Equipment financing pays for machinery, vehicles, technology and other business assets either with a loan, where the business owns the equipment from the start, or with a lease, where the lessor owns it and the business pays to use it. The choice affects the monthly cost, the cash needed upfront, what the business owns at the end and how the cost is deducted for tax. This guide is part of the personal loans, lines of credit and business borrowing hub.
Equipment Financing Options
| Option | Typical use | Typical rate | Max amount | Ownership |
|---|---|---|---|---|
| CSBFP loan | Small businesses (gross revenue of $10 million or less) | At most prime + 3% (floating) | $500,000 for equipment and leasehold improvements combined | You own it |
| Bank term loan | Established businesses with strong credit | 5–10% | Varies | You own it |
| Equipment lease | Preserving cash, fast-changing technology | 6–15% equivalent | Varies | Lessor owns it (often with an option to buy) |
| Manufacturer or vendor financing | Vehicles and heavy equipment | 0–8% (promotional) | Equipment value | You own it |
| Credit union loan | Local, relationship-based businesses | 6–12% | Varies | You own it |
| Online lender | Fast approval, fair credit | 10–25% | $5,000–$500,000 | You own it |
| Business line of credit | Ongoing smaller equipment needs | Prime + 1–5% | Credit limit | You own it |
CSBFP Equipment Loans
Under the federal Canada Small Business Financing Program, a bank or credit union can lend up to $500,000 for equipment and leasehold improvements combined, within the program’s $1 million term-loan limit, at no more than the lender’s prime rate + 3% (floating) plus a 2% registration fee; the lender takes security on the equipment financed. Who qualifies, the other limits and how to apply are covered in small business loans in Canada.
Buying vs Leasing
| Factor | Buying (loan) | Leasing |
|---|---|---|
| Monthly cost | Higher | Lower |
| Upfront cost | Often a 10–20% down payment | Often $0 or first and last payments |
| Ownership | You own the asset | Lessor owns it until a buyout |
| Tax deduction | Capital cost allowance (CCA) plus loan interest | Lease payments, as a business expense |
| End of term | You keep the equipment | Return, renew or buy at the residual value |
| Cash flow | Larger upfront commitment | Preserves working capital |
| Technology risk | You own equipment that may become obsolete | Return it and upgrade |
| Typical fit | Long-life equipment | Short-life equipment, preserving cash |
Worked Example: $50,000 of Equipment
| Buy (5-year loan at 7%) | Lease (5 years, quoted payment) | |
|---|---|---|
| Down payment | $5,000 (10%) | $0 |
| Monthly payment | $891 (on $45,000 borrowed) | $850 |
| Total payments | $53,463 | $51,000 |
| Buyout at the end | $0 (you own it) | $5,000 (estimated) |
| Total cost to own it at the end | $58,463 | $56,000 |
| Deductions | CCA on $50,000 plus $8,463 of interest | $51,000 of lease payments, then CCA on the $5,000 buyout |
The comparison changes with the lease’s real interest rate, the buyout price and the timing of the deductions, so the lease contract’s implicit rate is worth asking for.
How Equipment Is Deducted
Equipment the business buys isn’t deducted all at once: it is claimed through capital cost allowance by CCA class, and property acquired after 2024 that becomes available for use before 2034 gets a larger first-year claim under the reaccelerated investment incentive, enacted by the Budget 2025 Implementation Act, No. 1. The classes, their rates and the first-year rules are set out in small business tax deductions.
Interest on an equipment loan is a deductible business expense, and payments on a true lease are deducted as an expense as they are paid. A GST/HST registrant can generally claim input tax credits on the purchase price, or on each lease payment (GST/HST).
Equipment Commonly Financed
| Industry | Common equipment | Typical cost range |
|---|---|---|
| Construction | Excavators, loaders, trucks | $50K–500K |
| Restaurant | Commercial kitchen, HVAC, POS | $20K–200K |
| Medical and dental | Imaging, chairs, instruments | $25K–300K |
| Technology | Servers, computers, networking | $5K–100K |
| Manufacturing | CNC machines, presses, automation | $50K–1M+ |
| Trucking | Trucks, trailers | $100K–300K |
| Agriculture | Tractors, combines, irrigation | $50K–500K |
| Retail | POS systems, fixtures, signage | $5K–50K |
Farming businesses aren’t eligible for the CSBFP; they have a separate federal program under the Canadian Agricultural Loans Act.
Choosing Between a Loan and a Lease
| Situation | Usually points to buying | Usually points to leasing |
|---|---|---|
| Equipment life over 7 years | ✅ | |
| Equipment life under 5 years | ✅ | |
| Strong cash reserves | ✅ | |
| Need to preserve cash | ✅ | |
| Want assets on the balance sheet | ✅ | |
| Technology changes quickly | ✅ | |
| Equipment holds its resale value | ✅ | |
| Startup with limited credit | ✅ (often easier approval) |
A business owner with weak personal credit has fewer lenders to choose from; business borrowing with weak personal credit covers the options, and the equipment itself often serves as the security.
Application Checklist
| Document | Why it’s needed |
|---|---|
| Business plan or description | Shows viability and the need for the equipment |
| Equipment quote or invoice | Confirms what is being financed |
| Two years of financial statements | Shows the business’s health |
| Owner’s personal financial statement | Needed for the personal guarantee |
| Business registration or incorporation documents | Confirms the legal entity |
| Most recent business tax return | Verifies revenue and expenses |
| Bank statements (three to six months) | Shows cash flow |
| Existing debt schedule | Helps the lender assess total obligations |
The business bank accounts comparison covers where to hold the business’s money, and the business insurance guide covers insuring financed equipment, which lenders and lessors usually require.
Sources
The figures and rules on this page come from these sources, last checked against them on October 1, 2026. How we check facts.
- Canada Revenue Agency: Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 4
- Justice Laws (Canada): Budget 2025 Implementation Act, No. 1