A landscaping contractor in Barrie found the used skid steer he needed for $78,000, called his bank on a Tuesday, and was told credit adjudication would take about three weeks. The machine sold that Friday.
Equipment financing in Canada is a loan or lease secured by the equipment you're buying. Because the machine itself is the security, lenders read the machine and your revenue together. Your credit score is one input, not the deciding one. Approvals are usually faster than on an unsecured loan, and the term gets matched to how long the equipment will keep earning.
That structure is why equipment deals get approved when other applications stall. It's also why they get declined for reasons that have nothing to do with the machine. Below: how the money is actually structured, when a lease beats a loan, what a Canadian underwriter reads in your file, and the contract terms worth arguing about. If you already know what you're buying, you can compare structures on our equipment financing page.
How equipment financing works in Canada
Equipment financing is asset-based lending. The lender registers a lien against the specific machine in your province's personal property security registry, which means the equipment can be recovered if the loan goes unpaid. That security changes the math for an underwriter. A $90,000 unsecured loan to a two-year-old business is a hard sell. The same $90,000 attached to a titled dump trailer with an active resale market is a different conversation entirely.
Two structures do most of the work in Canada.
The equipment loan
You own the machine from day one. The lender advances the purchase price, commonly against a down payment of 10% to 20% of the invoice, and you repay principal and interest over a fixed term. Terms usually run two to seven years, set against how long the asset will keep producing revenue.
The equipment lease
The lessor owns the machine and you pay to use it. Monthly payments are typically lower than a loan on the same asset, because you aren't paying down the full purchase price. The contract then ends one of four ways: you buy it out, renew, upgrade, or hand it back.
What qualifies is broader than most owners expect. Commercial trucks and trailers, excavators and attachments, CNC and press equipment, commercial kitchen lines, dental chairs and imaging units, shop tools, servers and point-of-sale hardware. Used equipment gets financed routinely, private sales included, though a lender will want a serial number, proof of ownership, and sometimes an appraisal before it funds one.
One route worth knowing about: the federal Canada Small Business Financing Program shares risk with banks and credit unions. It allows up to $500,000 of a term loan toward equipment and leasehold improvements, for businesses under $10 million in gross revenue. It carries a 2% registration fee and it runs on bank timelines. If the machine you want will still be sitting on the lot in six weeks, that paperwork is worth doing. If it won't be, speed has a price, and you should know what that price is before you agree to it.
Lease or loan: what actually changes
The two structures pull cash out of your business at different times, and the Canada Revenue Agency treats them differently at year end. That second part is where owners get caught.
| What to compare | Equipment loan | Equipment lease |
|---|---|---|
| Who owns it during the term | You do, from day one | The lessor |
| Cash needed upfront | Down payment, often 10% to 20% | Little to none, sometimes first and last payment |
| Monthly payment | Higher for the same asset | Lower for the same asset |
| End of term | You own it outright | Buy out, renew, upgrade, or return |
| Usual tax treatment | Capital cost allowance plus interest | Payments deducted as an operating expense |
| Best fit | Long-life assets with resale value | Assets that date fast, or tight cash |
On tax, the general rule is simple enough. Lease payments are usually deductible as an operating expense in the year you make them. When you own financed equipment, you can't deduct the purchase price at all: you claim capital cost allowance on the asset, plus the interest portion of your payments. The Canada Revenue Agency sets the rate by class. Most general equipment and furniture sits in Class 8 at 20%, vehicles in Class 10 at 30%, computer hardware in Class 50 at 55%. Accelerated first-year incentives also come and go with federal budgets, so the year you take delivery can change what you deduct.
None of that makes one structure better than the other. It makes them different, and the difference turns on whether your business needs the deduction now or spread out. Ask your accountant before you sign, not in April.
When a lease usually wins
The asset dates quickly, which covers most technology and diagnostic equipment. Or you want the option to hand it back. Or payroll and receivables are tight enough that protecting cash beats building equity.
When a loan usually wins
The machine will still be earning in eight years and has a real secondary market. Trailers, attachments, and well-maintained iron almost always fall here. If you'd keep it at the end of a lease anyway, you've just paid a premium for the option not to.
The 5-point file check every equipment lender runs
Underwriters are answering one question: if the deposits slow down, does this machine still make sense? Five things settle it, and only one of them is your credit history.
1. Deposit history
Three to six months of business bank statements, read line by line. Average monthly deposits, the worst month, NSF entries, and whether other lenders are already pulling daily or weekly payments off the account. Our guide to what Canadian lenders look for in bank statements covers what to tidy up before you apply.
2. Time in business and revenue consistency
Most alternative lenders want six to twelve months of operating history. Consistency counts for more than size. A contractor clearing $40,000 a month every month is an easier file than one averaging the same number off two large invoices.
3. The asset itself
Send the quote or invoice, the year, make, model, hours or kilometres, the serial or VIN, and the vendor's details. "Excavator, around $85,000" stalls a file for days. A dated quote from a named dealer moves it the same afternoon.
4. Existing secured debt
Liens already registered against your other assets, outstanding advances, and anything currently coming off your deposits. Disclose all of it upfront. Underwriters find it anyway, and the surprise costs you more credibility than the debt ever would.
5. Credit, as one input
Your score gets read for patterns: recent write-offs, tax arrears, judgments. It is not a pass mark. This is where alternative underwriting parts ways with bank adjudication, because a person reads the whole file before deciding anything.
Honestly, the equipment file that gets declined is almost never declined over the machine. It gets declined because nobody could tell what the deposits were doing. Fix the statements and the story before you go shopping for money. If you want to see what that review looks like end to end, our process page walks through every step.
What it costs, and the four mistakes that cost the most
Nobody can quote you a rate without reading your file, and any lender who does before seeing your statements is guessing. What you can do is compare offers properly. Total cost is the payment multiplied by the number of payments, plus documentation and registration fees, plus whatever you pay at the end to keep the machine. Two offers with an identical monthly payment can differ by thousands once the residual and the fees are counted.
Sales tax deserves a call to your bookkeeper. On a purchase, GST or HST is due on the full price at closing, even though the loan spreads over years. On a lease, it applies to each payment as you go. If you're registered, input tax credits generally recover it either way, but the cash timing is nothing alike.
Four mistakes show up over and over:
- Chasing the lowest monthly payment. A longer term lowers the payment and raises the total. Worse, it can leave you still paying for a machine that has stopped earning.
- Draining the reserve to make a bigger down payment. A thin cushion is how one slow month turns into a missed payroll.
- Ignoring the buyout. Fair market value is not a fixed price. If you intend to keep the equipment, negotiate a stated buyout amount at signing.
- Financing a machine with no revenue attached to it. If you can't name the contract, route, or product line it serves, the payment is a bet.
One more note on structure. If your purchases are small and recurring, a business line of credit is usually the cheaper tool. Equipment financing is built for a specific asset with a specific working life, and it works best when you treat it that way.
Solid Capital is a Canadian alternative lender funding business equipment, working capital, and private mortgages for owners the big banks decline or under-serve. Alternative underwriting is the difference: a Canadian advisor reads your full file, the bank statements, the revenue history, and the asset itself. The credit score is one page of it. The application at solidcapital.ca takes about five minutes, there's no impact to your credit to apply, and for approved files funding often lands within 24 hours.
Equipment financing rewards preparation far more than perfect credit. Clean statements, a dated quote, a buyout you understand. That's the whole game. The machine was never the hard part.
Frequently Asked Questions
Can you get equipment financing in Canada with bad credit?
Often, yes. Because the equipment secures the loan, many alternative lenders weigh your deposit history and the asset itself more heavily than your score. Expect a soft credit check as part of the review, and expect a larger down payment or a shorter term if your credit history is thin.
How much of a down payment do you need for equipment financing?
Commonly around 10% to 20% of the invoice, though strong files sometimes fund closer to the full amount and weaker ones need more. Putting more down usually buys you a better structure rather than approval on its own, so protect your cash reserve first.
Is it better to lease or finance equipment in Canada for tax purposes?
Neither is automatically better. Lease payments are generally deductible as an operating expense in the year you pay them, while owned equipment gets capital cost allowance plus the interest portion of your payments. Ask your accountant which timing suits your tax position before you pick a structure.
Can you finance used equipment or a private sale in Canada?
Yes. Used equipment gets financed routinely, private sales included, but lenders usually want a serial number or VIN, proof of ownership, and sometimes an appraisal. Older assets often come with shorter terms because the resale value is lower.
How long does equipment financing approval take in Canada?
With complete bank statements and a dated quote, alternative lenders often decide within one business day and fund shortly after for approved files. Bank and government-backed programs typically run on a multi-week timeline. Missing asset details are the most common cause of delay.
Does applying for equipment financing affect your credit score?
Applying through Solid Capital does not affect your credit, because the initial review uses a soft credit check. If you shop several lenders that each run a hard inquiry, those inquiries can appear on your report, so ask which type of check a lender performs before you apply.
