Business equipment and machinery keep the ball rolling in many industries, and broken equipment may mean the difference between business continuity and stagnation. That’s even truer when you are in the delivery or transport business. Commercial and business vehicle breakdowns require immediate fixing.

But buying or replacing a delivery truck and other vehicle equipment runs into thousands of dollars. Not so many startups or small businesses can pay for such big-ticket items out of pocket. Even for established SMEs, such big one-off expenses can result in serious cash flow gaps and impede everyday business operations.

That’s where equipment financing comes in. An equipment loan enables you to purchase business equipment now and pay slowly as the equipment brings value to your business. You can obtain equipment financing from banks or online lenders like Camino Financial within a short call.

What’s Equipment Financing?

Equipment financing is a type of business loan used to purchase or lease business machinery and equipment such as delivery trucks and other business vehicles. The lender advances to the borrower a loan amount equal to 80%-100% of the purchase amount.

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How Does an Equipment Loan Work?

Equipment loans are term loans that should be paid back in equal monthly installments. Repayment terms range between 2-7 years. Like in auto financing, the purchased equipment serves as collateral to secure the loan. 

If you fail to meet your obligations to the lender, they can repossess the equipment and auction it to recover their money. But if you successfully pay, your business owns the truck or vehicle at the end of the term.

Since the vehicle or truck acts as collateral for the loan, equipment financing is easier to obtain than other types of unsecured loans. Lenders rely on your personal and business credit, trading history, and annual business revenue to create a risk file and determine the terms at which you should be approved.

Pros and Cons of Equipment Financing

Pros of Equipment Financing

Business continuity and growth

Imagine if you were to raise money for all the equipment you need for business growth out of pocket. It could lead to missed business opportunities and delayed growth. Equipment loans help ensure business continuity and faster growth than if you’re to wait until you have enough cash flow in the business to cover the cost out of pocket.

Avoid cash flow gaps

Using money from your business to buy a new truck or replace a broken business vehicle may leave your business with a serious cash flow crisis. Equipment loans enable you to cover such costs while keeping enough money in hand to cover daily operational expenses.

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Easy to budget and manage

You get predictable monthly repayments for 2-7 years. That helps spread the cost over time and pay with smaller, manageable monthly payments.


Monthly equipment loan payments may be deductible as operating expenses. To be sure, check with your lender or tax attorney.

Cons of Equipment Financing

Potential for added liabilities

There’s a possibility of a blanket lien for borrowers with poor credit profiles. It’s where a lender requires you to attach other business assets as collateral or make a personal guarantee to be personally liable for the loan if your business is unable to pay.

The loan term may surpass equipment life

Trucks and vehicles depreciate in value quickly. You may find yourself stuck with monthly payments for a piece of equipment that has outlived its business usefulness.

Default risk

The risk of default is still there if your business runs into difficulties and you’re unable to repay as required. You may lose the equipment or other business/personal assets used as collateral.

Where to get Equipment Financing

It’s not advisable to use personal loans or business lines of credit to purchase business equipment. Your best bet is to obtain equipment financing from a bank or online lenders.


Banks offer small business loans at lower interest rates than you can find elsewhere. The downside is, they have stringent lending conditions and you’ll require excellent business credit, revenues, and long trading history to qualify. 

You’ll also face bureaucratic, paper-laden application processes and long approval periods. They may not be ideal for small businesses that need to buy or replace a truck or business vehicle quickly.

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Online lenders

Fintech lenders offer faster funding with fewer qualifying criteria. For instance, Camino Financial offers equipment financing to small businesses with fair credit within 1-10 days. Visit the link above to browse their loan offerings.

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