Comparisons
Equipment financing vs. working capital: which should you use?
Buying a truck, an oven or a machine? You can finance the equipment itself or use general working capital. Here's how they compare.
When you need equipment, you have two broad options: finance the equipment directly, or use working capital funding and buy it outright.
Equipment financing
The equipment itself secures the financing. Because the funder has an asset backing the deal, payments are often lower and terms longer, matched to how long the equipment will last. You'll usually need a quote or invoice from the seller.
Working capital
General working capital can be used for anything, equipment included. It's often faster and needs less paperwork, but terms are shorter, so payments are higher.
Side by side
| Equipment financing | Working capital | |
|---|---|---|
| Use of funds | The specific equipment | Anything |
| Secured by | The equipment | Usually no specific collateral |
| Term | Longer, matched to the asset | Shorter |
| Paperwork | Quote or invoice | Bank statements |
| Speed | Days to a week or two | Often 1 to 3 days |
A simple rule of thumb
If the equipment will earn for years and you can wait a few days, equipment financing is usually the better deal. If you need it tomorrow, like a replacement for something that just broke, working capital gets you running fastest.
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This article is general information, not financial, legal or tax advice. Talk to a qualified professional about your situation.