Equipment Financing for Technology Companies

The short answer: Equipment financing lets a company buy or lease hardware and pay for it over time, using the equipment itself as security. For technology companies with significant hardware needs, it can fund growth without selling equity, though it adds fixed payments you must be able to meet.

How it works

In a typical loan, a lender advances funds to purchase specific equipment and holds a security interest in it. You make regular payments and own the asset at the end. A lease is similar, but the lender or lessor may retain ownership, and the end-of-term options vary. Some structures also allow a sale-leaseback, where you sell equipment you already own and lease it back to free up cash.

Which technology companies use it

It suits businesses where hardware is central to the product or the revenue. Examples include servers and GPU compute for AI workloads, networking gear for data centers, power and cooling equipment, manufacturing machinery, and specialized devices. Software-only companies with little physical infrastructure usually have less to finance this way.

What lenders look for

• Asset quality: equipment that holds value and has a resale market is easier to finance.
• Useful life: lenders prefer terms shorter than the time the equipment stays useful.
• Cash flow: evidence that you can cover payments from revenue or reliable funding.
• Contracts: customer agreements that show the equipment will be put to productive use.
• Management: a team with a track record of operating this kind of asset.

Advantages and risks

The main advantage is preserving ownership. Equity is the most expensive capital for a company that grows well, so using debt for assets that generate revenue can make sense. Equipment financing is also faster and more predictable than many other types of borrowing because the collateral is clear.

The risks are real. Payments are fixed whether or not revenue arrives, and fast-changing technology such as GPUs can lose value or become outdated sooner than expected. Lenders may also place covenants on how you operate. Model your payments against conservative revenue, not best-case revenue.

Pairing it with equity

Many companies combine the two: equity pays for people, product and early traction, while equipment financing pays for the hardware that scales it. Showing that an asset-backed lender is willing to finance your equipment can also strengthen your case with equity investors. Leasing and borrowing carry accounting and tax implications, so speak with a qualified accountant and lawyer before committing.

Building infrastructure in Canada?

Launch Capital is a Toronto venture capital firm and family office that provides growth capital to Canadian technology companies, including those building AI infrastructure, data centers and power. We are operators who have built and exited companies. If that sounds like you, send us your pitch. It takes two minutes and no deck is required.