Financing Solutions for Machinery 2024 | Read Our Guide

When it comes to machinery financing, small businesses often struggle to finance new machines with cash—for example, a small excavator can cost you 500,000 kronor or more.

That's why it's common for businesses to look at different financing options for their purchases. There are two dominant alternatives on the market:

Machinery loan

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

Leasing

• You rent the machine from the bank, which remains the official owner
• Lower monthly payments, but you must buy the machine from the bank when the lease expires. This cost is referred to as the residual value and is typically 20-50% of the purchase price.

» Learn more: Apply for machinery financing

Which option is best for your business is hard to say. But in this article, we share our insights regarding the terms offered to businesses that have applied for machinery loans and leasing on our platform.

The best options for financing machinery in 2024

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

• Marginalen Bank offers both machinery loans and financial leasing. Their offering in 2023 stood out because they weren't just among the cheapest options, but also offered a high financed amount as a percentage of the machine's purchase price.
• Aros Kapital primarily offers loans to small businesses that can be used to purchase machinery. But beyond that, they also offer leasing for larger amounts. Their offering in 2023 stood out due to pricing and their strong digital process with high disbursement rates.
• Grenke Leasing offers both financial and operating leasing for small businesses. Their offering stood out in 2023 due to the option of choosing hire purchase instead of leasing, which is better for a company's balance sheet. In addition, they were also among the cheapest options for financing machinery.

Criteria for evaluating equipment financing providers

In 2023, we helped around 1,500 customers looking for machine financing. The factors that mattered to them are similar to those that matter to a typical business loan customer. Since we also produce an annual guide to the best business loans, we try to use similar criteria but adjust the list to be more relevant to machine financing.

The criteria we removed were flexibility, since for machinery it's fairly unlikely to repay a loan after just 3-6 months. Most of the time, companies want to keep digging. We also removed guarantee requirements, as it's more common to receive leasing offers without needing a guarantor.

Criteria we used in our analysis:

• Cost – simply which solution has the lowest interest rate.
• Financed amount – which solution allows you to finance as much of the purchase price as possible.
• Payout rate – to what extent lenders honour the offers they submit on our platform versus how many customers were rejected afterwards
• Impact on key figures – to what extent the financing solution helps you preserve your balance sheet for other investments
• Approval rate – the lenders who approve the most eligible applications

Sample size - which lenders and offers we evaluated

For our analysis, we looked at all loan and leasing applications on Krea in 2023 where customers applied for leasing or a loan and stated machine financing as the purpose. These amounted to around 1,500 applications in 2023.

Only lenders that work with Krea and are part of our network were included in the analysis.

Cost - the cheapest options for machine financing

Let's first look at what we mean by the cheapest option. For a standard business loan, the monthly cost and interest rate are easier to compare. But when comparing leasing and machine loans, you need to take into account that leasing has a residual value - and sometimes requires an initial down payment.

When comparing costs, we therefore look at the effective annual interest rate. Even for leasing contracts, an effective interest rate can always be calculated - even if the seller might try to say otherwise.

Which were the cheapest options for machine financing?

In 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 offer both machine loans and leasing through Krea.

Financed amount - the option that finances the largest share of the purchase price

When it comes to machine loans, it's relatively straightforward to see how much of the purchase price you can finance with a loan - it's simply the offered loan amount. For leasing, it works differently, but it's still fairly easy to calculate.

You can take the purchase price and subtract any down payment and residual value to arrive at the financed amount. (To get the exact value, you would also need to subtract part of the residual value from the end of the period to today - but we'll skip that step for simplicity.)

Looking at the financed amount, you can therefore generally expect a machine loan to have a higher financed amount compared to leasing.

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

Payout rate - which lenders get deals done

When purchasing a machine, you probably want a smooth process and wouldn't like it if a lender withdrew their offer midway through. That's why it's important that banks and other lenders keep their promises to you. One way we at Krea can evaluate this is by looking at how many customers received their machines compared to how many were in the process with a given lender.

We call this the disbursement rate. Here we compare the number of machines delivered with the number of customers the lender was in contact with.

The financing options with the highest disbursement rate in 2023 were offered by Qred, Marginalen Bank and Aros. It's not particularly surprising that loans also had a higher disbursement rate in this criterion compared to leasing, offering greater certainty that the purchase would go through. This is especially true for digital lenders accustomed to running a digital process. In a leasing transaction, the bank needs to evaluate not just the business but also the object being purchased.

Impact on financial key metrics

This criterion was more subjective compared to other quantitative metrics from activity on our portal. Essentially, it looks at how the solution offered by the lender affects the company's balance sheet.

For machine loans it's relatively straightforward. Since your company owns the machine, it will appear on your balance sheet. There's no benefit to "saving" your credit limit for future purchases if you choose a machine loan.

For leasing, there are generally two options: operational or financial leasing. Both have their pros and cons. However, when it comes to the impact on the balance sheet, operational leasing (also known as "rental") is more advantageous, as Swedish companies following K3 requirements can still avoid including the machine on their balance sheet.

Among the lenders Krea works with, only Grenke Leasing offered operational leasing during 2023.

Approval rate - the lenders that approve the most businesses

Generally, when we look at approval rates, an individual lender will always have a lower approval rate compared to a financing marketplace like Krea. This is because lenders tend to be fairly niche and focus on certain industries or risk classes.

However, there's also a huge spread when we look at how many offers a lender provides compared to how many applications they've received.

So which lender approved the most requests from customers 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 of 74% of eligible applications, meaning they were genuinely looking for solutions for a very broad range of businesses.