If you’re an up-and-coming manufacturer, or need capital to build out your assembly line, equipment loans are practical pathways to increasing your company’s infrastructure.
But, where can you find the best equipment loans in Canada?
What Are Equipment Loans?
Like a mortgage, equipment loans are a secured form of financing, where the lender uses the asset as collateral. If you default on the loan, the lender can repossess the equipment and sell it to recoup the proceeds.
Equipment loans can be structured as renting, or conventional asset-based loans or leases:
- Lease-to-own means you obtain the title after the debt is repaid.
- Traditional loans include immediate ownership, and the title is yours from the start.
- Renting the equipment requires you to make periodic payments and return the asset after the term ends.
How Important Is My Credit Score?
Your credit score is a critical variable in obtaining affordable equipment financing. Lenders view borrowers with weak credit histories as riskier, which results in higher interest rate premiums.
To mitigate the problem, please see our guide on How to Improve Your Canadian Credit Score. We cover 10 proven strategies to uplift the metric. The Government of Canada notes that “it takes 30 to 90 days for information to be updated in your credit report,” so it’s possible to build momentum quickly. However, for larger jumps, please understand it’s a long-term journey.
To supplement your progress, Canadian fintechs are great resources. Our Borrowell Credit Report Review highlights its three main benefits:
- Monitor & Track
- Understand & improve
- Find the Right Product
By tracking your success, flagging errors, and spotting fraudulent activity, Borrowell helps clean up mistakes. Moreover, its AI-powered Credit Coach, Molly, provides personalized tips, articles, and tools to help increase your credit knowledge. Last, Borrowell Canada curates a list of financial products that may fit your needs. Best of all, Borrowell Canada is free, meaning you can improve your credit score at no cost.
As a third option, our KOHO Credit Building Review notes how opening a $30 to $500 secured line of credit and borrowing from the balance can boost your credit score. KOHO reports your repayment activity to Equifax and TransUnion, which can move the needle in the right direction. But, there is a cost to using KOHO, so please read the full review to determine if it’s the right product for you.
Finally, a KOHO secured credit card is free if you set up direct deposits or load $1,000 into your account every month. It was rated one of the “3 Best Prepaid Credit Cards in Canada for 2024” by Nerdwallet, there is no credit check, and approval is guaranteed. You also get cash back on purchases, and on-time repayments can strengthen your credit score. For more information on the pros and cons, please see our KOHO Credit Cards Review.
7 Equipment Loans For Startup Businesses in Canada
While equipment loans are excellent for start-up companies lacking financial resources, it’s wise to consider other options before diving in. With guides to assist you with all forms of business financing, please consult the list below to see what solutions are available in your area:
- Asset-Based Financing Guide, and provincial resources for Ontario, Alberta, and BC.
- 10 Places to Get Business Loans in Alberta
- 10 Places to Get Business Loans in Ontario
- 16 Things to Know About RBC Business Loans
- Keep Business Credit Card Review
- Zensurance Business Insurance Review
1. First Financial
As a leading equipment financier, First Financial aids the manufacturing process by providing secured lease solutions. It issues loans to companies operating in sectors like construction and heavy equipment, healthcare, IT solutions and services, materials handling and automation, and renewable energy plus solar.
Typically, the purchased equipment acts as collateral, and you own the asset once the debt is repaid in full. First Financial is also a member of the Canadian Lenders Association (CLA), which advocates for ethical credit practices.
2. Armada Credit Group
By building relationships with banks, independent finance companies, and non-traditional lenders, Armada Credit Group is a broker that can help you obtain affordable equipment financing. Although the firm sometimes provides funds directly, it mostly facilitates deals across virtually all sectors. Therefore, it’s a great equipment financing solution for start-ups and small and mid-sized companies. Some benefits include:
- Loan-to-value (LTV) ratios can reach upwards of 100%
- Deferred payments and seasonal policies for certain assets
- Owning the asset now and paying with future dollars can be a hedge against inflation
- The firm often matches loan repayments with the cash flows generated by the equipment for smoother functionality
On top of that, Armada Credit Group is a CLA member, adhering to the agency’s standards and code of conduct.
3. Prime Capital
Although Prime Capital describes its product as a “lease,” the end result is similar to traditional equipment financing. For example, ownership of the asset stays with Prime Capital until you repay the debt. Then, the firm transfers the title to your company and you become the new owner. This is a form of lease-to-own financing.
The great thing about Prime Capital is it works with “all types of businesses, from mom-and-pop shops to multinational organizations.” As a result, there should be solutions for start-up companies.
Examples of leasable equipment include, but are not limited to:
- Construction Equipment
- Medical Equipment
- Manufacturing Equipment
- Transportation Equipment
Likewise, following in the footsteps of the other lenders on our list, Prime Capital is also a CLA member.
4. Meridian Credit Union
Meridian Credit Union partners with Accord Financial to provide equipment financing. The firm employs customized equipment strategies and payment plans to help build out your company’s long-term vision. Moreover, its team of advisors can help you seize opportunities and grow.
Meridian Credit Union provides equipment loans with the following benefits:
- Enhanced cash flow with LTV ratios up to 100%
- Match the loan terms to your company’s budget and seasonal revenues
- Receive competitive rates, flexible terms, and fixed payments
Furthermore, Meridian Credit Union is a CLA member and supports ethical lending practices.
5. QuickFi
As your go-to source for digital equipment financing, QuickFi aims to ease the strain on small and medium-sized businesses. Promoting a faster and dramatically preferred borrower experience, you can obtain equipment loans in as little as three minutes.
By working with proponent equipment manufacturers (OEMs) and banks, QuickFi can offer special terms and rates that are usually unavailable through other platforms.
The company also promotes “bank level security,” and is a CLA member.
6. Vendor Lender
If you need heavy equipment to bolster your start-up’s production potential, Vendor Lender may be the right platform for you. As a business-to-business (B2B) broker, the firm helps connect you with dealers and facilitates transactions. Boasting proprietary technology and industry-leading rates, you have three financing options to choose from:
- Lease to Own ($1,000 to $2,000,000+)
- Traditional Loan (Up to $300,000)
- Rent
Please note that a traditional loan can be secured equipment financing or unsecured working capital. The only catch is your business must be up and running for at least three months before you can apply.
But, Vendor Lender is a CLA member, and the stamp of approval adds further credibility.
7. Fincap Financial Group
Similar to Vendor Lender, Fincap Financial Group is an online broker with over 30 Canadian representatives and 25 financing partners. The firm specializes in heavy machinery loans and has several eligible equipment options to choose from, but are not limited to:
- Forest Trucks
- Tractor-Trailers
- Cranes
- Compactors
- Excavators
- Backhoes
- Bailers
- Forklifts
Fincap Financial Group is also a CLA member.
Conclusion
If your startup business operates in industries like construction, mining, or resources, equipment financing could be an integral part of your growth strategy. Luckily, affordable options are available, and because all of the lenders on our list are CLA-certified, they work with an agency that promotes responsible credit issuance.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
