Equipment Financing Options Compared
Side-by-side comparison of the main ways to acquire business equipment.
This table compares types of financing, not individual providers or prices. Rates and terms change with credit, equipment and market conditions, so use the table to decide which structure to ask for and then compare written quotes.
Select a column header to sort.
| Option | How it works | Good for | Watch out for |
|---|---|---|---|
| Fair market value (FMV) lease | Lower payments based on the equipment's expected value at the end; at the end you return it, renew or buy at fair market value. | Technology and equipment that loses value or becomes outdated quickly. | Purchase price at the end is not fixed; return conditions and renewal clauses can be costly. |
| $1 buyout lease | Payments cover nearly the full cost; you buy the equipment for $1 (or a nominal sum) at the end. | Equipment you plan to keep for its full useful life. | Higher payments than FMV; you are responsible for the asset as an owner in most respects. |
| 10% purchase option lease | Fixed purchase option, often a stated percentage of original cost, at the end of the term. | Buyers who want a middle path between FMV and a $1 buyout. | The percentage may exceed real market value; confirm exactly how the option is defined. |
| Equipment finance agreement (loan) | Lender finances the purchase and takes a security interest; you own the equipment from day one. | Businesses that want ownership, depreciation and a clear payoff. | Down payment may be required; the whole price is borrowed against your credit. |
| Bank or SBA term loan | Traditional loan, sometimes SBA-guaranteed, used to buy equipment outright. | Established businesses with strong credit wanting lower rates. | Slower approval and heavier documentation; collateral and personal guarantees are common. |
| TRAC lease (vehicles) | Terminal rental adjustment clause lease for commercial vehicles with a stated residual that the lessee may share in or guarantee. | Fleets and tractor-trailers or work trucks. | Residual risk can shift to you; review the clause with an advisor. |
| Short-term or seasonal rental | Rent equipment for days or months without long-term commitment. | One-off projects, peak seasons and testing a machine before committing. | Per-month cost is typically higher; availability and maintenance terms vary. |
| Sale-leaseback | You sell equipment you already own to a lessor and lease it back to free up cash. | Raising working capital from paid-off machinery. | You give up ownership and pay financing costs; tax and accounting treatment needs professional review. |
Ownership, tax treatment and accounting treatment depend on the contract language, not the label on the proposal. For tax questions see the IRS; for lease accounting see the FASB and your CPA; for industry background see the Equipment Leasing and Finance Association. Always request written quotes that show total payments, fees and the end-of-term price.