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By Travis Yule — CEO & Founder, Full Send Funding
Published 2025-10-06 · Updated 2026-09-30
When the money buys a physical asset, the asset can back the deal — better pricing, longer terms, easier approval. The trap is a blanket lien instead of a specific one.
In one sentence: Equipment financing lets the asset carry part of the risk, which usually buys a longer term and a lower cost than unsecured money; what decides the terms is the asset’s resale market, the term against its useful life, and how specific the lien is.
Most small-business funding is unsecured, and priced accordingly. Equipment financing works the other way: when the money buys a physical asset, the asset itself can back the deal — and that usually makes it the best-priced structure available to a young or credit-challenged business. We arrange equipment financing through a direct lending partner; what we fund in house is working capital, which can pay for equipment too.
What the structure costs is set by the partner and stated in writing with its other terms, and it can vary a long way between two files that look alike. A credit score sets part of the price, as it does on most files. What decides the rest is three further questions the score cannot answer: whether the machine has a resale market a lender can actually reach, whether the term sits inside the asset's remaining life, and how much of the invoice is the asset at all. Those three questions are decided inside the file, where the applicant does not usually get to look, and they are what this article is about.
An unsecured advance is priced for the possibility that if things go wrong there is nothing to recover. An equipment facility has something to recover. That is the whole of the difference, and three consequences follow from it, all three in your favour: better pricing, because the risk is collateralised; longer terms, matched roughly to the useful life of the asset rather than to a cash-flow window; and easier approval, because part of the underwriting question is answered by the equipment.
What we fund in house works the other way. No collateral is required on anything we fund in house. On deals up to $2 million, our working-capital agreements carry no UCC-1 lien filed against the business and no confession of judgment. Equipment financing is arranged through a direct lending partner, only after talking through the options with you and only if you choose to, at no fee to you; the partner’s terms, including any filing on the equipment, are set out in writing before anything is signed.
The security interest on an equipment facility is usually specific — it attaches to the financed asset, not to everything the business owns, and its reach is set by the collateral description on the filing.[2] That distinction matters a great deal for what you can do next, and it is worth being explicit about it, because a blanket lien over all business assets is a different animal and can block your next facility.
The practical test is one line on one form. A filing that names a machine by serial number reaches that machine and stops. A filing that reads "all assets now owned or hereafter acquired" reaches the receivables a factor would lend against, the inventory an asset-based lender would count against a borrowing base, and everything you buy next year. Two offers at the same cost of capital, one filing specifically and one filing a blanket, are not the same offer, and the difference appears nowhere in the pricing. Ask which is being filed, ask for the answer in writing, and ask before you sign rather than after.
Build out a realistic invoice for an $80,000 machine: $80,000 for the asset, $6,400 of sales tax at 8%, $3,200 of freight and rigging, and $2,400 to install and commission it. The invoice totals $92,000, of which $12,000 — about 13% — is soft cost. Every dollar of it is real, most of it is financeable, and none of it exists the moment the machine leaves your yard. Freight is not an asset. Installation is not an asset. Sales tax is emphatically not an asset.
Then apply the second haircut, the one nobody quotes you. Assume the machine would fetch 75% of its price in a quick sale — an assumption, stated so you can substitute your own; a lender with auction comparables will use theirs, and on a soft market it will be lower. That is $60,000 of realisable security against a $92,000 invoice, leaving about $32,000, or roughly 35% of the invoice, with nothing behind it at all.
This is why an equipment facility is not a pawn transaction and why a strong machine does not rescue a weak file. The collateral covers part of the exposure; it never covers all of it, and it covers least in the first year, when depreciation is steepest and the balance is highest. The rest is covered by the business.
The first question on the file is not what the machine cost. It is who else wants one.
A late-model excavator, box truck, dental chair or commercial fryer from a major manufacturer has an active secondary market with results a lender can look up, and it underwrites easily. A bespoke fabrication rig built to one customer's specification has three plausible buyers in the country, whatever it cost to build, and a lender that cannot sell the collateral prices the deal as though there were none. Our own equipment financing page says it plainly: security that cannot be resold does not function as security.
Two other things get checked that applicants rarely anticipate. The serial number goes into a search for existing filings, because a machine that already secures somebody else's money is not available to secure a new facility. And a purchase between related parties — a sale from an affiliate, a spouse's company, an entity with the same address — gets read closely, because the price in a related-party sale is chosen rather than negotiated, and a chosen price is not evidence of value.
The projection of what the machine will earn is yours. The deposits are the bank's. When those two disagree, a lender works from the deposits, and it is the most common surprise in an equipment file: the machine was fine and the account was not.
The arithmetic is small enough to do yourself. A $2,200 monthly payment against $40,000 of monthly deposits is 5.5% of revenue committed to that one obligation, which is comfortable. Add an existing advance taking $4,000 a month and the combined figure is $6,200, or 15.5%, a heavier share — and why applications are declined sets out how a share like that is judged against the rest of the file. The machine does not change either number. This is also why what four months of bank statements say about you still matters on an equipment file: average daily balance, deposit consistency, negative days and existing positions decide whether the payment fits, and the asset decides what the payment costs.
Equipment deals fail on sequence more often than on credit. The steps, in the order they actually happen:
Two honest notes on speed. Our clock — a decision within 24 business hours and, on deals up to $2 million, funding within 24 hours of approval — is the clock for working capital we fund in house; an equipment facility runs on the partner's timeline, and even there the approval is conditional until the certificate, the title and the acceptance are in, which run on the vendor's calendar and your state's. A clean working-capital file submitted before 2pm ET can fund the same day; an equipment file usually cannot, and the delay is almost never the lender. If the purchase is genuinely time-critical, say so at application — it changes which structure we would recommend.
Three structures get called equipment financing, and the difference between them is not the payment. It is what you own on the last day.
An equipment loan or finance agreement. You own the asset from day one and the lender holds a lien until the balance clears. The obligation is fixed, the asset is on your balance sheet, and when the last payment lands the lien should be released.
A $1 buyout lease. Called a lease, structured as a financed purchase: at the end you buy the asset for a nominal sum, so ownership was never really in doubt. Payments are usually close to a loan's, and it behaves like one.
A fair-market-value lease. The payment is lower, sometimes markedly, because the lessor keeps a residual interest in the asset. At the end you hand the machine back, renew, or buy it at whatever it is then worth — a number nobody has quoted you, on a date years away. The lower payment is not a discount; it is the portion of the asset you are not buying.
The question that settles which one you are being offered is short: what do I own on the last day, and at what price? If the answer is a number, it is a purchase. If the answer is "market value at that time", it is a rental with a long fuse.
There is a tax dimension and it belongs to your accountant, not to your salesperson. Financing does not change the tax treatment of a purchase: equipment bought on a loan can generally still be expensed under Section 179 in the year it is placed in service, within the annual limits the IRS publishes, while a lease is treated on its own terms.[1] The timing consequences of that — what it does to a December purchase, what the income cap does in a loss year, and what bonus depreciation does alongside it — are worked through in detail in the capital-allocation piece on iron versus cash, which also runs the own-versus-rent break-even. This article will not repeat that arithmetic.
Unsecured funding is sized off revenue. A business depositing $40,000 a month sits in our published band of 80% to 150% of monthly revenue, which is $32,000 to $60,000 — and if that business needs a $92,000 machine, the obvious reading is that it does not qualify.
The obvious reading is often wrong, and this is the most useful thing on this page for a business that has been told no. An equipment facility is sized against the equipment rather than the revenue multiple: a lender tracks the cost of the asset and its resale value. Direct lending partners often finance the full quoted amount, depending on your revenue and the equipment; the partner’s terms, including the amount, the price and any filing on the equipment, are set out in writing before anything is signed. The revenue test does not disappear — it changes shape, from how large an advance can this revenue support to can this account carry this payment, which is the 5.5% arithmetic above and a far easier bar to clear on a long term than on a short one.
If you are working out what the business can carry across both structures at once, the sizing arithmetic is set out separately; the short version is that they are two different questions and a good file asks both.
Used equipment is financeable, and often sensibly so — a five-year-old machine at half the price with two-thirds of its life remaining is frequently the better capital decision. What changes is the evidence: hours or mileage, maintenance records, and a resale market that a lender will check by model year rather than by model. Expect a shorter term or a larger deposit where the age eats into the remaining life.
The useful-life test is arithmetic, not judgement. A machine with roughly 12,000 hours of economic life left, running 1,800 hours a year, has about six years and eight months of earning in it — 12,000 divided by 1,800 — so a three-year term ends with more than half its life unspent. Run the same test on a machine already carrying 9,000 hours on the clock and the answer changes, which is why the term offered on a used asset is shorter and why that is a structural decision rather than a pricing one.
Private-party purchases are usually possible and always slower: a bill of sale, proof of clear title, a lien search against the seller, and often an inspection. A dealer transaction is faster because the paperwork is standard and the dealer has done it before. The tightest version of this is an auction with a 48-hour settlement window, where the calendar the equipment file needs simply does not exist — plan the financing before the paddle goes up, not after.
Broader than most owners assume. Vehicles and trailers, construction and heavy equipment, machine tools and production equipment, commercial kitchen and refrigeration, medical and dental equipment, HVAC systems, the lifts and diagnostic systems in an auto shop, a gym's cardio and strength equipment, IT and point-of-sale infrastructure, and often the installation and freight required to put a machine into service.
The test is whether the thing is tangible, identifiable and resaleable. Three common line items fail it, and they are worth knowing before you build a budget around them: software licences, which are not resaleable and often not transferable; leasehold improvements, which belong to the building rather than to you; and training or extended warranty, which is a service. Any of them may still ride along on a file with enough asset behind it, at the lender's discretion — but they are the first thing cut when a file is tight, so ask specifically rather than assuming.
A real decision, and one worth making deliberately rather than by default. Working capital funding is faster and unrestricted — the money arrives and you spend it on whatever you like, including a machine. Equipment financing is slower, restricted to the asset, and cheaper.
Where a purchase is urgent and the equipment paperwork will not close in time, using working capital and refinancing later is a legitimate sequence — do it knowingly rather than by drift.
The rule that holds up: match the term of the money to the life of what it buys. A machine that earns for seven years should not be paid for out of a nine-month remittance, because the payment ends long before the asset stops producing and the cash-flow strain lands entirely in year one. Conversely, a genuine timing gap in the operating cycle should not be financed over three years.
There is a second consideration for contractors: equipment debt consumes bonding capacity, because the current portion sits in current liabilities and reduces the working capital a surety counts. If you are bonded, that is a real cost to weigh against the price advantage.
The table's last line is the one to act on: if you take the faster money, price the short instrument against the equipment facility before you sign, so the refinance is a plan rather than a rescue.
The structure runs in reverse too, and almost nobody asks about it. A business holding unencumbered equipment — a paid-off truck, a line of machines bought out of cash flow in a good year — can sell those assets to a funder and lease them back, keeping them in service while converting them into working capital. Raising cash against equipment you already own — refinancing it, or selling it to a funder and leasing it back — is also arranged through a direct lending partner, at no fee to you, on the partner’s written terms. The lien moves onto the machine; the machine does not move.
Two situations where it is the right call. The first is the one above in reverse: a business that paid cash for iron and now finds the operating cycle short of the money that bought it. The second is the exit from a mistake — equipment bought on a short working-capital instrument, where refinancing the asset onto an equipment term extends the term, cuts the remittance to something the machine itself can pay, and moves most of the balance out of the current portion. It is not free, and every consideration on this page applies to it: check the lien description, check the term against the remaining life, and check the total cost in dollars.
The obvious answer — the collateral makes it cheaper, so use it — is wrong often enough to name the cases.
The purchase is too small to carry the process. A $9,000 tool package still needs a quote, a lien search, an insurance endorsement and a signed acceptance, and the tool is usually needed this week. The price advantage is real at any size, but on a small purchase it is small in dollars, it is the only advantage on the table, and it is what you weigh against a week of calendar. If the tool earns from Monday, the faster money is often the right answer.
The cheaper offer files a blanket. An equipment quote at a lower cost of capital that reaches all assets now owned or hereafter acquired is not the cheaper offer; it is a cheaper payment attached to a decision about your next three years of financing. Price the lien, not just the money.
It is not really equipment. If a large share of what you are financing is software, training, warranty or leasehold work, expect the pricing of an unsecured file whatever the product is called. Know that going in so it does not read as a bait and switch.
You still owe money on the machine it replaces. Rolling a shortfall on the old asset into the new facility finances a machine you no longer own, on a term set by one you do. It is sometimes the only way through, and it is never cheap — get the payoff figure on the old obligation before you agree to anything on the new one, and treat the difference as what it is.
Three things, honestly. It cannot tell you what your machine is worth, because that is a market question answered by comparables a lender pulls and a dealer disputes. It cannot tell you whether a particular agreement is a lease or a sale in substance — that turns on the document and on the law of your state, and a commercial attorney reading the actual paper is the only reliable answer. And it cannot tell you what your deduction is: the federal treatment is one thing, state conformity is another, and both belong to your CPA.
What it can tell you is what will be asked and in what order, which is most of what makes an equipment deal go slowly or quickly.
The collateral is the product. It usually buys a lower cost, a longer term and an approval a thin file would not otherwise get. What moves an equipment file on price is the asset's resale market, the term against its remaining life, and how much of the invoice is actually the asset — on a $92,000 invoice carrying $12,000 of soft costs, and a machine worth $60,000 in a quick sale, about 35% of that invoice has nothing behind it. That is why the bank statements still decide the file, and why the payment is tested against your deposits rather than against the machine's projected earnings. Keep the lien specific, keep the term inside the life, and read the end of a lease before you read the payment.
If you have a quote in hand, send it with the application, and we will talk through both routes with you. Equipment financing is arranged through a direct lending partner, only after talking through the options with you and only if you choose to, at no fee to you; the partner’s terms, including any filing on the equipment, are set out in writing before anything is signed. Our unsecured funding is working capital we fund in house, from $5,000 to $10 million against monthly revenue, and it can pay for equipment too. No collateral is required on anything we fund in house. Our floor for every application is four months in business and $10,000 a month in revenue, and applying uses a soft credit pull only. Or call 518-312-0382 and ask about both.
Security interests, perfection and lease characterisation are governed by state law and by the documents themselves. This is information rather than legal advice; a commercial attorney should read anything that puts a lien on business assets.
The comparison table sets equipment financing against unsecured working capital directionally rather than as figures: equipment financing is arranged through a direct lending partner whose terms depend on the asset and the file and are not published here. The worked figures in the text are illustrations from stated inputs, not quotes: an invoice built at $80,000 plus 8% sales tax, $3,200 of freight and $2,400 of installation; a quick-sale recovery assumed at 75% of the asset price, which a lender with auction comparables will replace with its own; and a $2,200 monthly payment tested against $40,000 of monthly deposits. The useful-life division is 12,000 remaining hours over 1,800 hours a year. The tax point is stated from the IRS publication cited and is general — a business's own adviser decides its deduction. The point about the reach of a security interest is stated from the model text of Article 9.
The lender takes a security interest in the specific machine, vehicle or system being financed, so if the obligation is not met the asset can be recovered. That lower risk shows up as better pricing, longer terms matched roughly to the asset’s useful life, and easier approval — because part of the underwriting question is answered by the equipment itself rather than by your history.
It depends on what else the cash is doing. Financing preserves working capital for the operating cycle, which is where most businesses are actually constrained, and matches the cost of the asset to the period it earns over. Paying cash avoids financing cost but converts liquid capital into an illiquid asset — which is precisely the position that forces expensive borrowing three months later.
It can be, and it is often the better capital decision — a five-year-old machine at half the price with two-thirds of its life remaining frequently beats new. Expect closer scrutiny of condition, hours and the resale market, and sometimes a shorter term or a larger down payment. Private-party purchases are usually possible but need a bill of sale, proof of clear title and often an inspection, so allow more time than a dealer transaction.
Less than for the equivalent unsecured facility, which is much of the point. Because the asset backs the deal, a business with strong revenue and thin history or a rough credit file often qualifies at a workable price where unsecured funding would be expensive. Cash flow is still the primary question — collateral improves terms rather than replacing the ability to pay.
Broader than most owners assume: vehicles and trailers, construction and heavy equipment, machine tools and production equipment, commercial kitchen and refrigeration, medical and dental equipment, HVAC systems, IT and point-of-sale infrastructure, and often the freight and installation required to put a machine into service. If it is a tangible, identifiable, resaleable asset used in the business, it is usually financeable. Ask specifically about soft costs like training or software.
Usually yes, because the term should match the life of what the money buys. A machine that earns for seven years should not be repaid out of a nine-month remittance — the payment ends long before the asset stops producing and the strain lands entirely in year one. Where a purchase is urgent and the equipment paperwork will not close in time, using working capital and refinancing later is legitimate, but do it knowingly rather than by drift.
Yes, and contractors should weigh it. A surety sizes capacity off adjusted working capital, and the current portion of equipment debt sits in current liabilities, reducing that figure — so a machine financed on a short term can cost meaningful bidding room. A longer term keeps more of the balance out of the current portion, which is one reason term structure matters more for bonded contractors than the rate alone.
Whether the security interest is specific to the asset or a blanket lien over all business assets; whether the term sits inside the asset’s useful life; the total cost of the facility in dollars rather than the monthly payment; whether there is a prepayment penalty; who carries insurance and maintenance risk; and, if it is a lease rather than a loan, what happens at the end — a $1 buyout and a fair-market-value buyout are very different deals.
What you own on the last day. On a loan or finance agreement you own the asset from day one and the lender holds a lien until the balance clears. On a $1 buyout lease you buy it at the end for a nominal sum, which makes it a financed purchase in substance. On a fair-market-value lease the payment is lower because the lessor keeps a residual interest, and at the end you hand the machine back, renew, or buy it at whatever it is then worth — a price nobody has quoted you. Ask the question directly: what do I own on the last day, and at what price?
On most equipment structures the funds go to the seller against their invoice rather than into your operating account, because the facility exists to buy that specific asset. That is also why a vendor quote with a serial number is the first document in the file rather than the last. A deposit you have already paid the vendor can sometimes be reimbursed out of the funding and sometimes cannot, so ask before you pay it.
Usually yes, and it is worth knowing what you are asking for. On an $80,000 machine, $6,400 of sales tax at 8%, $3,200 of freight and rigging and $2,400 of installation take the invoice to $92,000, and that $12,000 of soft cost has no resale value at all — the lender is secured on the machine and unsecured on the rest. Most files carry it. A tight file cuts it first, so ask specifically rather than assuming it is included.
Two structures do it. One is refinancing the machine onto an equipment term — the standard exit from equipment bought on a short working-capital instrument, which extends the term and cuts the payment to something the asset itself can carry, at a new price. The other is a sale-leaseback, in which a business sells unencumbered equipment to a funder and leases it back, so the asset keeps working while it converts into working capital. Raising cash against equipment you already own — refinancing it, or selling it to a funder and leasing it back — is also arranged through a direct lending partner, at no fee to you, on the partner’s written terms. Every check on a new purchase applies: the lien description, the term against remaining life, and the total cost in dollars.
Because the collateral sets the price and the bank account sets the answer. Strip soft costs out of the invoice and apply a quick-sale haircut and the realisable security is well below the amount financed, so the payment still has to fit the deposits. A file already committing a heavy share of deposits to existing positions cannot carry another debit whatever the machine is worth. The other common cause is the asset itself: equipment with no real secondary market is underwritten as though there were no security at all.
Travis Yule worked in business funding before starting Full Send Funding in 2021, and has more than five years in business funding in all. He leads the company from Middle Grove, New York, and writes about working capital from the underwriting side of the table — what the numbers actually have to say before a business gets funded.