How to Finance Used Equipment

Whether it’s a crane for your construction or an oven for your restaurant — buying new equipment can be a drain on your budget

If you’re looking to a little money, you might consider getting used equipment instead of buying new

Used equipment financing is a type of small- loan for buying pre-owned equipment, machinery or tools

This financing allows you to access the equipment you need without bearing the full upfront cost of buying it new — making it a more cost-effective option for some es

See Your Loan Optionswith Fundera by NerdWalletWe’ll start with a brief questionnaire to better understand the unique needs of your

Once we uncover your personalized matches, our team will consult you on the cess moving forward

Can you get financing for used equipment

Yes, you can get financing for used equipment purchases

Many lenders that issue equipment loans offer options for both new and used purchases

Because used equipment financing is typically secured by the machinery itself, however, some lenders may be more hesitant to offer loans for older equipment

Used equipment tends to have a shorter remaining lifespan and a greater susceptibility to damage, which increases the lender’s risk

As a result, these loans often come with higher interest rates and shorter repayment terms compared with new equipment financing

Additionally, lenders may only finance certain types of used equipment, such as construction or heavy machinery, but exclude computers or similar nology

They also may put limits on the age of the equipment they will finance — for example, some companies won’t finance equipment older than 10 years

S and cons of used equipment financingsLower overall cost compared with buying new equipment

Smaller loan amounts can be easier to qualify for, especially if you’re a new or have bad credit

Used equipment depreciates more slowly since initial years of depreciation have passed

Used equipment can be more readily available from vendors than new equipment, which may have to be ordered

ConsMay have higher interest rates and shorter repayment terms compared to new equipment financing

Lenders may have restrictions on the age or type of equipment that can be financed

Used equipment can have a shorter lifespan and may need more frequent repairs

How to get used equipment financingThe cess of financing used equipment isn’t all that different from financing new equipment

These steps to get started:1

Evaluate your financing needsDetermine exactly what type of equipment you need and how you plan to use it in your operations

Consider how much the equipment might cost and what your budget looks

To make sure you can afford any potential debt, use an equipment loan calculator

This tool can help you estimate payments and interest costs so that you can see what works best for your financial situation

Find the equipment you want to buyMost lenders will want you to include an equipment quote as part of your application

Look for reputable vendors or suppliers that offer the equipment you need, such as established dealers, manufacturers or third-party sellers

As you compare vendors, ask each company for detailed information the equipment, including the selling price, the model or serial number, ownership history and maintenance records

You’ll want to verify that the equipment is in good condition, either by seeing it in-person or hiring a third-party inspection

In addition to the selling price, you should also factor in additional costs such as transportation, installation, maintenance and insurance — as these can affect your financing needs and overall budget

Review your ’s qualification requirementsKnowing where your stands ahead of time can help you time when comparing loan options

Although loan requirements vary, most lenders will consider similar criteria, including annual revenue, personal credit score and time in

Even if you’re a startup or have bad credit, you may still be able to qualify for used equipment financing

Because the equipment itself serves as collateral, some lenders can be more lenient with their requirements

You should also consider whether you can offer a down payment — and if you can — how much

Although down payments aren’t always required, viding one can increase your chances of qualifying, as well as help you access better rates and terms. » MORE: Compare the best equipment loans for bad credit4

Compare used equipment financing companiesRe and compare several used equipment financing companies to determine which is the right fit for your

Make sure that the company can finance the type of used equipment you want to purchase, as well as consider its repayment terms, interest rates, fees, funding speed and application cess

You might start your with these options:ductMax loan amountMin

For faster or more flexible funding, you might consider online lenders

Specialized equipment lenders, CAG Truck Capital or AgDirect, can be a good option if you want to work with experts knowledgeable the specific type of equipment you want to buy

Prepare and submit your applicationThe application cess will vary largely based on the type of lender you choose

Bank and SBA lenders, for instance, typically require extensive documentation and may require you to visit a branch to apply

Online lenders, on the other hand, often use automated nology to line the application cess, with minimal documentation required

In any case, you should be prepared to vide the ing:Basic information you and your

Personal and bank statements

Personal and tax returns

Review your loan agreement and get fundsAfter you’ve submitted your application and received apval, your lender will vide you with an equipment loan agreement

You should review the loan agreement carefully and make sure you understand all the terms and conditions

If you have any questions or concerns, reach out to your lender for clarification before signing

Once you’ve signed the agreement, your lender will transfer the funds to your bank account

Transfers may take a few days (and this can vary based on your bank), but once you have access to your funds, you can use them to purchase your equipment

Should you finance new or used equipment

Whether or not you should buy new or used equipment depends largely on your individual needs and financial situation

To help you decide, however, consider the ing:Buy new if:You want the nology with the most advanced features

Reliability is a priority — new equipment is less ly to have mechanical issues and often includes a warranty

You want to maximize the lifespan of your equipment

You have strong credentials and can afford to pay back financing for a new equipment purchase

Buy used if:You’re on a tight budget and need to buy equipment at a lower price

You have weaker qualifications and might not get apved for a larger loan amount

You operate in an industry, farming or agriculture, where used equipment can perform just as well as new, without the higher cost

The equipment isn’t crucial to your day-to-day operations/is for occasional use — and it makes more sense to invest less upfront

The authorRanda KrissRanda Kriss is a senior writer and NerdWallet authority on small

She has nearly a decade of experience in digital content

Her work has been by The Washington Post, The Associated Press and Nasdaq, among others

Randa earned a bachelor's degree in English and Spanish at Iona University (formerly Iona College)