In one paragraph
Asset and equipment finance — most commonly structured as a chattel mortgage or an equipment lease — and a business line of credit both help a business acquire or fund equipment, but they are built for different intentions. Equipment finance is tied specifically to the asset being financed, sized against its value and typically at a lower cost than an undirected facility, because the lender's security is the equipment itself. A business line of credit is a general-purpose facility that can be used to buy equipment among other things, but is not tied to the asset and does not benefit from the pricing an asset-specific structure typically attracts.
Side by side
|
Chattel mortgage or lease |
Business line of credit |
| Security |
The specific asset financed |
Property, GSA or a combination |
| Size |
Typically matched to the asset's value |
Typically a broader, standing facility limit |
| Speed |
Often same day to a few business days |
Typically 3–10 business days to establish |
| Cost basis |
Generally the lowest cost way to fund a specific asset |
Line fee on the limit plus interest on funds drawn |
| Flexibility |
Fixed to one asset and one repayment schedule |
Revolving, usable for any business purpose |
| Best for |
A known, specific equipment purchase |
Ongoing or unpredictable funding needs |
When equipment finance wins
Equipment finance wins whenever the need is a specific, identifiable asset — a vehicle, a piece of machinery, a fit-out item — since the lender's security in the asset itself generally supports a lower rate and a faster, simpler approval than a general-purpose facility would offer for the same purchase. A chattel mortgage or lease can typically also be arranged very close to the point of sale, sometimes through the equipment supplier's own finance relationships, making it the more efficient path for a straightforward, one-off acquisition.
When a business line of credit wins
A line of credit wins where the need is less defined, spans more than one purpose, or where the business wants standing access to funds it can draw against as needs arise rather than committing to a single asset-specific facility every time. A business anticipating several equipment purchases, ongoing working capital needs, or simply wanting a buffer against irregular cash flow benefits from the flexibility of a revolving facility, even at a higher cost per dollar drawn than a dedicated equipment facility would offer for a single purchase.
Businesses weighing these options should also consider how each affects their balance sheet and future borrowing capacity, since a chattel mortgage or lease is generally assessed by future lenders as a straightforward, asset-backed obligation, while a large undrawn line of credit limit can sometimes affect how a subsequent lender views the business's overall committed exposure, even where the facility is barely drawn on. Equipment suppliers themselves often have established finance relationships that can expedite a chattel mortgage or lease specifically for their products, sometimes with promotional terms for a limited period, which is worth comparing against a business's existing line of credit terms before defaulting to either option automatically. A business with a genuinely mixed need, some equipment purchases and some general working capital, should resist the temptation to fund everything through whichever facility is already in place, since matching each need to its best-fit structure, even across two separate facilities, usually produces a lower overall cost of finance than convenience alone would suggest.
Can you use both
Yes, and it is a common combination — a business finances major, identifiable equipment purchases through chattel mortgages or leases specific to each asset, while maintaining a separate line of credit for general working capital and smaller or less predictable needs. Structuring both together simply requires the business's overall serviceability and security position to support each facility independently, which a broker coordinating across lenders can generally manage more efficiently than the business approaching each lender separately.
Related
Asset & equipment finance · Business lines of credit · Chattel mortgage · Facility limit