seller can be paid.
Decision and funding times vary. Provide the requested information promptly and coordinate your expectations with both the financing provider and equipment seller.
Support When You Need It
A responsive point of contact can help you understand the application, review your offer, and answer questions as you move toward completing the purchase.
Ask who you will work with and how to reach them if questions come up.
What Information Do You Need to Apply?
Requirements vary by provider and transaction. Gathering key information before you apply can help you have a more productive conversation.
Depending on your request, you may need:
- Your business name, address, and ownership details
- A description of the equipment and how your business will use it
- An equipment quote or invoice from the seller
- The purchase price and any related expenses
- Business bank statements or financial statements
- Tax returns or other financial information, if requested
- Information about existing business obligations, if requested
For used equipment, be prepared to provide details about its age, condition, and specifications.
Ask the financing provider for a documentation checklist tailored to your business and equipment purchase.
How to Compare Equipment Financing Offers
A monthly payment is important, but it should not be the only number you compare. A longer term may reduce the monthly payment while increasing the total amount paid over time.
1. Compare the Amount Financed
Confirm how much of the purchase price is included and whether you will need to pay a deposit, down payment, or other amount upfront.
2. Review the Full Payment Schedule
Check the payment amount, payment frequency, first payment date, and length of the agreement.
Make sure the schedule fits your cash flow during both busy and slower periods.
3. Calculate the Total Cost
Review the total amount payable, including finance charges, applicable fees, and any final payment or purchase option.
Also budget for costs outside the agreement, such as maintenance, insurance, training, and repairs.
4. Understand Ownership and Collateral
Ask when your business will own the equipment and whether the equipment will secure the financing.
Review any personal guarantee or additional collateral requirements. Equipment collateral and a personal guarantee are separate obligations.
5. Ask About Early Payoff
Find out whether you can pay off the agreement early and how the payoff amount would be calculated. Do not assume that paying early will eliminate all future charges.
6. Compare the Support and Process
Consider how clearly each provider explains the offer and what assistance is available during the application and funding process.
The lowest estimated payment is not always the best fit if the full terms or requirements do not work for your business.
What Types of Equipment Can Businesses Finance?
Equipment financing may be available across a wide range of industries. Eligibility depends on the provider, the equipment, and the overall transaction.
Examples of equipment businesses may finance include:
- Manufacturing machinery and production equipment
- Construction and heavy equipment
- Commercial kitchen and restaurant equipment
- Automotive lifts, diagnostic tools, and shop equipment
- Medical and dental equipment
- Computers, software, and business technology
- Commercial vehicles and transportation equipment
- Office furniture and printing equipment
If you are replacing older equipment, get a current quote for the upgrade and ask whether related costs can be included in your financing request.
Frequently Asked Questions About Equipment Upgrade Loans
Is it better to finance equipment through a bank or an equipment financing company?
Both are worth considering. A bank may offer financing as part of an existing business relationship, while an equipment financing company focuses on equipment purchases.
Compare the actual offers, including the payment schedule, total cost, upfront requirements, and support available throughout the process.
Are online lenders faster than banks?
Sometimes, but there is no guarantee. Decision and funding times vary based on the provider, equipment, documentation, and transaction.
Ask each provider what to expect for your specific purchase and what requirements must be completed before funding.
Can I finance used equipment?
Many equipment financing providers offer financing for eligible used equipment. Approval may depend on the equipment’s age, condition, type, value, and seller.
Ask about the specific equipment before committing to the purchase.
Can equipment financing cover delivery and installation?
Some providers may finance eligible costs beyond the equipment itself. Ask whether delivery, installation, software, training, or other related expenses can be included in your request.
Will I own the equipment?
Ownership depends on the financing structure and agreement. An equipment loan generally finances a purchase, while a lease may have different end-of-term options.
Ask the provider to explain ownership, any purchase option, and any final amount due before you sign.
Can I finance an equipment upgrade if I already have a bank loan?
You may be able to, depending on your business finances, existing obligations, and the provider’s requirements. Review your current agreements and discuss any restrictions or collateral questions with your financing provider.
Explore Equipment Upgrade Financing With Centra Funding
The right equipment can help your business keep moving, serve customers, and prepare for what’s next. Finding the right financing partner is an important part of that investment.
Centra Funding helps businesses finance new and used equipment across a wide range of industries. Our team can help you explore financing options based on your business, the equipment you are purchasing, and the transaction.
Learn more about equipment financing with Centra Funding.
Ready to upgrade your equipment?
Request an Equipment Financing Quote
Financing is subject to credit approval and program requirements. Available amounts, terms, and eligibility vary by applicant, equipment, and transaction.
