Equipment Financing vs. Term Loan: Which Is Right for Your Business?
Equipment financing and term loans both provide a lump sum repaid on a fixed schedule. The difference is what secures the funding and what it’s for: equipment financing is tied specifically to a purchase, with the equipment itself often serving as collateral, while a term loan is general-purpose and may or may not require collateral depending on the program.
| Equipment Financing | Term Loan | |
|---|---|---|
| Use of funds | Tied to a specific equipment purchase | General-purpose: expansion, renovation, debt refinancing, and more |
| Collateral | Often the equipment itself | Varies by program; some require collateral, some don’t |
| Qualification | Can be more accessible since the equipment secures the financing | Weighted more heavily toward overall business profile |
| Best for | Buying or replacing machinery, vehicles, or technology | A broader one-time capital need without a specific asset attached |
Which one fits your situation?
If your capital need is specifically an equipment purchase, equipment financing is usually the more accessible and purpose-built option. If your need is broader than a single purchase, a term loan gives you more flexibility in how the funds are used.
Frequently asked questions
Is equipment financing faster to qualify for? This depends on your matched program, but because the equipment can serve as collateral, qualification is sometimes more straightforward than an unsecured term loan.
Learn more about Equipment Financing or Business Term Loans.
Ready to see what you qualify for?
One application, matched to funding options across our lending network.