If you’re shopping for equipment financing, you might be wondering: Should I go through my bank, or is there a better option out there?
The truth is, both banks and non-bank lenders offer equipment financing — but they operate very differently when it comes to underwriting, speed, flexibility, and documentation requirements.
Let’s break down the differences.
🏦 Traditional Banks: Low Rates, High Friction
Many traditional banks — especially national institutions — have dedicated equipment finance divisions that operate separately from their general commercial loan departments. Banks can be a great option if you qualify and don’t need funds urgently. Some major banks with dedicated equipment finance divisions include:
These divisions offer programs that include:
- Lower interest rates (often 6%–10% depending on credit)
- Longer terms (3–7 years is common)
- SBA-backed equipment loans for eligible borrowers
But there are trade-offs:
- Extensive documentation required (full financials, debt schedule, tax returns, projections)
- Slow underwriting (can take weeks)
- Less flexibility on newer businesses, credit blemishes, or unconventional equipment
- Some banks only lend to existing customers with a strong relationship
In short, banks prioritize risk management over speed — and they’re not ideal for borrowers who need fast approvals or don’t check every box.
⚙️ Specialty Equipment Lenders: Faster, More Flexible
Specialty equipment financing companies focus entirely on funding equipment purchases — and they tend to be more:
- Responsive (many approve deals in 1–3 business days)
- Adaptable to different industries and equipment types
- Willing to fund newer businesses with strong cash flow
- Open to “app-only” approvals (no tax returns or financials required) up to $150K–$250K
These lenders often:
- Work directly with equipment vendors
- Know the secondary market value of assets
- Can get creative with structure (leases, EFAs, step payments)
Rates can range from high single digits to low double digits depending on credit and deal structure. They may be higher than bank rates — but for many businesses, the speed and simplicity are worth it.
🏭 Captive Finance Programs: Built-In Options from Manufacturers
Another lesser-known — but often attractive — source of equipment financing is captive financing. These are programs offered directly by the equipment manufacturers themselves (or their finance subsidiaries), John Deere Financial, Caterpillar Financial, or CNH Industrial Capital.
These programs are designed to:
- Help customers purchase their own branded equipment
- Offer competitive promotional rates or zero-down offers
- Streamline underwriting with simplified applications
- Incentivize loyalty to the brand or dealership network
Captive finance programs are ideal for borrowers purchasing new equipment from a specific vendor. However, they often:
- Only finance the manufacturer’s own equipment
- May not be as flexible on used assets or custom needs
- Require strong credit or existing customer history for the best terms
Still, if you’re buying directly from a major manufacturer, captive financing can be one of the most affordable and accessible ways to finance the deal — especially for newer businesses or repeat buyers.
📝 SBA 504 Loans: Long-Term Financing for Fixed Assets
If you’re purchasing large equipment — especially assets with a long useful life — the SBA 504 loan program might be worth exploring. It’s a government-backed option specifically designed for major fixed asset investments that promote business growth and job creation.
What Can the SBA 504 Be Used For?
The 504 program is ideal for purchasing:
- Heavy machinery and specialized equipment
- Manufacturing or production equipment
- Equipment with a useful life of 10+ years
- In some cases, it can be used for equipment installation costs
Key Features:
- Loan size: Up to $5 million for most businesses; up to $5.5 million for manufacturers
- Terms: The CDC portion is typically fixed for 10, 20, or 25 years. However, the bank portion is usually amortized over the useful life of the equipment, which may be significantly shorter — sometimes as little as 5–10 years.
- Rates: Fixed and generally very competitive — often below market bank rates (as of this writing, long-term fixed rates often land around 6% or lower)
- Structure: Typically 50% from a bank, 40% from a Certified Development Company (CDC), and 10% down from the borrower
This blended structure means that while the overall loan may carry the appearance of long-term financing, your monthly payment will be driven in part by the shorter amortization of the bank’s portion, which could increase your cash flow burden relative to a fully 20- or 25-year loan.
What to Expect:
- Extensive documentation and time to fund (expect 30–90 days from start to finish)
- Requires strong financials, personal guarantees, and detailed use of proceeds
- Ideal for borrowers with longer timelines and large capital investments
While not fast, the 504 loan can be one of the most affordable and long-term-friendly ways to finance major equipment purchases.
🧠 Which One Should You Choose?
If you:
- Have strong financials and plenty of time
- Already bank with a lender you trust
- Need long terms and the absolute lowest rates
➡️ Then exploring bank or SBA equipment financing might be worth the hassle.
But if you:
- Need funding quickly
- Don’t want to deal with tax returns or a full financial package
- Have good (but not perfect) credit or limited time in business
➡️ You’re likely a great candidate for a specialty equipment lender.
Don’t Guess. Let Diogenes Guide You.
Instead of chasing banks and waiting weeks for an answer, let Diogenes match you with equipment finance companies that actually want your business — based on your real qualifications.
Next in the series: Why Equipment Loans Are Cheaper Than Cash-Out Loans (And Why That Matters)
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