Equipment Financing Guide
Plan equipment acquisitions around useful life, cash flow, down payment, term and business objectives.
What Is Equipment Financing?
Equipment financing spreads the cost of equipment over a term, usually with the equipment serving as collateral. The best structure matches the repayment term to the asset's useful life and to the business's cash flow.
Useful Life
Term should make sense relative to the asset.
Down Payment
Cash contribution affects amount financed and cash preservation.
Productivity
Quantify what the equipment adds, replaces or protects.
Total Cost
Compare payment, total interest, maintenance and operational impact.
An Illustrative Total-Cost Comparison
Comparing only the monthly payment can hide the real cost. Look at the down payment, the payments over the term and ongoing costs such as maintenance and insurance.
Common Equipment Financing Mistakes
- Choosing a term longer than the equipment's useful life
- Ignoring maintenance, insurance and operating costs
- Comparing monthly payments instead of total cost
- Applying before getting a vendor quote and specifications
- Assuming a lease and a loan are equivalent
Equipment Financing Guide FAQs
Should I finance or lease equipment?
It depends on how long you will use the equipment, your cash flow and tax and accounting considerations. Consult your tax advisor. See equipment financing and leasing.
How long should the term be?
Generally no longer than the equipment's useful life, and short enough that the payment fits the business's cash flow.
Is a down payment required?
Often. The amount varies by funding source, equipment type and borrower.
Have a real scenario?
Use the guide to organize the question, then let CMCC review the facts.
Related CMCC Tools & Financing Paths
Use the resource to understand the issue, then move to the relevant calculator, financing path or application when the scenario is ready.