Side by side

Choose Equipment Financing when

• The full amount is going into identifiable equipment with resale value
• You want the asset itself to carry the security rather than the business
• Credit is imperfect — asset-backed underwriting is more forgiving
• You want the payment schedule matched to the equipment's useful life

Choose Term Loan when

• The spend is mixed and only partly equipment
• You need the equipment free of a lien, for a future sale or refinance
• The equipment is specialised with a thin resale market, which weakens it as security
• You are buying used equipment from a private seller and the lender will not finance it directly

When both make sense

A frequent structure is equipment financing for the asset and a smaller term loan or line of credit for the installation, training and working capital that come with it — matching each dollar to the right instrument rather than forcing one to cover everything.

Frequently asked questions

Can I finance used equipment?

Usually yes, though age and condition affect both the advance rate and the term. Private-seller purchases are the harder case: some lenders will not fund them at all, which is a common reason a file moves to a term loan instead.

Do I own the equipment?

Under equipment financing you own it and the lender registers security against it, released on final payment. That differs from a true lease, where the lessor owns the asset — see the equipment financing versus leasing comparison for that distinction.

Which is cheaper?

Equipment financing, generally, because the asset reduces the lender's risk. The published ranges are roughly 7–18% for equipment against 8–22% for term debt, though the specific file, the equipment type and the lender all move that.

Related

• Chartered bank term loan vs Business Line of Credit — A chartered bank term loan is cheaper and should be your first call if the business is bankable — two or more years of history, clean financials and strong credit.
• Invoice Factoring vs Merchant Cash Advance (MCA) — If the business invoices other businesses, factoring is almost always the cheaper answer — it advances money the business has already earned, priced from 1.5% per 30 days, and creates no debt.
• Term Loan vs Merchant Cash Advance (MCA) — A term loan is the cheaper instrument and the right one whenever the file can carry it — fixed payments, a defined end date, and pricing quoted as an annual rate.
• Inventory Financing vs Business Line of Credit — A line of credit is underwritten on the business as a whole and can be spent on anything; inventory financing is underwritten on the stock and is used to buy stock.
• Inventory Financing vs Merchant Cash Advance (MCA) — Both instruments put stock on the shelf without a bank loan, and the choice usually comes down to what the file supports.
• Equipment Financing vs Business Line of Credit — Buy the machine on equipment financing and keep the line of credit for working capital.
• Chartered bank term loan vs Invoice Factoring — If your file is bankable — strong credit, two-plus years of history, clean financials — the bank loan is the cheaper instrument and you should pursue it first.
• Chartered bank term loan vs Merchant Cash Advance (MCA) — These sit at opposite ends of the same spectrum.
• RBC Royal Bank business operating line vs Business Line of Credit — If RBC will approve the operating line inside your timeline, take it — the rate on a bank line is lower than anything a non-bank lender can price.
• TD Canada Trust business line of credit vs Business Line of Credit — For a business with filed statements and clean guarantor credit, a TD business line of credit is cheaper than any non-bank alternative and should be the first application.
• Scotiabank receivables-secured operating facility vs Invoice Factoring — A Scotiabank receivables facility is the cheaper way to finance invoices and the right call if your receivables fit a bank margin formula: many customers, none dominant, all under ninety days, all easy to credit-check.
• BMO Bank of Montreal equipment term loan vs Equipment Financing — If BMO will write the equipment term loan and the delivery date allows, take the bank rate — nothing else prices lower on a long-lived asset.
• CIBC business term loan vs Term Loan — A CIBC business term loan is the cheapest way to fund a defined, one-time capital need, and a bankable file should apply there first.
• National Bank of Canada receivables-secured operating facility vs Invoice Factoring — For a Quebec business with a diversified receivables book, a National Bank operating facility is cheaper than factoring and easier to run in French from end to end.
• Desjardins equipment financing through a caisse vs Equipment Financing — If you are an established Desjardins member and the caisse will finance the machine, that is the cheapest capital available and the relationship is worth protecting.
• Vancity business line of credit vs Business Line of Credit — For a British Columbia business whose work fits Vancity's mandate, a credit union line of credit is cheaper than a non-bank facility and worth the application.
• ATB Financial equipment term loan vs Equipment Financing — For an Alberta business buying new equipment, ATB is a genuinely well-matched lender and should get the first quote — provincial focus means the underwriting understands your cycle.

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