4 Factors to Consider When Making  Equipment Finance Decisions

Make smarter equipment financing decisions. Learn four key factors—from cash flow to bonus depreciation—that impact business loans and long-term costs.

2 min read

Chris Bucher

May 13, 2026 |

Everyone understands that interest rates affect financing costs. It’s no surprise, then, that given the daily news headlines about rates, financial managers regularly ask our bankers this question: How should the Federal Reserve’s stance on rates influence my decisions about equipment acquisition and financing?

It’s a reasonable query, but here’s what we tell them: Whatever position the Fed takes on setting the overnight federal funds rate isn’t particularly relevant to your business’s equipment acquisition and financing strategy.

The fed funds rate is the rate banks use to charge one another for overnight loans. It’s a target rate that influences short-term interest rates throughout the economy, but it has no immediate or consistent correlation to the rates you pay to finance equipment. Most equipment is financed for 3, 5, or 7 years—or even longer—depending on its useful life. Thus, it’s medium- and long-term rates, not short-term rates, that impact equipment financing costs.

Indeed, there isn’t always a direct correlation between short- and longer-term rates. Historically, interest rates tend to climb as you go farther out along the yield curve. But an upward slope is not set in stone. When there’s an inverted yield curve, like we experienced from July 2022 to early last year, medium and long-term interest rates can actually fall below short-term rates.

More Relevant Strategic Considerations

Simply put, there are other things you should focus on when making decisions about acquiring and financing equipment. Some of the most important factors include:

1. Business cash flow

Many companies need equipment to generate revenue and grow. For them, the decision to acquire equipment is often a “no-brainer.” If your existing equipment is nearing the end of its life, and you need it to operate your business, you must replace it— regardless of interest rates. Similarly, you may need to add equipment to meet growth goals.

2. Replacement cycle

What’s the economic useful life of your equipment? This will generally drive your decision about when to replace old equipment and what term to adopt in your borrowing structure.

Typically, you will want to base your replacement cycle on your experience with the useful life of the equipment. Good asset management practices also require you to consider maintenance expense. Most business equipment is like the car you drive: The older it gets, the more likely it will need costly repairs. So, holding on to it for too long can be a mistake.

3. Your debt posture

Which is most important to you, getting out of debt quickly or minimizing monthly debt service payments? This is another factor that can influence the term you choose for your loan.

4. Bonus depreciation

The One Big Beautiful Bill Act’s 100% expensing provision (“bonus depreciation”) allows a company to deduct the entire cost of eligible short-lived assets in the first year they are placed in service. You can take advantage of this tax benefit if your business is tax-efficient and can use all the depreciation in the quarter in which you purchase the equipment. If that’s not going to be the case, you might want to consider taking advantage of bonus depreciation indirectly through leasing the equipment: The lessor reaps the tax savings from the 100% deduction and can pass it along to your business in the form of a lower implicit rate on your lease.

Evaluating Your Options

There are many alternatives related to equipment acquisition and financing to consider. At Hancock Whitney, we can help. Our Equipment Finance specialists can walk you through all your options related to borrowing structure and bonus depreciation. To have that discussion, contact Equipment Finance directly or ask your banker to connect you with one of our specialists.

This information is educational and informational in nature, and not intended to be used as tax, legal or accounting advice. We advise you to consult your tax, legal and accounting advisors regarding your tax needs.

Hancock Whitney Bank, Member FDIC. All loans and accounts subject to credit approval. Terms and conditions apply.

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This information is educational and informational in nature and is not intended to be used as tax, legal, or accounting advice. We advise you to consult your tax, legal and accounting advisors regarding your tax needs.