Understanding Down Payments in Equipment Financing: When, Why, and How Much

If you’ve ever asked yourself, “Do I need a down payment to finance equipment?”—you’re not alone. It’s one of the first questions business owners bring up when looking at financing options.

The short answer? It depends on the type of equipment, your business credit profile, and how the lender structures the deal. 

Let’s unpack when down payments are required, why they matter, and how much you can expect to put down.

When a Down Payment Is Required

Most equipment lenders look at three things before deciding if a down payment is needed:

1. Credit history and time in business

   
   

   • Startups or businesses under two years old often need to show “skin in the game.” A down payment helps offset the higher risk.

   • Typically this is represented as "advanced payments", where you make 1-2 payments upfront. For example on a 48 month term, if you made two advanced payments, you would only have 46 payments remaining.

     
     

2. Equipment type and resale value

   
   

   • Most assets (like specialty trucks, trailers, and construction machinery) may qualify for 100% financing with a decent business credit profile.

   • Specialized or custom-built equipment may require 10–25% down since resale value is harder to gauge.

     
     

3. Overall financial picture

   
   

   • Strong cash flow, consistent bank deposits, and solid business credit can sometimes qualify you for zero down programs.

     
     

Why Lenders Require a Down Payment

A down payment serves two purposes:

• Risk reduction – It gives the lender immediate equity in the asset.

• Commitment – It signals that your business is invested in the equipment’s success.

  
  

But there’s an upside for you, too:

• A small down payment can improve approval odds and reduce the interest you pay.

• It can also reduce monthly payments, which helps stabilize cash flow.

  
  

Think of it as a tradeoff between liquidity and leverage—how much you want to keep in reserves versus how much you want to finance.

How Much You’ll Likely Need to Put Down

Typical down payments fall into these ranges:

• Established businesses (2+ years, strong credit): 0%

• Moderate credit or newer businesses: up to 10% (typically one or two advance payments)

• Weaker credit profiles and/or older equipment: up to 30%

  
  

Some lenders structure this as “first and last payment upfront” rather than a lump-sum deposit. In practice, it works the same way—showing commitment and lowering risk.

Used Equipment and Private Party Purchases

If you’re buying used equipment, it is possible you will see stricter down payment requirements. Lenders often ask for:

• A condition report or photos

• Odometer or hour meter readings

• Equipment or site inspection

Tips for Reducing or Avoiding a Down Payment

If keeping cash in-hand is a priority, here are a few strategies:

• Leverage strong bank statements. Consistent deposits can offset marginally weaker credit.

• Finance newer or more common equipment. The easier it is to resell, the less risk the lender takes.

• Work with a funding partner. Brokers can match you with lenders who prefer your industry, or the specific type of equipment you are looking to purchase, improving the odds of a zero down approval.

  
  

Final Thoughts

There’s no one-size-fits-all rule for down payments in equipment financing—but understanding what drives lender decisions helps you plan smarter. Whether you’re buying new machinery from a dealer or picking up used gear at auction, knowing how much cash you’ll need up front prevents surprises and helps keep your growth on schedule.

If you’re exploring equipment financing options, it’s worth talking with a funding partner who can compare offers side by side and help you structure the deal in a way that preserves working capital.

   About the Author

   Jared Holmes is the founder of Brilliance Funding Partners, where he helps business owners navigate the commercial lending landscape with confidence. With 10 years of hands-on experience in SBA lending, equipment financing, and working capital solutions, Jared focuses on asking the right questions and delivering financing strategies that make sense for each business. Connect with Jared for a personalized conversation about your options.