What Are Typical Terms for Equipment Financing?

When you’re considering equipment financing for your business, understanding the typical terms offered can make the difference between a deal that accelerates growth and one that strains your budget. Financing terms dictate how long you’ll be making payments, the interest rate you’ll pay, and the total cost of ownership for your equipment. Whether you’re buying a new heavy-duty truck, upgrading manufacturing machinery, or adding vehicles to your construction fleet, the right terms will help preserve cash flow while keeping your operations efficient.

At Mehmi Financial Group, we match Canadian businesses with financing structures that align with their cash flow, industry cycles, and long-term goals. In this guide, we’ll explore the most common terms you can expect when financing equipment and the factors that influence them.

Why Terms Matter More Than You Think

Many business owners focus on the monthly payment alone, but the terms of an equipment financing agreement go beyond that figure. Terms dictate the length of repayment, the interest rate, ownership conditions, fees, buyout clauses, and even the flexibility you have if your circumstances change.

A well-structured term can:

• Improve cash flow stability during slow seasons.
• Allow you to align payments with equipment revenue cycles.
• Reduce total cost of ownership over time.
• Protect your ability to upgrade or refinance when needed.

For example, a trucking company might choose a 60-month term to keep payments low while operating in a high-mileage, wear-intensive environment. A dental clinic purchasing an X-ray machine might prefer a 36-month term, allowing them to pay off the asset quickly and upgrade as technology advances.

For more industry-specific financing insights, you can explore our Transportation & Trucking and Construction & Contractors pages.

Typical Loan Lengths

Most equipment financing agreements run between 24 and 84 months (2 to 7 years), though specialized equipment with longer lifespans may be financed over a longer period. Shorter terms generally result in higher monthly payments but lower total interest paid, while longer terms can keep payments manageable but increase the total financing cost.

Seasonal businesses — such as farming, construction, and hospitality — may benefit from customized repayment schedules that match revenue cycles. This flexibility ensures that your payments are made when your business is generating income, reducing cash flow pressure during slower months.

Common Interest Rates

Interest rates for equipment financing in Canada can range widely depending on the borrower’s credit profile, the type of equipment, and the lender’s risk assessment.

Rates may be fixed for the entire term or variable, although fixed rates are more common for predictable budgeting.

Down Payment Requirements

Many lenders require a 10%–25% down payment, particularly for used equipment. However, some financing programs — especially those tied to newer assets or government-backed loans like the Canada Small Business Financing Program — may allow for 0% down, depending on credit strength and business history.

Balloon Payments and End-of-Term Options

Some equipment financing structures include a balloon payment at the end of the term, reducing monthly costs but requiring a larger final payment. This is common in certain industries, especially for high-value transportation equipment. Leasing structures, such as equipment leases, may offer options to return the asset, renew the lease, or purchase it for a pre-agreed residual value.

Factors That Influence Terms

Several elements can impact the terms you receive:

1. Equipment Type – Assets with longer lifespans (like excavators or tractors) may qualify for longer terms.
2. Equipment Age – New equipment often qualifies for lower rates and longer terms compared to used assets.
3. Industry Risk Profile – Lenders assess the volatility of your industry, which can influence repayment flexibility.
4. Creditworthiness – Both business and personal credit scores are factored in.
5. Collateral Value – Since the equipment serves as collateral, its resale value plays a major role in the term offered.

Example Term Scenarios

Here’s how terms can look for different industries:

Tips for Choosing the Right Terms

Selecting the right terms isn’t just about getting the lowest monthly payment — it’s about finding a balance between affordability and total cost. Here are a few tips:

• Align with Equipment Life – Don’t finance equipment over a longer period than you expect to use it.
• Consider Seasonal Payments – If your revenue fluctuates, request a seasonal payment plan.
• Ask About Early Payoff Options – Some lenders allow early repayment without penalties, saving interest costs.
• Review All Fees – In addition to interest, be aware of documentation fees, insurance requirements, and maintenance obligations.

Conclusion

Typical terms for equipment financing in Canada vary based on your business profile, industry, and the asset you’re acquiring. At Mehmi Financial Group, we tailor financing to your needs, ensuring your terms fit both your operational goals and budget. From equipment loans to asset-based lending, our team can guide you through every option available.

If you’re ready to explore your financing terms, contact us today for a personalized quote.

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