How equipment financing works in Canada
The business gets a quote from the dealer or vendor, the lender approves the asset and the borrower, pays the vendor directly and registers a security interest in the equipment under the provincial PPSA (the RPMRR in Quebec). The business repays a fixed monthly amount over a term matched to the asset’s useful life — two to seven years — and owns the equipment outright at the end of a loan or exercises a buyout at the end of a lease. Because the lender can repossess and resell the asset, published APRs start near 7 percent, far below unsecured products, and lenders will often finance 100 percent of new equipment with strong resale value.
Equipment financing rates in Canada
Published ranges run roughly 7 to 30 percent APR. An established business with good credit buying new, resalable equipment — a tractor, a CNC machine, a commercial oven — from a mainstream dealer prices near the bottom; a young business, a weaker owner file, used or specialised equipment or a private sale prices higher and may require a 10 to 20 percent down payment. Captive lenders at the manufacturers sometimes subsidise rates on new equipment; the CSBFP caps a bank’s rate at prime plus 3 percent for eligible equipment; and BDC finances equipment on longer terms for growth projects. Compare offers on total cost over the term, the down payment, fees and the end-of-term terms, not the headline rate alone.
| Source | Who it suits | Typical rate | Time to fund | Notes |
|---|---|---|---|---|
| Specialised equipment finance company | Most businesses, 6 months to 2 years old, credit 600+ | 7 – 30 percent APR | 2 – 5 business days | Up to 100 percent on new, resalable assets |
| Bank equipment loan | Established businesses with statements | Prime + 1 – 4 percent | 2 – 6 weeks | Security over the asset and often the business |
| CSBFP through a bank | Younger businesses buying new or used equipment | Capped at prime + 3 percent plus 2 percent fee | 2 – 6 weeks | Up to $1 million for equipment |
| Dealer or captive financing | Buyers of new equipment from major manufacturers | Subsidised rates on some models | Days | Tied to the brand |
| BDC equipment loan | Growth projects, 1 – 2 years in business | A few points above the banks | 2 – 4 weeks | Longer terms, seasonal repayment options |
Equipment financing requirements
Lenders look at the equipment first — a quote or invoice, specifications, and for used assets the age, hours or mileage and the resale market — then at the business: six months to two years in business, credit around 600 with strong equipment offsetting a weaker score, three to six months of bank statements, and for larger amounts a financial statement or T2 return. Trucks and trailers, construction and agricultural machinery, medical and dental equipment, restaurant equipment and manufacturing machinery are the strongest asset classes; software, fixtures and highly specialised equipment are the weakest.
Prepare the file
What to have ready
- Quote or invoice from the vendor with specifications and serial numbers
- For used equipment: age, hours or mileage, condition and an appraisal for large amounts
- Three to six months of business bank statements
- Business registration, business number and government ID
- Financial statements or T2 return for larger requests
- Insurance on the asset naming the lender
Truck, trailer and machinery financing in Canada
Commercial trucks and trailers are the largest category of equipment financing in Canada, from owner-operators buying a first tractor to fleets adding units for the Highway 401, the Trans-Canada and cross-border lanes. Lenders finance new and late-model used tractors at five-to-seven-year terms, want a driver’s record, the truck’s history and, for a new carrier, a contract or lane, and price new units near the low end of the range. Construction and agricultural machinery finance the same way, with seasonal repayment options from some lenders for farms and contractors whose revenue arrives in a few months of the year.
Comparing equipment financing offers
Ask every lender for the amount financed, the down payment, the rate, the term, the monthly payment, all fees, the total cost over the term and the end-of-term terms — ownership, buyout amount or return conditions — in writing. A lease with a $1 buyout is a loan in another form; a fair-market-value lease is not. No Canadian law requires these figures to be disclosed in a standard form for business credit, so the comparison is the borrower’s job, and the total cost over the term is the figure that decides.