A trucking client of ours put it well: “The truck earns the money that pays for the truck. I just need someone to bridge the gap.” That’s equipment financing in one sentence, and it’s why lenders like it more than almost any other type of business lending. The asset you’re buying is the security. Your approval odds on equipment are better than for nearly anything else you’ll ever ask a lender for.
Which makes it strange how many Canadian businesses either drain their cash reserves buying equipment outright, or give up after one bank conversation. Here’s the full picture.
Your three routes, and when each one wins
An equipment loan. You borrow, you buy, you own it from day one. The equipment itself secures the loan, so rates sit below unsecured borrowing. Terms usually track the useful life of the asset, three to seven years for most machinery and vehicles. Best when the equipment holds value and you intend to run it for years past the final payment. You claim depreciation (capital cost allowance) as the owner.
An equipment lease. The lessor owns it, you pay to use it, and at term-end you return it, renew, or buy it out depending on the structure. Payments are typically fully deductible as an operating expense, upfront cash is minimal, and upgrading at term-end is painless. Best for technology and anything that ages fast: computers, medical and dental equipment, fitness machines, salon fit-outs. The lifetime cost runs higher than a loan; that’s the price of flexibility and preserved cash.
A line of credit. Fine for small tools and sub-$10,000 purchases where paperwork outweighs the purchase. Wrong tool for major equipment, because you’re consuming revolving credit you’ll want available for cash flow. We’ve covered how business lines of credit work separately.
The honest decision test is not “lease vs buy” in the abstract. It’s two questions: will this asset still be worth owning when it’s paid off, and can your cash reserves survive buying it outright? Depreciating tech points to leasing. Long-life machinery you’ll run for a decade points to a loan. And almost nothing justifies emptying your operating account to avoid financing, because cash reserves are the one asset you can’t finance back into existence when a rough quarter hits.
What it costs in Canada right now
Equipment financing is priced on three things: the asset, the file, and the lender.
Strong file plus new, easily resold equipment (trucks, yellow iron, standard machinery) from a bank or captive dealer program: expect rates from the high single digits. Average files, used equipment or specialised assets with thin resale markets: low to mid teens. Alternative lenders funding challenged credit or very young businesses: higher again, in exchange for approvals the banks won’t write.
Beyond rate, watch for: documentation and PPSA registration fees, end-of-lease buyout terms (a “$1 buyout lease” behaves like a loan; a fair-market-value buyout can surprise you at term-end), and personal guarantees, which most Canadian equipment deals under $250k still include.
Down payments run zero to 20 percent. New equipment with strong resale often finances at 100 percent. Used or niche equipment usually wants skin in the game.
The CSBFP route most borrowers never hear about
The Canada Small Business Financing Program guarantees equipment loans through participating banks and credit unions, covering businesses with under $10 million in revenue. Because the federal government backstops the bulk of the loan, lenders approve files they would otherwise decline, particularly younger businesses. Maximum rates are capped, registration involves a one-time fee, and equipment is one of the core eligible uses alongside leaseholds and property.
If a bank has declined you for a standard equipment loan, asking the same bank about a CSBFP-backed loan is not a strange question. It’s a different risk calculation for them, and branch staff don’t always raise it unprompted.
What approval actually depends on
After a decade of funding equipment across trades, transport, healthcare, hospitality and fitness, the pattern is consistent. Lenders weight four things:
The asset’s resale market. A dump truck finances easily; a custom-built one-of-a-kind machine doesn’t, whatever it cost new.
Your last six months of deposits. Revenue consistency matters more than your credit score for most equipment lenders, because the question is simply whether the payment fits inside your cash flow.
Time in business. Two years opens every door. Six to twenty-four months narrows you to CSBFP, captives and alternative lenders, all still workable.
Credit, last. Bruised credit raises your rate; on well-secured equipment it rarely kills the deal outright.
Prepare accordingly: a quote or invoice for the specific equipment, six to twelve months of bank statements, and a one-line answer to how the equipment increases revenue. “This second chair lets us take 40 percent more bookings” gets approved faster than any business plan.
Industry notes worth knowing
Transport and construction: the strongest resale markets in the country, hence the sharpest rates. Dealer and captive financing is competitive here; get an independent quote anyway, because captives count on you not shopping.
Dental, medical, veterinary: long-life, high-cost equipment with dedicated healthcare lenders who understand practice cash flow. Leasing dominates for imaging and technology, loans for chairs and core fit-out.
Salons, gyms and hospitality fit-outs: equipment plus leaseholds usually finance together. Expect leasing for the equipment layer and be careful matching term length to your premises lease; financing a fit-out for two years longer than your lease runs is a classic trap.
Farms: a parallel world of specialised lenders (FCC and co-op programs) with seasonal payment structures. Use them; general commercial terms fit farm cash flow badly.
Frequently asked questions
Can I finance used equipment in Canada? Yes, though expect a larger down payment, a shorter term and a slightly higher rate than new. Private-sale used equipment (rather than dealer-sold) narrows your lender options but doesn’t eliminate them.
Is it better to lease or buy business equipment? Buy (with a loan) what holds value beyond the term. Lease what depreciates fast or needs regular upgrading. And run the cash test: if buying outright leaves you unable to absorb a bad month, finance it even if you could technically pay cash.
Can a new business get equipment financing? Yes, more easily than almost any other financing type, because the equipment secures the deal. Expect a down payment, a personal guarantee, and to be choosing between CSBFP-backed bank loans, dealer programs and alternative lenders rather than standard bank terms.
What credit score do I need? There’s no single threshold. Strong asset plus steady deposits covers a multitude of credit sins. Sub-600 scores mean alternative lenders and higher pricing, not automatic decline.
If a piece of equipment would earn its own payments, the gap between “can’t afford it” and “own it” is usually one application. Tell us what you’re buying and we’ll tell you what the funding looks like, typically within a day.
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