Equipment Financing vs. Line of Credit: Compare Business Funding
Equipment financing vs. line of credit — asset-specific loans vs. revolving working capital access for your business.
Equipment Financing: Equipment financing uses the purchased equipment as collateral, making it one of the most accessible forms of business funding for asset-heavy industries. Business Line of Credit: A revolving business line of credit lets you draw funds as needed up to a set limit and only pay interest on what you use.
Equipment Financing vs. Business Line of Credit — side by side
| Equipment Financing | Business Line of Credit | |
|---|---|---|
| Typical amount | $5,000 – $5,000,000 | $10,000 – $500,000 |
| Typical term | 2 – 7 years | Revolving (12 – 24 month draw period) |
| Rate | 6% – 24% APR | 8% – 36% APR |
| Minimum time in business | 1 year | 6 months |
| Minimum credit score | 600+ | 580+ |
Which is right for your business?
- Equipment Financing tends to fit best when you need machinery or vehicles.
- Business Line of Credit tends to fit best when you need ongoing cash flow or seasonal inventory.
Frequently asked questions
Does using my line of credit for equipment affect available credit?
Yes — drawing your line for equipment permanently reduces capacity until repaid, leaving less buffer for working capital. Equipment financing keeps your line untouched. Each product works best when matched to its intended use.
Which builds business credit faster?
Both build credit when reported to business credit bureaus. Equipment loans demonstrate installment debt management; lines of credit demonstrate revolving credit management. Having both on your profile is ideal for a strong Paydex score.
