Day One Equipment: How Startups Can Finance Equipment With No Business History

Starting a business that needs equipment can feel like a catch-22: you need equipment to generate revenue, but lenders want to see revenue before they will fund equipment. The good news is that equipment financing is uniquely accessible to startups because the equipment itself serves as collateral.

This guide covers the various paths startups can take to finance equipment, even with minimal or no business history.

Why Equipment Financing Works for Startups

Equipment financing is often called "self-collateralizing" because the equipment you are purchasing secures the loan. This fundamentally changes the risk equation for lenders.

• Tangible collateral: If you default, the lender can repossess and sell the equipment
• Known value: Equipment has determinable fair market value
• Essential to business: Equipment generates the revenue to make payments
• Lower lender risk: Collateral reduces reliance on business history
• Industry precedent: Lenders have experience with startups in equipment-heavy industries

Startup Equipment Financing Requirements

While requirements vary by lender, here is what startups typically need to qualify:

The Role of Personal Credit

For startups without established business credit, personal credit becomes the primary indicator of creditworthiness. Your personal credit score, payment history, and debt-to-income ratio will significantly impact approval and terms.

The following are general guidelines only. Actual rates, terms, and approval thresholds vary significantly by lender, loan amount, equipment type, and overall financial profile. Always obtain quotes from multiple lenders to understand your specific options.

• 750+: Best rates, minimal down payment, highest approval odds
• 700-749: Very good rates, standard terms, strong approval chances
• 650-699: Moderate rates, may need 15-20% down, good approval odds
• 600-649: Higher rates, likely 20-30% down, approval possible
• 550-599: Limited options, highest rates, 25-40% down typical
• Below 550: Very limited options, may need co-signer or alternative path

Down Payment Strategies for Startups

A larger down payment can overcome a shorter business history or lower credit score. It also reduces your monthly payment and total interest cost.

SBA Microloans for Startup Equipment

The SBA Microloan program provides loans up to $50,000 specifically designed for startups and small businesses that might not qualify for traditional financing. Program details are per SBA.gov; rates and terms are set by individual intermediary lenders and may vary.

• Loan amounts: Up to $50,000 (average around $14,000 per SBA)
• Terms: Up to 6 years
• Rates: Typically 8-13% (varies by intermediary lender and creditworthiness)
• Time in business: No minimum - startups eligible
• Use of funds: Equipment, inventory, working capital, fixtures
• Collateral: Required but more flexible than traditional loans
• Training: Some programs require business training component

Vendor and Manufacturer Financing

Many equipment manufacturers and dealers offer their own financing programs, often with more flexible terms for new businesses. They have a vested interest in selling equipment and may accept more risk than traditional lenders.

• Promotional rates: 0% or low interest for qualified buyers
• Deferred payments: Start paying 90-180 days after delivery
• Lower credit requirements: Manufacturer knows equipment value
• Bundled deals: Financing included with equipment purchase
• Trade-in programs: Credit for older equipment toward new purchase
• Seasonal payments: Aligned with business cash flow cycles

Equipment Leasing for Startups

Leasing can be more accessible than loans for startups because the lessor retains ownership of the equipment, reducing their risk.

• Lower barrier to entry: Often requires only first and last payment
• No large down payment: Preserves startup capital
• Easier approval: Lessor owns the asset throughout
• Flexible end options: Return, renew, or purchase
• Potential higher total cost: Trade-off for easier access

Alternative Paths to Equipment

If traditional equipment financing is not available, consider these alternatives:

• Used equipment: Lower price point, easier to finance, proven reliability
• Equipment rental: Short-term rental to prove concept, upgrade later
• Rent-to-own: Build equity while testing the equipment
• Revenue-based financing: Pay back as a percentage of revenue
• Business credit cards: For smaller equipment purchases under $25,000
• Personal loans: May offer better rates with strong personal credit
• Friends and family: Informal loans with clear repayment terms
• Crowdfunding: For unique or community-focused businesses
• Angel investors: Equity in exchange for capital

Building Toward Better Terms

If you cannot get ideal terms today, you can work toward better financing in the future.

• Start with smaller equipment purchases to build payment history
• Use a business credit card responsibly to establish business credit
• Keep personal credit clean - it matters for years
• Build 6-12 months of operating history before major purchases
• Maintain clean financial records and bank statements
• Consider leasing initially, then refinancing to a loan later

Preparing Your Startup Application

To maximize your approval chances, prepare these items before applying:

• Detailed equipment quote with make, model, and price
• Business plan explaining how equipment will generate revenue
• Personal financial statement showing assets and liabilities
• Three months of personal bank statements
• Business bank statements if available
• Resume or CV showing relevant industry experience
• Down payment funds readily available
• Business licenses and formation documents
• Tax returns (personal if no business returns yet)

Red Flags to Avoid

When seeking equipment financing as a startup, watch out for these warning signs:

• Upfront fees before approval: Legitimate lenders do not charge application fees
• Guaranteed approval: No lender can guarantee approval without review
• Pressure to sign quickly: Take time to review terms and compare
• Vague payment terms: All fees and rates should be clearly disclosed
• No physical address: Verify the lender is legitimate and established
• Extremely low rates: If it sounds too good to be true, it probably is