Ask a U.S. small business owner how they buy the machinery, vehicles and technology needed to grow, and you’ll get an earful on how that process has rarely been easy, or cheap. Equipment financing lets a business buy that equipment now and pay for it over time, with the equipment itself securing the financing. Banks have long been the default source, but specialty finance companies, leasing firms and other nonbank lenders now fill much of the gap.
Now, in late 2026, even as U.S. businesses ramp up spending on equipment, getting a traditional bank to finance those purchases can be a big hill to climb. That creates an opening for equipment leases, specialty finance companies and other nonbank lenders.
As usual, the numbers tell the story.
The U.S. equipment finance sector reached an estimated $1.34 trillion in 2023, and 82% of organizations that acquired equipment or software used some form of financing to pay for it, according to the Equipment Leasing & Finance Foundation’s end-user survey, published in October 2024.
Banks Step Back as Independent Lenders Fill the Gap
Over the past few years, U.S. banks have taken a big step back from equipment financing, mainly due to tighter regulatory standards and declining capital. Only 28% of banks approved at least 81% of equipment finance applications in 2024, down from 34% in 2021, according to a Foundation report covered by Equipment Finance News.
That, in turn, has opened up opportunities for independent lenders to step in. “Independent lenders have emerged as major players in the equipment finance industry as banks grapple with tighter regulatory standards and declining capital,” the Foundation noted. Forty percent of independent equipment financiers approved 81% or more of applications in 2024, up from 30% in 2021.
Financing remains the norm: in the Foundation’s survey, 64.2% of private-sector equipment and software investment was financed rather than bought entirely with cash. And demand is still climbing in 2026. The Equipment Leasing and Finance Association reported a record $14.3 billion in seasonally adjusted new equipment-financing volume among its surveyed member companies in July, with year-to-date volume up 16.8% from 2025, ELFA reported. ELFA now expects 2026 financing volume to reach $137.3 billion, exceeding the previous record by 14%.
Private Capital Moves In
Where is the new, independent cash coming from? For starters, private capital is moving aggressively to capture some of that business.
On September 22, investment giant KKR launched Akrapoint Commercial Capital with a $350 million commitment. The platform connects equipment manufacturers, vendors and customers with financing for vocational equipment, specialty trailers and industrial assets, serving small and middle-market companies in industries ranging from manufacturing and construction to energy, transportation and waste services.
“As reshoring, electrification and supply chain resilience drive a multi-year capital spending cycle, demand for essential equipment keeps climbing,” said Daniel Pietrzak, partner and global head of private credit at KKR.
Why Banks Are Pulling Back
“I watched this dynamic play out during my decade at Price Waterhouse and then again while running my own financial-systems practice for 27 years,” Rob Pfleghardt, a former CPA and founder of VoraPrep, an exam-prep platform covering the money management realm, told SBG Funding.
In the equipment financing market, credit risk and capital requirements drive everything, but banking arithmetic is brutal, Pfleghardt noted.
“A $75,000 forklift loan requires nearly the same underwriting labor and compliance checks as a $2 million commercial real estate deal, but the revenue to the bank is maybe a tenth of that,” he said.
Banks always chase better margins, and right now that means larger corporate clients and structured finance deals that justify their overhead costs. “Economic uncertainty isn’t the sole cause of the retreat; it’s simply accelerating what is already baked into their profit model,” Pfleghardt said.
Equipment Financing Alternatives to Banks
As banks step back, a fragmented market is filling the gap, and business owners need to know exactly who they are dealing with.
Specialty Equipment Lenders
“Specialty equipment lenders move faster than banks and actually understand the machinery you’re buying,” Pfleghardt said. “They’ll approve a deal in days instead of weeks, but you’ll pay a premium in the rate.”
Equipment Leasing
Equipment leasing preserves cash, but it isn’t off the books. “However, under current accounting standards (ASC 842), most leases now require recognition of a Right-of-Use asset and corresponding lease liability on your balance sheet,” Pfleghardt added. “You pay an implicit premium for flexibility and build zero equity, but it’s key for tight cash flow.”
Alternative Lenders
Alternative lenders may be the speed kings, sometimes approving deals in hours. But the price tag can sting. “I’ve seen rates 400 basis points above prime, with aggressive payment structures,” Pfleghardt noted.
When the Bank Says No
If a bank or any other lender turns down an equipment financing application, it’s time to go back to the drawing board.
“If a bank said no, the next move is not a harder bank,” Jonathan Curtis, principal, acquisitions and private capital at Tiger Eye Cascadia LLC, told SBG. “Instead, go back and know your numbers, especially what the equipment earns, what it costs, and what it’s worth used.”
Then, approach lenders who specialize in that asset class and compare total financing cost and collateral exposure, not just APR, Curtis advises. “Also, never sign a personal guarantee you can’t survive losing,” he added.
Four Traps to Check in a Nonbank Term Sheet
Another option is to dissect nonbank term sheets with surgical precision. “I’ve seen too many business owners sign the first offer that shows up because they’re desperate,” Pfleghardt said. “That is a fatal error.”
Pfleghardt advises looking past the headline rate and checking these four traps.
1. True Financing Cost
A 9% loan with $5,000 in origination, documentation and processing fees can cost more over 36 months than an 11% loan with zero fees. “I’ve built cash flow models for 27 years, and businesses miscalculate this constantly,” he noted.
2. Collateral Overreach
“Nonbank lenders will claim a first position on the equipment, but I’ve seen them require a blanket lien on all business assets for a single equipment loan,” Pfleghardt said. “Read that section twice.”
3. Prepayment Penalties
Banks rarely charge them on equipment. “Nonbank lenders almost always do,” Pfleghardt said. “If you plan to refinance when rates drop or sell the business, those penalties can cost tens of thousands.”
4. Repayment Structure
Alternative lenders love daily ACH debits. It sounds manageable until you realize it drains your operating account every single business day, leaving zero buffer for lumpy revenue cycles. “Model the payment schedule against your actual cash flow patterns before you sign anything,” Pfleghardt added.
Compare Your Options with SBG Funding
SBG Funding is a direct provider of revenue-based financing and a marketplace offering a broad range of funding solutions through an extensive network of lenders. Our equipment financing advances up to 90% of the equipment’s value, with terms of 2 to 5 years matched to the asset’s useful life and fixed weekly or monthly payments. The financing is secured by the equipment itself, so you aren’t required to pledge other business or personal assets to qualify. For a purchase that isn’t tied to one asset, a small business term loan may fit better. The online application takes about five minutes, decisions often come the same day, and applying doesn’t involve a hard credit pull.
Get Started Today:
- Fill out our online application.
- Speak with a funding specialist to discuss your options.
- Submit your documents and receive funding quickly.
Typical Requirements:
- Four months of bank statements
- Minimum FICO score of 500, six months in business, and $150,000 in annual revenue
FAQs
Smaller equipment deals take nearly as much underwriting and compliance work as large ones but earn the bank far less, and tighter regulation and declining capital have pushed banks toward larger corporate deals. Only 28% of banks approved at least 81% of equipment finance applications in 2024, down from 34% in 2021.
Leasing preserves cash and offers flexibility, but you don’t build equity, and most leases now appear on the balance sheet under ASC 842. With financing, you own the equipment and build equity in it, which suits assets you plan to use for years.
Compare the total cost including fees, not just the rate; check whether the lender wants a lien beyond the equipment; ask about prepayment penalties; and make sure the payment schedule fits your actual cash flow.
