What are the four ways to finance equipment?
A term loan against the asset, a lease, inclusion in an asset-based borrowing base, or a sale-leaseback of equipment already owned. Small-ticket comparisons treat these as interchangeable products differing only in rate. At fleet or plant scale they are different balance-sheet positions, and the differences outlast the pricing.
The loan buys ownership and residual value, ties up a deposit, and adds fixed amortization to debt service. The lease trades residual value for lower periodic payments and flexibility at term end, with the fair-market-value and dollar-buyout variants sitting at opposite ends of that trade: the first is closer to renting, the second is a loan wearing lease documentation. Folding equipment into an asset-based facility borrows against what is already owned without a separate instrument. And the sale-leaseback runs the whole question in reverse, converting owned equipment back into capital and a payment stream.
No lender frames the choice this way, because each lender sells exactly one of the four. A bank quotes its equipment loan against another bank's equipment loan; a lessor compares leasing to buying; an asset-based lender prices the base it can control. The comparison that matters, all four against the company's ownership horizon and existing capital structure, is the one the borrower has to assemble alone, and it is the frame for everything below.
| Term loan | Lease | In the borrowing base | Sale-leaseback | |
|---|---|---|---|---|
| Who owns the asset | The business | The lessor | The business | The buyer-lessor |
| What it consumes | Debt capacity and a deposit | Fixed-charge headroom | Capped base capacity | The asset itself |
| Residual value | Kept | Traded away (FMV) or kept (buyout) | Kept | Traded away |
| Capacity it frees | None | Deposit stays in the business | No separate instrument | Capital out of owned equipment |
| Fits best when | Run-to-end-of-life assets | Technology or contract cycles | Facility already in place | Appraisal-rich, liquidity-poor |
“Mid-market owners come in asking which lender has the best equipment rate. The better question is which structure they want to be sitting in three years from now, because the rate difference is small and the structural difference is not.”
What do equipment financing rates depend on?
The base rate, the credit of the borrower, the quality and liquidity of the asset, and the tenor against the asset's useful life. Equipment debt is priced as a spread over a funding benchmark, and the spread widens as the borrower's credit weakens, the asset becomes harder to resell, or the term stretches toward the end of the equipment's economic life.
We do not quote a current rate table here, and the reason is worth a paragraph. The equipment rates published online are overwhelmingly small-ticket figures: online lenders and brokers quoting for transactions a fraction of fleet scale, where pricing reflects a different credit process and a different loss experience. A mid-sized business that anchors on those tables will either be pleasantly surprised by a bank quote or, worse, conclude the small-ticket lender is competitive and pay a spread built for a market it is not in. No published, citable series covers negotiated mid-market equipment pricing, and a number invented to fill that gap would be worth less than the explanation of why it cannot exist.
What a borrower can control is the spread's inputs. Financial statements that support the credit story, an asset spec with a documented secondary market, a tenor that leaves the lender residual cushion, and competing term sheets from more than one structure, not just more than one bank, each move pricing more reliably than negotiating the quoted rate on a single proposal.
How do liquidation-value appraisals set borrowing capacity?
Lenders lend against what the equipment would fetch in a disposal, not what it cost. The standard for that number is a liquidation-value appraisal: orderly liquidation value assumes a reasonable marketing period, forced liquidation value assumes an auction under time pressure, and the gap between the two is the price of urgency. Bank supervision points the same way: the OCC's asset-based lending handbook instructs that appraisals provide net orderly liquidation value as the standard for collateral valuation, not cost or retail value (OCC, Comptroller's Handbook: Asset-Based Lending, version 1.1, January 2017).
Advance rates are then set against the appraised figure, and for equipment they are negotiated per facility rather than published as a range: the same handbook records common advance rates of 70 to 85 percent against eligible receivables and a traditional 80 percent of net orderly liquidation value for inventory, but for fixed assets it sets the appraisal standard and leaves the percentage to the credit. Specialized, installed, or single-purpose machinery appraises far below general-purpose equipment with a liquid used market, and the advance rate compounds the difference.
The practical consequence runs in both directions. Before a financing, the appraisal is worth commissioning early, because it sizes every structure on the previous list at once. And during one, the appraisal clause matters: reappraisal frequency and who bears its cost are negotiated terms, and a right the lender exercises in a downturn against a soft used-equipment market is a borrowing-capacity cut arriving at the worst time.
How does the equipment decision interact with the credit line?
Directly, and this is the interaction the product comparisons omit. If the business runs an asset-based facility, equipment can sit inside the borrowing base, but supervisory guidance treats fixed assets as the marginal collateral: an asset-based structure should rest on working assets, with less-liquid collateral like equipment generally limited to a small percentage of the base (OCC, Comptroller's Handbook: Asset-Based Lending, version 1.1, January 2017). Equipment in the base is capacity, but capped capacity, and it is the first component a nervous lender trims.
Financing the equipment outside the facility changes the facility's arithmetic too. A new term loan adds fixed charges to the coverage covenant; a lease may or may not, depending on how the covenant definitions treat lease obligations, which is a drafting point worth settling before signing rather than at the first test. And equipment pledged to an equipment lender is equipment unavailable to the working-capital lender, a priority conversation that goes better when it happens before both commitments exist.
The sale-leaseback is the interaction run deliberately: owned equipment leaves the balance sheet, capital comes in, and the fixed-charge line inherits the rent. For a business whose equipment is appraisal-rich and whose borrowing base is receivables-poor, that trade can fund growth no working-capital facility would. The linked position on sale-leasebacks carries the mechanics; the point here is that it belongs in the same decision as the loan and the lease, not in a separate one labelled real estate.
How should an owner decide between the four?
Ownership horizon first. Equipment the business will run to the end of its useful life argues for owning it, through a loan or a dollar-buyout lease; equipment that turns over with technology cycles or contract cycles argues for the fair-market-value lease and someone else's residual risk. The structure should match how long the asset genuinely serves the business, not how the payment compares this quarter.
Balance-sheet strategy second. A business preserving debt capacity for an acquisition wants the structure that consumes least of it; a business maximizing current liquidity may want the sale-leaseback even at a higher implied cost; a business already tight against a fixed-charge covenant needs to model each structure against the definitions before pricing anything. Tax treatment differs across all four, materially and by jurisdiction, and it is a question for the company's tax advisers rather than this page: the observation that survives here is only that the after-tax comparison can reorder the pre-tax one.
Then, and only then, the rate. Priced from competing term sheets across at least two of the four structures, against the appraisal already in hand. Run in that order, the process usually ends somewhere the first quote would never have suggested, which is the argument for treating a seven-figure equipment programme as a financing decision rather than a procurement line.
As of September 2026
Sources: OCC, Comptroller's Handbook: Asset-Based Lending, version 1.1, January 2017 (net orderly liquidation value as the appraisal standard; common receivables advance rates of 70 to 85 percent; inventory advance rates traditionally at 80 percent of NOLV; fixed assets generally limited to a small percentage of an asset-based borrowing base). No current equipment loan or lease rate is quoted anywhere in this article: no published, citable market series exists for negotiated mid-market equipment financing pricing, and the rate tables available online describe small-ticket lending, a different market. The four-structure comparison is market convention, described figure-free.
This position sits within our equipment financing practice.