Best Equipment Loans for a Startup Business

An equipment loan for a startup business allows that business to borrow money to purchase necessary equipment. They can be difficult to obtain for startups as most lenders require at least two years in business. However, equipment loans are available from some lenders for borrowers with at least 650 credit with rates starting around 6%.

Best Equipment Loans for a Startup Business

When to Use Small Business Equipment Loans for a Startup

Most businesses need some form of equipment when starting out. Manufacturing businesses need specialized plant equipment to fulfill orders, construction businesses require heavy equipment, and doctors’ offices need medical equipment. Even businesses that do not rely on specialized equipment will need computers, desks, cellphones, and other items.

Many startup business owners choose to use equipment loans as they allow access to needed equipment without paying the entire amount upfront. Typically, equipment with a long economic lifespan that the business intends to own at the end of the loan term is best suited for an equipment loan. Equipment that has a short shelf-life, such as certain computers and other technology, might be better suited to other types of financing like an equipment lease.

How to Qualify for Equipment Loans for a Startup

Qualifying for an equipment loan is more difficult for startup businesses than for businesses with at least two years of history and revenue on the books. Because the lender will be unable to evaluate the creditworthiness of the business, it must instead rely on the credit history of the business’s owner or owners. This means that lenders will want to see a higher minimum credit score, usually of at least 650, prior to approving a loan.

Underwriting for small business equipment loans relies heavily on the business’s ability to make payments, which is why lenders want to see at least two years in business and minimum gross annual revenues of at least $100,000. Qualifying for equipment financing for a startup without this business history will likely require a down payment—typically 20% for borrowers with excellent credit. However, lenders may require up to 50% down for borrowers with less-than-perfect credit.

How We Evaluated Lenders Offering Equipment Loans for Startups

Borrowing money for equipment as a startup is inherently tricky. For most businesses, loan approval will come down the creditworthiness of the business’s owner and any co-signers. For this reason, our focus for this list was primarily weighted toward the availability of an equipment loan for businesses with no history and no revenues. We examined more than 20 different lenders and loan brokers to compile this list.

The primary criteria we focused on when choosing lenders were:

• Underwriting guidelines: Companies that listed a minimum time in business cutoff were excluded from this list.
• Type of funding: For the primary list, we focused only on loans and equipment financing. We also tried to include lenders with many diverse types of funding, so borrowers have a better opportunity to find the right fit.
• Minimum revenue: We excluded any company that set a minimum revenue requirement from our list, although we did not exclude companies that require projections.
• Cost of financing: The overall cost of financing was taken into consideration and broken out for each lending option. Prohibitively expensive loans were excluded from this list.
• Customer reviews: We researched consumer reviews to determine whether the lender is engaged in any questionable practices, and highlighted positives as well as common criticisms of each lender.

National Business Capital & Services tops our list of the best equipment loans for startups, offering borrowers access to up to $100,000 with credit of at least 650. Borrowers who need flexible equipment financing with interest rates starting at 8% should consider National for their needs.

National Business Capital & Services: Best Overall Startup Equipment Loan

National Business Capital & Services (“National”) is an online business loan broker with a large network of active lenders that offer a variety of unique financing programs. It emphasizes personalized service and custom-tailored financing. Borrowers who are looking for equipment financing and would like to compare programs from banks and alternative lenders to choose the best fit should consider working with National Business Capital & Services.

National Business Capital & Services Types of Financing Available

The types of financing offered by National Business Capital & Services are:

• Equipment loans
• Equipment financing agreements
• Equipment leasing
• Small Business Administration (SBA) loans
• Commercial mortgage
• Accounts receivable (A/R) and purchase order (PO) financing
• Performance advance
• Business line of credit
• Term loans

National offers several proprietary financing programs, as well as a typical mix of the traditional and alternative types of financing offered by most marketplace lender platforms. National also offers its eQuickment Financing Product, which features equipment financing with streamlined approvals and funding. In this article, we will focus on National’s standard equipment financing options.

National Business Capital & Services Equipment Financing Qualifications

Qualifications for National Business Capital & Services’ equipment financing are:

• Time in business: No stated minimum
• Minimum credit: 650
• Minimum revenue: No stated minimum
• Personal guarantee: Required from all partners

National lists a minimum credit score of 650 and no minimum revenue to qualify for an equipment loan. Borrowers with a lower credit score may still be able to qualify for other equipment financing, such as an equipment lease, from National’s lenders.

National Business Capital & Services Equipment Financing Costs

National Business Capital & Services’ equipment financing costs are:

• Minimum down payment: 20%
• Interest rate: Starting at 8%
• Application fee: No
• Origination or closing fees: A percentage of financing origination or closing cost is collected at closing
• Prepayment penalty: May apply

Because National is a marketplace lender, the rates and terms will vary depending on which lender a borrower selects. The advantage is that borrowers using National can shop multiple lenders and choose the best rate for them. National is paid a percentage of the financing origination fee or closing cost, which varies by lender. Borrowers will receive a written fees disclosure prior to signing for funding.

National Business Capital & Services Equipment Loan Terms

General terms for the equipment loan from National Business Capital & Services are:

• Funding speed: 48 to 60 hours
• Loan amount: $10,000 to $100,000
• Term length: 12 to 60 months
• Repayment frequency: Monthly, other flexible repayment terms may be available

National boasts a speedy application process, with approvals available within one hour, and funding available in as little as 48 hours. Term lengths are likely to be available up to five years and are based on the borrower’s desired term, not to exceed the estimated economic life of the equipment being financed. As with costs, additional terms will vary greatly based on the lender involved, and borrowers should ask for all terms in writing prior to signing for funding.

What National Business Capital & Services Is Missing

National Business Capital & Services has a mostly positive reputation and offers a wide variety of financing solutions, including financing for startups, which many lenders don’t offer. National may not be able to deliver on its equipment loan program for borrowers with a credit score below 650. However, borrowers may still wish to consider National for its equipment financing solutions, including its eQuickment Financing with a minimum borrower score of 600.

National Business Capital & Services Reviews

National Business Capital & Services receives mostly positive reviews, averaging slightly more than 4.5 stars across review websites. Positive reviews speak to the company’s personalized, high-touch process, and many reviews are from repeat customers. Some negative reviews reference higher interest rates than what was originally communicated. Borrowers should always be wary that rates may change once a full credit application has been submitted to a lender.

How to Apply With National Business Capital & Services

To apply for equipment financing with National Business Capital & Services of up to $100,000, borrowers can fill out an application in just a few minutes and receive approvals within one hour and funding in as little as two days.

Wells Fargo: Best for Equipment Financing With No Minimum Revenue

Wells Fargo is among the largest banks in the United States and offers equipment financing in various industries and across various segments of its business, including small business equipment loans for startups. Borrowers that need equipment up to $100,000 in value and have strong personal credit should consider this option, which does not list any minimum time in business or annual revenue requirements.

Wells Fargo Types of Financing Available

The types of financing offered by Wells Fargo are:

• Equipment loans
• Equipment leasing
• Business line of credit
• Term loans
• SBA loans
• Business credit card

Wells Fargo is a large, multinational bank that offers a wide variety of loan types and financing options across its various segments. Small businesses looking for equipment loans for startups will want to consider Wells Fargo’s Equipment Express Loan, which is available online to businesses with a preexisting relationship with the bank or can be applied for in person.

Wells Fargo Bank Equipment Express Loan Qualifications

Qualifications for Wells Fargo Bank’s Equipment Express Loan are:

• Time in business: No minimum
• Minimum credit: 640
• Minimum revenue: No minimum
• Personal guarantee: Required from all owners

Wells Fargo’s Equipment Express Loan is an attractive option for startups as Wells Fargo does not have any minimum time in business requirements. Wells Fargo lists a minimum credit score of 640, but for startup business owners, a score of at least 680 is recommended. Additionally, Wells Fargo will require a personal guarantee from all owners with a 25% stake or higher in the business.

Wells Fargo Bank Equipment Express Loan Costs

The rates and fees you should expect with Wells Fargo Bank’s Equipment Express Loan are:

• Typical down payment: 10% to 20%
• Interest rate: Starting at 6.25%
• Application fee: $150, which may be waived
• Origination or closing fees: None
• Prepayment penalty: None

Wells Fargo indicates that equipment can be financed up to 100% of the cost. However, equipment loans for a startup business will likely require a down payment of between 10% to 20%. Interest rates start at 6.25%, which includes a 0.25% discount based on an autopay agreement from a qualifying business checking account. The $150 application fee may also be waived.

Wells Fargo Bank Equipment Express Loan Terms

General terms for the Equipment Express Loan from Wells Fargo Bank are:

• Funding speed: Two to four business days
• Loan amount: $10,000 to $100,000
• Term length: 24 to 72 months
• Repayment frequency: Monthly

Wells Fargo offers relatively speedy funding, with most loans able to be funded within four business days. Other loan terms are flexible, with the maximum term length based on the expected economic life of the equipment, up to six years. No additional collateral is required on a Wells Fargo Equipment Express Loan beyond the equipment that is being financed.

What Wells Fargo Is Missing

Wells Fargo offers existing banking customers access to its Express Equipment Loan online, which can be a great financing option for qualified borrowers. However, Wells Fargo only accepts online applications from existing customers, meaning new customers will need to apply in person, so it will not be a fit for all businesses. Additionally, borrowers who need to purchase equipment costing more than the $100,000 cutoff will need to explore other options.

Wells Fargo Reviews

Wells Fargo receives mixed reviews, which is typical for large banking organizations. Positive reviewers make a note of the bank’s footprint, which includes thousands of branches and ATMs nationwide as well as business-friendly Saturday banking hours. Negative reviews are largely related to deposit accounts and reference Wells Fargo’s notoriously low savings rates, as well as conservative underwriting criteria.

How to Apply With Wells Fargo

For an Express Equipment Loan up to $100,000 from Wells Fargo, borrowers with an existing banking relationship of at least one year can apply online for approvals as quick as the same day and funding in as little as 48 hours.

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Chase Bank: Best for Major Equipment Purchases

Chase is another large bank, with more than 5,300 branches and 15,000 ATMs nationwide. Chase is a leading lender in the SBA’s Preferred Lenders Program, which means it can streamline SBA loan applications by making its own underwriting decisions. Business owners who need to purchase major equipment for $200,000 or more should consider an SBA 504 loan with Chase Bank.

Chase Bank Types of Financing Available

The types of financing offered by Chase Bank are:

• SBA loans
• Equipment loans and leasing
• Term loan
• Business credit card
• Business line of credit

Chase Bank, like Wells Fargo, offers a vast array of different financing options in addition to its consumer and business deposit accounts. In 2018, Chase funded loans in 31 different states and is a leading SBA lender able to lend in most states in the US. Its SBA 504 loan is suitable for startups and an excellent choice for large equipment purchases.

Chase Bank SBA 504 Loan Qualifications

Qualifications for Chase Bank’s SBA 504 loan are:

• Time in business: No minimum
• Minimum credit: 680
• Minimum revenue: No minimum
• Personal guarantee: Required from all partners with at least 20% stake

While Chase Bank does not list any minimum years in business or annual revenue criteria, borrowers should be aware that equipment loans for startup businesses will have some strict requirements. In addition to meeting the minimum credit criteria, businesses must also show that the 504 equipment loan will support or add at least one job for every $65,000 in funding.

While a 680 credit score will typically be good enough, borrowers will also need to bring experience related to the business they are starting, a credit report with no derogatory marks for at least the last three years, and a strong business plan with projections showing they can support the loan payment.

Chase Bank SBA 504 Loan Costs

The rates and fees you should expect with Chase Bank’s SBA 504 loan are:

• Minimum down payment: 10%
• Interest rate: Certified Development Company (CDC) loan, 3.76% to 4.08%; Chase Bank SBA loan, 5% to 12%
• Application fee: None
• Origination or closing fees: 2.5% to 3% of the total loan amount
• Prepayment penalty: Yes, if paid within 10 years.

Understanding the costs associated with an SBA 504 equipment loan can be complicated, but the good news is that the rates are some of the best available on equipment purchases. To understand the rates, it is essential to understand that an SBA 504 loan is made up of two distinct loans. The first 40% is funded by a nonprofit CDC, which Chase partners with, and the remaining 60% is funded by a separate loan from Chase Bank.

Chase Bank SBA 504 Loan Terms

General terms for the SBA 504 loan from Chase Bank are:

• Funding speed: 45 to 60 days
• Loan amount: $200,000 and up
• Term length: 7 to 10 years
• Repayment frequency: Monthly

There is no maximum loan amount for an SBA 504 equipment loan, and Chase likewise does not state a cutoff for borrowing. Terms are generally between seven and 10 years, and no longer than the estimated remaining economic life of the asset being financed.

What Chase Bank Is Missing

Chase is a leading nationwide SBA lender and well-positioned to provide equipment financing for startups. However, borrowers need to be well-qualified, and funding takes time, with the fastest SBA 504 loans funding in around 45 days. Borrowers that need quick funding should consider Wells Fargo’ Equipment Express Loan or an equipment loan from US Business Funding, both of which can turn around and provide funding in as little as 48 hours.

Chase Bank Reviews

Similar to Wells Fargo, Chase Bank’s reviews are mixed, and many of the reviews reference the bank’s consumer deposit accounts. Positive reviews note its professional experience and banking hours, which are friendly to consumers and businesses. Negative reviews criticize what are seen as high interest rates and subpar customer service.

How to Apply With Chase Bank

Currently, there is no online application available for an SBA 504 loan with Chase Bank, so interested borrowers will need to visit the bank’s website and use its branch locator to find a branch nearest them.

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US Business Funding: Equipment Financing up to $35,000

US Business Funding is another online marketplace that emphasizes speedy turnaround times on both applications and funding and offers borrowers access to its cultivated network of banks and alternative lenders. Borrowers with a personal credit score of at least 680 and equipment financing needs of less than $35,000 should consider US Business Funding for rapid funding of critical equipment.

US Business Funding Types of Financing Available

The types of financing offered by US Business Funding are:

• Equipment loans
• Equipment leases
• Working capital loans
• SBA loans

US Business Funding offers several types of financing through its large network of active lenders, including equipment loans and equipment leases as well as loans for working capital needs. Among these options, it offers some limited equipment financing for borrowers that don’t have business history but can show strong credit qualifications.

US Business Funding Equipment Financing Qualifications

Qualifications for US Business Funding’s equipment financing are:

• Time in business: None
• Minimum credit: 680
• Minimum revenue: None
• Personal guarantee: Required

Like other financing companies on this list, US Business Funding has equipment financing options for businesses with no operating history and, as a result, no revenues. This financing is heavily credit-driven and will require not only a strong credit score of 680 or better but also a clean payment history as well as a credit report free of derogatory marks for at least the last three years.

US Business Funding Equipment Financing Costs

The rates and fees you should expect with US Business Funding’s equipment financing are:

• Minimum down payment: 20% to 50%
• Interest rate: 8% to 20%
• Application fee: None
• Origination or closing fees: None
• Prepayment penalty: May vary

Equipment financing with US Business funding may be available from several different lenders, so precise costs and rates may vary. However, US Business Funding indicates it does not charge any application or closing fees to borrowers. Instead, the lender makes the percentage rate based on the performance of the equipment financing. While borrowers should not expect to pay any upfront fees with US Business Funding, it is important to collect written confirmation of this prior to signing up for funding.

US Business Funding Equipment Financing Terms

General terms for the equipment financing from US Business Funding are:

• Funding speed: As soon as one day
• Loan amount: Up to $35,000
• Term length: 24 to 72 months
• Repayment frequency: May vary

A hallmark of US Business Funding is its speedy funding, offering borrowers financing on equipment in as little as 24 hours. Qualified borrowers will be able to access up to $35,000 over 24 to 72 months, although the term length will not exceed the useful life of the equipment. Depending on the type of financing, repayment frequency may vary, with the possibility of seasonal and deferred payments.

What US Business Funding Is Missing

US Business Funding serves an important niche in equipment financing with fast funding available on new and used equipment up to $35,000. However, borrowers will need strong credit and may find the cap limiting. Those acquiring equipment that costs more than $35,000 will need to look elsewhere, such as National Business Capital, which presents a strong funding option up to $100,000.

US Business Funding Reviews

In general, US Business Funding has established a positive online reputation, averaging more than 4 stars across online review websites. Positive reviewers note professional staff and excellent customer service while underscoring US Business Funding’s claims of quick application and funding timelines. Some negative reviews note aggressive email marketing techniques, with several mentioning a high volume of emails received over several days.

How to Apply With US Business Funding

For access of up to $35,000 in equipment financing, well-qualified borrowers can apply online with US Business Funding for quick approvals in as little as 1 hour and access to funding as quickly as 24 hours.

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Small Business Equipment Loan Alternatives

Finding a lender that offers equipment loans for startups is difficult, and lenders that do offer equipment loans with no minimum time in business requirements typically have stiff minimum credit criteria that need to be met. Like equipment leasing, there are alternatives to equipment loans available based on the needs of a business as well as creditworthiness and equipment condition.

Equipment Loans for Startups Alternatives

Equipment Leasing

Businesses that need equipment often turn to two different types of equipment financing: loans and leases. While loans are ideal for equipment that the business intends to keep and require that company to pay off the entire balance for the equipment over time, many equipment leases are structured for short-term use of the asset. They require a business to only pay a portion of the total equipment value for the period of time it intends to access the equipment.

In addition to the advantage of only paying for the period of time the equipment is needed, qualifying for a lease is often simpler than an equipment loan. Some alternative lenders will lease equipment to a startup with a borrower’s credit score as low as 550. In general, while an equipment lease may be easier to qualify for than an equipment loan, if the goal is ultimately to own the asset, an equipment loan will be less expensive over time.

Equipment Financing Agreement

An equipment financing agreement (EFA) is a hybrid between a loan and a lease and is best when the equipment being financed is intended to be kept long-term. EFAs are written so that the entirety of the equipment value, plus finance charges and other fees, is paid off by the end of the term. Unlike a loan, the principal and interest are not distinguishable, and paying off an EFA early will typically not net a borrower any discounts.

Many lenders offer EFAs either in addition to or in place of simple interest equipment loans and equipment leases, as a bridge between the two for borrowers that might otherwise present too much risk to lend to. They are a popular, if often misunderstood, tool. Alternative lenders such as eLease and Smarter Finance USA offer EFAs as do some traditional banks like Stearns Bank.

Unsecured Term Loan

Some borrowers may not wish to pledge any collateral to secure a loan. In some cases, lenders may not want to finance a specific piece of equipment, perhaps because it is in poor condition and needs to be refurbished. Whatever the reason, unsecured term loans may be used to purchase equipment as well as for working capital and other purposes, such as meeting payroll and short-term obligations.

The trade-off with unsecured term loans is they are typically much shorter terms, with payoff due between three to 36 months, based on borrower qualifications, the business’s creditworthiness, and other factors. Term loans also come with higher interest rates and daily or weekly payment schedules. Lenders such as BlueVine, Fundbox, and OnDeck all offer unsecured term loans, with APRs ranging from 30% to 50% and minimum credit score requirements between 500 and 600.

Manufacturer or Dealer In-house Financing

In-house financing, often known as captive financing, is a popular method for financing new or gently used equipment. It is offered by many large manufacturers of equipment ranging from heavy equipment to medical, shipping, and restaurant equipment. It typically takes the form of a lease, or EFA, although loans, as well as 90-day net terms, may be available as well.

A primary advantage of in-house financing is that it is often offered with additional incentives to the buyer, such as 0% interest or finance charges. To qualify for discounts and special rates, however, borrowers must have strong credit. Some examples of manufacturers in various industries that offer in-house financing on equipment are Caterpillar, Inc., Siemens, and Pitney Bowes.

Bottom Line

Getting approved for an equipment loan can be difficult, especially for startups. Lenders want to see operation history as well as minimum annual revenue to finance equipment, and in the absence of both will need to rely heavily on borrower’s credit to make lending decisions. While it may be possible to get an equipment loan as a startup, it may make more sense for some businesses to consider alternative methods of financing like an equipment lease.