Equipment-Only Loans vs. CapEx Loans: Key Differences in Risk, Structure and Financing Strategy

When businesses need financing for equipment, the structure of the loan matters just as much as the capital itself. Two common options are Equipment-Only Loans and Capital Expenditure (CapEx) Loans. While they may sound similar, they serve very different purposes and carry distinct risk considerations, especially for companies that fall outside traditional bank financing.

At Celtic Capital, we offer both solutions, but not interchangeably. Understanding how these loan types differ, and why they are structured the way they are, can help business owners make smarter financing decisions.

What Is an Equipment-Only Loan?

An Equipment-Only Loan is secured by existing company-owned equipment already in service. This type of financing is designed to unlock liquidity from assets a business already owns, without taking on additional operational complexity.

Our Equipment-Only Lending Criteria

We consider Equipment-Only Loans when:

• The equipment is owned outright by the company.
• It is used in manufacturing or operations, or qualifies as rolling stock.
• The equipment is primarily housed in a single, company-controlled location.

Because collateral control is critical, rental equipment located across multiple customer sites does not qualify. Assets must be centralized and accessible to support an accurate valuation and risk assessment.

How Equipment-Only Loans Are Valued

We typically lend 75%–80% of the equipment’s forced liquidation value (FLV). This conservative approach reflects real-world recovery values rather than theoretical market prices, ensuring the financing remains sustainable even in stressed situations

What Is a CapEx Loan?

A Capital Expenditure (CapEx) loan finances the purchase of new equipment. While new equipment can enhance productivity and fuel growth, it also introduces immediate depreciation and execution risk. For this reason, CapEx loans at Celtic Capital are not offered as stand-alone facilities.

Why CapEx Loans Must Be Tied to an AR Line

CapEx loans are available only when paired with an accounts receivable (AR) line of credit. This structure provides additional collateral support and ongoing liquidity, creating a more balanced and resilient financing package.

Here’s why this matters:

• On a CapEx loan, we typically lend up to 70% of the equipment’s purchase price.
• Like a new car, equipment depreciates as soon as it’s put into service.
• New equipment has no operating history, increasing execution and resale risk.

By combining a CapEx loan with an AR facility, we reduce reliance on a single asset and give the business the working capital flexibility it needs during growth or transition periods.

Equipment-Only vs. CapEx Loans: A Side-by-Side Comparison

Why Forced Liquidation Value Matters

The market Celtic Capital serves consists primarily of non-bankable companies: businesses that may be experiencing rapid growth, transition, or financial complexity. These companies often sit at a riskier point in their lifecycle, making realistic collateral valuation essential.

That’s why we rely on forced liquidation value, not optimistic resale assumptions. This approach allows us to provide capital responsibly while still supporting companies that need flexible, non-bank financing solutions.

Both Equipment-Only Loans and CapEx Loans can play an important role in a company’s capital structure but only when used appropriately. Equipment-Only Loans are ideal for unlocking value from existing assets, while CapEx loans are best suited as part of a broader financing facility that includes working capital support.

By structuring financing around real-world asset values and operational realities, businesses can access the capital they need without overextending themselves.

If you’re evaluating equipment financing options, understanding these distinctions upfront can make all the difference in long-term success.

About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset-based financing solutions from $500,000 to $8 million with no financial covenants.

As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.