Equipment financing funds the purchase or use of business equipment, with the equipment serving as collateral. Lakeshire Business Funding, a small-business funding broker in Duluth, Minnesota, explains loans, finance leases, operating leases and equipment finance agreements, used equipment and contractor vehicles, then introduces requests to lending partners, which make credit decisions and set rates and terms.
| Security | The equipment being financed |
|---|---|
| Structures | Loan, finance lease, operating lease or EFA |
| New or used | Either, depending on the partner and the machine |
| Construction employers | 572 in St. Louis County (Census CBP 2023) |
| Food service employers | 421 in St. Louis County (Census CBP 2023) |
| Who decides | The lending partner |
Four structures, one machine
| Structure | Owner while payments run | At the end | Typical reason to choose it |
|---|---|---|---|
| Equipment loan | You; the lender holds a lien | Lien released; you own it outright | You want to own a long-lived asset |
| Equipment finance agreement (EFA) | You, under a financing contract | You own it | Simpler paperwork than a loan with similar ownership |
| Finance lease | The lessor | Usually a purchase for a nominal or set amount | Ownership in substance, with lease paperwork |
| Operating lease | The lessor | Return, renew or buy at fair value | Equipment that dates quickly, or use without ownership |
The labels vary between companies, so read the end-of-term clause in any agreement rather than relying on the name. How each structure is treated for tax and accounting purposes is a question for your accountant.
Equipment financing vs leasing
Financing builds ownership: once the last payment is made, the equipment is yours. Leasing pays for use: at the end you return the item, renew, or buy it at whatever price the lease sets. A finance lease with a nominal buyout behaves almost like a loan; an operating lease behaves like a rental. If the equipment will be useful for many years, ownership usually costs less over time. If it will be obsolete in a few, a lease can avoid being stuck with it.
Equipment loan vs a general business loan
A term loan can buy equipment too, but an equipment loan has an advantage: the asset secures the debt, so the partner may ask for less additional collateral. A general business loan makes more sense when the purchase is a mix of items, installation and other costs that do not add up to one identifiable piece of equipment. A business loan to buy equipment and an equipment loan are often priced differently, so it can be worth asking for both.
Buying used, and financing work trucks
Many partners finance used equipment, though they may limit its age, require an inspection or an independent valuation, and set shorter terms. For private-party sales, expect the partner to verify the seller's ownership and check for existing liens on the item.
Contractors often finance work vehicles alongside machines: pickups with service bodies, dump trailers, compact track loaders and excavators. Our partners' confirmed sectors include construction; long-haul trucking is not a sector we arrange funding for.
What St. Louis County, MN businesses finance
In 2023 St. Louis County had 572 construction employer establishments, 366 of them specialty trade contractors, and 421 food service and drinking place establishments (U.S. Census Bureau, County Business Patterns 2023). Those two groups alone account for a large share of the equipment questions we hear: excavation and lifting machinery, trailers and tools for the trades, and ranges, refrigeration and ventilation for kitchens. Medical and dental offices, which our partners also work with, finance chairs, imaging and sterilization units.
The sector pages go into each trade's equipment in more detail, and the county's business profile has the full sector table.
Delivery, installation and other soft costs
The price on the quote is rarely the whole cost. Delivery, installation, training, software and extended service plans are often called soft costs. Some partners include them in the financed amount; others limit or exclude them. Ask before you sign the vendor's purchase order, so you know how much cash you will need on top of the financing.
Five questions for any equipment quote
- Is this a loan, an EFA or a lease, and who owns the item at the end?
- What is the payment, how often is it due, and for how many months?
- What is the total of all payments plus any buyout amount?
- Is a down payment required, and are soft costs included?
- Will a lien be filed on just this equipment or on all business assets?
Lien filings on equipment are public. The Minnesota UCC search guide shows how to check what is already filed against your business.
Documents equipment partners request
A vendor quote or invoice describing the equipment, business bank statements, and details of the business and its owners. Larger requests can add financial statements or tax returns. The four steps explain how a request moves from there.
By Lakeshire Business Funding · Updated
