Getting the right equipment can make or break a business. Whether you’re in construction, logistics, healthcare, or manufacturing, having the right tools is essential—but they don’t come cheap. Equipment financing offers a solution, helping businesses acquire everything from trucks to high-tech machinery without draining their cash reserves.
Instead of paying the full price upfront, businesses can spread out the cost through a loan or lease. The key difference? A loan lets you own the equipment once it’s paid off, while a lease gives you access without the commitment of ownership. Each option has its pros and cons, and the best choice depends on your business’s needs, cash flow, and long-term plans.
This guide breaks down everything you need to know about equipment financing in South Africa, from the different types of financing to eligibility requirements and top lenders. Whether you’re a startup looking for your first major purchase or an established business upgrading essential machinery, we’ll help you find the best financing option to keep your operations running smoothly.
Understanding Equipment Loans vs. Leasing
When financing equipment, South African businesses generally have two paths: buying with a loan or leasing it for a set period. The difference comes down to ownership, cost, and flexibility.
Equipment Loans: Own the Equipment After Repayment
An equipment loan works much like a car loan. You borrow money to purchase the equipment, make fixed monthly payments, and once the loan is paid off, the equipment is yours.
Pros of Equipment Loans:
- Full ownership at the end of the loan term
- Builds business assets and equity
- Can be used to finance both new and used equipment
- Interest rates may be lower compared to unsecured business loans
Cons of Equipment Loans:
- Higher upfront costs (some lenders require a deposit)
- Depreciation may reduce resale value over time
- You’re responsible for maintenance and repairs
Best for: Businesses that plan to use the equipment for many years, such as manufacturing plants, construction firms, and medical practices.
Equipment Leasing: Pay to Use, But Don’t Own It
Leasing is an alternative that allows businesses to rent equipment for a set period instead of purchasing it outright. At the end of the lease, you can either return the equipment, renew the lease, or in some cases, buy it at a reduced price.
Pros of Equipment Leasing:
- Lower upfront costs (usually no deposit)
- Easier approval for businesses with limited credit history
- Allows frequent upgrades, ideal for industries with rapidly evolving technology
- Maintenance and repairs may be covered by the leasing company
Cons of Equipment Leasing:
- No ownership unless there’s a buyout option
- Can be more expensive in the long run compared to purchasing
- Monthly payments continue as long as you lease
Best for: Businesses that need the latest equipment, such as IT companies, medical professionals, and businesses that don’t want to deal with resale or depreciation.
Secured vs. Unsecured Equipment Financing
A secured loan means the lender uses the equipment as collateral. If payments aren’t made, they take back the equipment. The upside? Lower interest rates and better terms.
An unsecured business loan doesn’t require collateral, but the lender takes on more risk—so expect higher interest rates and stricter approval requirements.
Which Option Is Better for Small Businesses?
- Secured loans: Ideal for businesses with limited credit history that can provide collateral.
- Unsecured loans: Best for businesses that need fast approval and don’t want to risk assets.
Each option has its place—it all depends on your business goals and cash flow.
Top Equipment Financing Options in South Africa
Finding the right equipment financing provider can make a big difference in how your business manages cash flow and growth. Some lenders offer flexible repayments, while others focus on speed or tailored solutions for specific industries. Below are three top options for businesses looking to finance equipment in South Africa.
| Lender | Best For | Est. Annual APR | Loan Amount | Loan Term |
| Merchant Capital | Flexible repayment options | Personalised | R50k – R5m | Aligned with business cash flow |
| GroWise Capital | SMEs with seasonal revenue | Approx. 20% | R15k – R3m | 6 weeks – 12 months |
| Lula | Seamless, paperless applications | 24%-60% | R10k – R5m | 3 – 12 months |
Merchant Capital – Best for Flexible Repayment Options
Merchant Capital is a strong choice for businesses with fluctuating revenue, such as those in retail, hospitality, and services. Instead of requiring fixed monthly payments, this lender structures repayments around your cash flow, making it easier to manage during slow periods. Loan amounts range from R50,000 to R5 million, with interest rates tailored to the borrower’s financial profile.
Businesses that experience seasonal sales dips or unpredictable income streams may find this option particularly helpful, as it removes the pressure of rigid repayment schedules.
GroWise Capital – Best for SMEs with Seasonal Revenue
GroWise Capital caters specifically to small and medium-sized businesses that face seasonal income fluctuations. Their equipment financing solutions allow businesses to adjust repayment schedules to match cash flow cycles, ensuring affordability even during slower months. Businesses can borrow between R15,000 and R3 million, with repayment terms ranging from six weeks to 12 months.
The estimated APR is around 20%, making it a competitive option for SMEs that need structured yet flexible financing. This is a solid choice for businesses in industries like tourism, agriculture, and event planning, where revenue can vary significantly throughout the year.
Lula – Best for Seamless, Paperless Applications
Lula stands out for its fully digital, hassle-free application process, making it an ideal choice for businesses that need quick funding without the paperwork. Applications are completed online, and approvals can be processed within hours. Lula offers loan amounts from R10,000 to R5 million, with repayment terms between three and 12 months.
However, interest rates range widely from 24% to 60%, depending on the applicant’s creditworthiness and financial history. Businesses needing fast and simple access to capital will benefit from Lula’s streamlined process, though it’s important to compare costs with other lenders before committing.
Eligibility Criteria for Equipment Financing in South Africa
Lenders assess several factors before approving equipment financing applications. While requirements vary, businesses that meet the following criteria are more likely to secure funding with favourable terms.
Business Age and Revenue Requirements
Most lenders prefer businesses with a proven track record. While some may finance startups, the majority require at least:
- 6 months to 1 year of operational history
- Minimum monthly revenue of R30,000 to R50,000 (varies by lender)
The industry a business operates in also plays a role. Sectors such as construction and logistics are often considered lower risk since equipment in these fields holds strong resale value. Newer businesses may still qualify for financing. However, they may need to provide additional documentation, such as financial projections or contracts showing expected income, to prove they can manage repayments.
Credit Score and Financial Statements
A business’s creditworthiness plays a major role in the approval process. Lenders evaluate both personal and business credit scores, particularly for small businesses and startups. A higher credit score signals financial reliability, often leading to better interest rates and more favourable terms.
Beyond credit scores, lenders assess financial health through bank statements, income statements, and balance sheets. Many require six to twelve months’ worth of bank statements to analyse cash flow consistency.
A tax clearance certificate is also commonly required to ensure the business is compliant with SARS. Businesses with lower credit scores may still qualify for financing, but they should expect higher interest rates or the need to provide collateral.
Collateral and Down Payment Considerations
As we mentioned, not all equipment financing requires collateral, but larger business loan amounts often do. Lenders may require either a deposit or an asset as security before approving the business loan.
Key factors to consider:
- Secured financing uses the purchased equipment as collateral, meaning the lender can repossess it if repayments are not made.
- Unsecured financing does not require collateral but typically comes with higher interest rates.
- Down payments generally range from 10 to 30 percent of the equipment value, depending on the lender.
Businesses that do not want to put up collateral should expect stricter approval requirements and potentially higher repayment costs.
How to Apply for Equipment Financing in South Africa
Applying for equipment financing requires preparation to increase approval chances and secure better terms.
Preparing Your Documents
Having the right documents ready can speed up the process and improve approval odds.
Commonly required documents:
- Business registration papers to verify legal status
- A tax clearance certificate to confirm compliance with SARS
- Bank statements covering six to twelve months to demonstrate cash flow
- Financial projections, particularly for newer businesses
For businesses under a year old, lenders may require personal financial statements from the owners to assess repayment ability.
Comparing Lenders and Interest Rates
Not all lenders offer the same terms, so businesses should take time to compare financing options. Interest rates vary widely, and even a small percentage difference can have a significant impact on the total cost of borrowing. Longer repayment terms reduce monthly payments but result in higher overall interest costs.
Hidden fees are another consideration. Some lenders charge origination fees, early settlement penalties, or late payment fees, all of which can add up. Reviewing the total cost of borrowing—not just the monthly instalment—helps businesses avoid unexpected expenses. Using online loan comparison tools like Fundrate is the best way to approach the reviewing process as it provides a holistic overview of all the equipment loan offers.
Common Mistakes to Avoid When Applying
Mistakes during the loan application process can lead to higher costs or rejection. One common mistake is applying without a clear business plan. Lenders want to see how the equipment will generate income, so failing to provide a solid justification for the purchase can hurt approval chances.
Another issue is borrowing more than necessary. While it may be tempting to finance additional equipment for future needs, larger loans mean higher repayments, which can strain cash flow.
Businesses should also carefully review repayment terms, as some financing agreements include balloon payments or penalties for early settlement. Overlooking these details can lead to financial difficulties down the line.
Pros and Cons of Equipment Financing for Businesses
Before committing to equipment financing, businesses should weigh the advantages and potential drawbacks.
Advantages of Equipment Financing
- Preserves cash flow by eliminating the need for large upfront payments
- Helps businesses scale faster by allowing access to essential equipment without waiting for capital accumulation
- Possible tax benefits, as monthly payments may be deductible as business expenses
For businesses that rely on equipment to operate, financing can enable growth without tying up working capital.
Potential Downsides to Consider
- Interest costs can add up, with total borrowing expenses sometimes exceeding the equipment’s value
- Secured loans come with the risk of losing the equipment if payments are not met
- Leasing options limit ownership, meaning businesses do not build equity in the equipment
Carefully considering these factors ensures financing aligns with long-term business goals.
Frequently Asked Questions: About Equipment Financing in South Africa
What Types of Equipment Can Be Financed?
Most lenders finance essential business equipment, including vehicles, machinery, technology, and medical tools. Logistics companies can secure delivery vans, construction firms can finance heavy machinery, and retail businesses can fund point-of-sale systems. If the equipment contributes to operations and revenue generation, it is likely eligible for financing.
Can Startups Qualify for Equipment Financing?
Startups can qualify but often face stricter requirements. Many lenders prefer businesses with at least six months of operations, but new businesses may secure financing by offering a personal guarantee, providing strong financial projections, or showing proof of future revenue. Alternative lenders may be more flexible than traditional banks, though they often charge higher interest rates.
How Long Do Equipment Financing Approvals Take?
Approval times vary by lender. Traditional banks may take one to two weeks due to their detailed review process, while alternative lenders often approve applications within 24 to 72 hours. Businesses needing quick funding may prefer digital lenders, though faster approvals can come with higher interest rates or stricter repayment terms.
