Financing Type Advisor

Answer 4 questions about your specific need and get a recommendation: LOC, equipment financing, or both.

1. What are you primarily trying to finance?
2. How long will you use this equipment?
3. Do you want to own the equipment outright?
4. How often will you need this type of financing?

    Full Decision Matrix

    FactorBusiness LOCEquipment FinancingEquipment Lease
    Best forWorking capital, small tools, flexibilityMajor equipment purchasesEquipment with rapid tech obsolescence
    CollateralUnsecured (usually)Equipment is collateral — lower rateLender owns equipment
    Typical Rate9–25% APR6–15% APREquivalent 8–16% APR
    Down PaymentNoneOften 10–20%Often $0 or first/last payment
    TermRevolving (no fixed term)2–7 years fixed1–5 years
    Tax TreatmentInterest deductibleSection 179 + depreciationLease payments deductible
    FlexibilityAny use, any vendor, any timeLocked to specific purchaseLocked to specific equipment
    Balance SheetLOC = off balance sheet until drawnAsset + liability addedOperating leases may be off-balance sheet
    Approval Speed1–5 days3–14 days3–10 days

    Scenarios: What to Use When

    Equipment Financing

    Buy a $150K CNC machine

    Large, long-lived asset. Equipment financing offers lower rate with the machine as collateral. Section 179 deduction available.

    Use LOC

    Buy $8K in hand tools across 5 vendors

    Small purchases, multiple vendors, no single collateral item. LOC's flexibility is the right fit here.

    Both

    Open a new service location

    Equipment financing for the major equipment ($50K+); LOC for working capital, supplies, and the first 3 months of operations.

    Equipment Lease

    Upgrade tech every 2 years

    Computers, copiers, tech equipment with rapid obsolescence. Lease to stay current without owning depreciating assets.

    Use LOC

    Repair existing equipment

    Repairs and maintenance don't qualify for equipment financing. LOC is the right tool for unexpected repair costs.

    Use LOC

    Bridge to equipment loan closing

    Equipment financing takes 2–4 weeks. Use LOC to pay a deposit or hold a deal while equipment financing closes.

    Frequently Asked Questions

    Should I use a LOC or equipment loan to buy equipment? ▼
    Equipment financing is almost always better for large equipment purchases ($25K+). It's secured by the equipment, so rates are lower (6–15% vs. 9–25%). A LOC is better for smaller purchases, repairs, multi-vendor buys, or when you need flexibility on timing.
    Can I use a business line of credit to buy equipment? ▼
    Yes — you can use LOC funds for any business purpose including equipment. But for purchases over $25,000–$50,000, equipment financing usually offers lower rates, longer terms, and potential Section 179 tax advantages.
    What is the difference between equipment financing and a LOC? ▼
    Equipment financing is a term loan or lease secured by the specific piece of equipment — fixed payments, fixed term. A LOC is revolving, usually unsecured, and can fund any business need. Equipment financing has one purpose; a LOC has unlimited flexibility.
    When is a LOC better than equipment financing? ▼
    A LOC is better when buying multiple small items from different vendors, when you need repair funding (not qualifying as equipment financing), when you want to preserve your equipment financing capacity for larger future needs, or when speed matters more than rate.
    Can I use both a LOC and equipment financing? ▼
    Yes — and many businesses do strategically. A common approach: equipment financing for major capital equipment (lower rate, longer term), and a LOC for working capital, small tool purchases, and operational flexibility. The two products are complementary, not competing.