Financing solutions for machines 2024 | Read our guide

When it comes to machine financing small businesses often struggle to finance new machines with cash as even a small digger can cost you 500 000 Swedish crowns or more.

It is therefore very common to look at financing options for your purchases. There are two predominant options in the market:

Machine loans

• You borrow money from a bank to buy the machine
• Higher monthly payments as you need to repay the full amount in normally 5 years

» Read more about: Machine loans

Leasing

• You rent the machine from the bank, that is the official owner
• Lower monthly payments, but you will need to buy the machine from the bank at the maturity of the leasing agreement. The cost is referred to as terminal value and is usually from 20-50% of the purchase price.

» Read more about: Machine leasing

What option is best for your business is hard to say. But we try in this article to at least share our insights into terms and conditions businesses received that applied for machine loans and leasing.

The best options to finance machines in 2024

Based on our analysis we found that Marginalen Bank offered the best solution for businesses looking to finance machines. Closely followed by Aros Kapital and Grenke Leasing.

• Marginalen Bank offers both machine loans and financial leasing. Their offering stood out as they were not only among the cheapest options, but also were offering a high financed amount in percentage of the machine’s purchase price.
• Aros Kapital offers predominantly loans to small businesses that can be used to buy machines. But on top of that, they also offer leasing for larger amounts. Their offering stood out because of price and having a good digital process with high payout ratios.
• Grenke Leasing offers both financial and operational leasing for small businesses. Their offering stood out because of the option to choose rent instead of leasing, which is better for a company’s balance sheet. On top of that they were also among the cheapest options to finance machines.

Criteria for evaluating equipment finance providers

During 2023 we helped approximately 1500 customers that were looking for machine financing. The things that are important to them are similar to what is important to a normal business loan customer. Since we also produce a yearly guide of the best business loans, we are trying to utilize similar criteria but also expand the list to be more relevant for machine financing.

The criteria we removed were flexibility, as for machines it is quite unlikely to repay a loan after only 3-6 months. Mostly you want to keep digging. We also remove guarantee requirements as it is more common to receive leasing offers without any need for a guarantor.

Criteria we used in our analysis:

• Cost - simply what solution has the lowest interest rate.
• Financed amount - what solution enables you to finance as much as possible of the purchase price.
• Payout ratio - to what extent are lenders fulfilling the offers they place in our portal or do customers get rejected in hindsight
• Impact on financial ratios - to what extent does the financing solution help you to save balance sheet for other investments
• Approval rate - the lenders approving most eligible applications

Sample size - what lenders and offers did we evaluate

For our analysis, we looked at all loan and leasing applications at Krea during 2023 where customers applied for Leasing or for a loan, specifying machine financing as a purpose. These were ~1500 applications in 2023.

Only lenders collaborating with Krea and that are part of our network were part of the analysis.

Cost - the cheapest options for machine financing

First let’s look at what we mean by cheapest option? For a normal business loan the monthly cost and interest rate is more easily comparable. But, when comparing leasing and machine loans you have to account for leasing having a terminal value - and sometimes requiring an initial down payment.

When we compare costs we therefore look at the effective yearly interest rate. Even for leasing contracts an effective interest rate can always be calculated - even if the sales person might try to tell you otherwise.

Which were the cheapest options for machine financing?

During 2023, Aros Kapital, Marginalen Bank and Grenke Leasing offered machine financing with the lowest average effective interest rate. Grenke Leasing only offers a leasing solution for businesses, while Marginalen and Aros both offer machine loans and leasing through Krea.

Financed amount - the option financing the largest percentage of the purchase price

When it comes to machine loans it is quite simply to see how much of the purchase price you can finance with a loan. It simply is the offered loan amount. For Leasing, it works differently. But, still fairly easy to calculate.

You can take the purchase price and deduct any eventual down payment and residual value to arrive at the financed amount. To be fully precise, you would also need to discount part of the residual value from the end of the period to today - but we skipped that step for simplicity purposes.

Looking at the financed amount it is therefore to expect that machine loans generally have a higher financed amount compared to leasing.

For the whole of 2023 we saw that DBT, SBL Finans and Marginalen Bank were the lenders providing the highest financed amount on average. Marginalen Bank had even a relatively high financed amount on their leasing offers at ~85% of the purchase price.

Payout ratio - which lenders make business happen

When it comes to buying a machine, you likely want to have a smooth process and would not like it if a lender takes back their offer in the process. It is therefore important that they deliver on their promises to you. One way how we at Krea can evaluate this is to look at how many customers received their machines compared to how many were in the process with a certain lender.

We call this the payout ratio. Where we compare the number of delivered machines with how many customers the lender was in touch with.

The financing options with the highest payout ratio in 2024 were offered by Qred, Marginalen Bank and Aros. It is not heavily surprising that even here loans had a higher payout rate compared to leasing and hence a higher certainty for purchases to go through. Particularly from digital lenders that are used to run a digital process. In a leasing transaction, not only does the bank need to evaluate the business but also the object that is being purchased.

Impact on financial ratios

This criteria was more subjective compared to other quantitative metrics from activity in our portal. Basically, it looks at how the solution offered by the lender is impacting the balance sheet of the company.

For machine loans it is quite simple. Since your business is the owner of the machine it will be on the balance sheet. There is no benefit to sort of “save” credit limit for future purchases if you choose a machine loan.

For leasing there are generally two options, either operational or financial leasing. Both have their advantages and downsides. But in terms of impact on the balance sheet, operational leasing (also-called “rent”) is more beneficial as Swedish businesses following the K3 requirements can still avoid to take up the machine on their balance sheet.

Among the lenders Krea is collaborating with, only Grenke Leasing has been offering operational leasing during 2023.

Approval rate - the lenders approving most businesses

In general when looking at approval rate, a single lender will always have a lower approval rate compared to a financing marketplace, like Krea. This as a result as lenders tend to be quite niched and focus on certain industries or risk classes.

However, there is also a very big spread when looking at how many offers a lender gives compared to how many applications they received.

So, what lender approved most requests from customers that were looking to finance a machine?

During 2023, the lenders with the highest approval rates were Nordic Finance, Ikano Bank and Froda. Nordic Finance had a particularly high approval rate at 74% of eligible applications, meaning that they were really looking to find solutions for a very broad range of businesses.