Banks vs. Private Equipment Lenders in Canada (Compared)

People ask me whether banks or private lenders are "better" for equipment financing, and the honest answer is that the question is slightly wrong. They are not better and worse. They are two different businesses with two different risk models, and choosing between them is really about figuring out which business your particular deal belongs in.

Here is the difference in one sentence: a bank lends mainly against you — your financials, your credit, your track record — with the machine as backup. A private equipment lender lends mainly against the machine — its brand, its resale value, its remaining life — with you as the backup. That single distinction explains almost everything downstream: why the bank wants two years of tax returns and the private lender wants your last six months of bank statements, why the bank is cheaper but slower, why a 580 credit score ends the conversation at one and barely registers at the other.

And here is the part people miss: under the hood, the two are more alike than they look. Whichever you use, the lender secures the loan the same way — a registered lien on the machine under the Personal Property Security Act (in force in every province except Quebec, which uses its Civil Code). You own the equipment and run it; the lender holds a registered security interest that only bites if you default, and it clears the day you pay the loan off. Same machine, same collateral mechanism. What changes between a bank and a private lender is who they will say yes to, how fast, and at what price. This guide walks the whole comparison so you can place your deal correctly the first time.

How bank equipment financing works

When you finance through a bank — RBC, TD, BMO, Scotiabank, CIBC, or a credit union — you are dealing with a federally regulated institution. Chartered banks operate under the federal Bank Act and the supervision of OSFI. They have structured lending departments, cheap capital, and underwriting that runs through analysts and sometimes a credit committee. That is why their rates are the lowest available — and why they are selective and slow.

The typical bank experience:

• Application: A detailed package — usually two years of financial statements (sometimes CPA-reviewed), tax returns, revenue projections, and personal guarantees.
• Approval criteria: A credit score around 680+, two-plus years in business, positive net income, a reasonable debt load, clean personal credit.
• Collateral: The equipment, often plus additional security — a general lien on business assets, personal guarantees, sometimes real estate.
• Fees: Real and itemized. On the federally backed small-business loan, for example, RBC lists a $175 documentation fee and a $100 application fee (plus a program administration fee folded into the rate). Conventional equipment loans can also carry appraisal and commitment fees — figures vary by bank and deal, so ask for the full list in writing.

The bank process is excellent when you have time, strong financials, and clean credit. It falls apart when any one of those three is missing.

How private (non-bank) equipment financing works

Private lenders are non-bank finance companies that specialize in equipment — construction, trucking, forestry, agriculture, and other asset-heavy industries. And it is worth being clear-eyed about what this sector actually is, because "private lender" makes some contractors picture a fringe operation. It is the opposite. Canada's asset-based equipment and vehicle finance industry financed over $400 billion of assets in 2018 and, by the industry association's own accounting, is the largest provider of debt financing in the country after the banks and credit unions — effectively the second-largest source of business debt financing in Canada. The Canadian Finance & Leasing Association represents 200-plus member firms, from manufacturers' captive finance arms to independent leasing companies to banks themselves. These are not unregulated operators, either — they work under provincial commercial and consumer law, the same PPSA lien system the banks use, and the federal criminal interest-rate cap. This is a mainstream channel, not a back alley.

What makes them different from a bank is the risk model. A private lender weighs the machine more heavily. A Cat D6 dozer with 3,000 hours holds its value and resells easily, so the lender sees solid collateral whether your score is 720 or 580. The typical experience:

• Application: Short — often one or two pages. Recent bank statements, ID, the equipment details, basic business info. Full financials help but are not always required.
• Approval criteria: A much wider band. Scores from the low-500s up, startups under two years, seasonal operators, contractors coming off a rough year. Equipment quality and down payment offset weaker credit.
• Speed: Fast. One established Canadian non-bank equipment lender publishes a target of a few business days for deals under $1 million (up to about two weeks above that).
• Collateral: Usually just the machine — no blanket lien on your other assets, no pledging your house.

BDC: the option most contractors forget is in between

There is a third lane, and it is the one people overlook: the Business Development Bank of Canada, a federal Crown corporation. BDC is interesting precisely because it blends the two models — closer to bank-grade cost, with some private-lender flexibility. Its equipment loan finances up to 125% of the purchase price (rolling in freight, install, and training), lets you pay interest only for up to the first 24 months while the machine ramps, and can amortize up to 12 years. On speed it sits between the two as well — BDC targets approval in under 10 days for smaller loans and under 30 days up to $350,000, with funds available within about a week of approval. It is not the right fit for every file, but if your deal is too slow-burning for a bank and you would rather not pay full private-lender pricing, BDC is worth a call.

The side-by-side comparison

Here is how the three stack up on what matters to a contractor. Rates float off the prime rate, which sits at 4.45% as of June 2026; treat the rate ranges as directional, not quotes.

Factor	Chartered bank	BDC (Crown)	Private finance company
Typical rate	Lowest (prime + a small margin)	Prime + a moderate margin	A few points higher; risk-priced
Approval speed	Several weeks	~10–30 days	A few business days
Minimum credit	~680+	Good profiles	~500+ possible
Time in business	2+ years	Established preferred	Startups considered
Down payment	0–10% on prime deals	Low; can finance 125%	10–25% typical
Documentation	Heavy	Moderate	Light
Equipment age	Prefers newer (under ~7 yrs)	Moderate	Flexible (up to ~15 yrs)
Seasonal/interest-only options	Rare	Yes (interest-only to 24 mo)	Common
Extra collateral	Often required	Sometimes	Usually equipment only

Key takeaway: Banks win on rate, private lenders win on speed and accessibility, and BDC splits the difference. The right pick is the one that matches your credit, your timeline, and the machine — not whichever has the lowest headline rate.

When a bank makes sense

Start with your bank if you check most of these:

When a private lender makes sense

Private lenders exist because banks cannot or will not serve every contractor. Go private when:

The rate gap, honestly

The rate difference is real, but it is smaller in practice than on paper. Say a bank offers 8% on a machine and a private lender offers 11%. On a $150,000 loan over five years, that is roughly $32,500 in interest at the bank versus about $44,600 private — a ~$12,000 gap. Significant. But weigh the other side:

• Bank-side fees. Documentation, application, appraisal, and commitment fees add up — even a federally backed small-business loan carries a $175 documentation fee and a $100 application fee at RBC, and conventional equipment loans can add appraisal and commitment charges on top.
• Time cost. If the bank takes five weeks and you lose a $30,000 contract for lack of the machine, the "savings" are gone instantly.
• Opportunity cost. Those same five weeks of downtime were billable.

A private lender often charges a modest documentation fee and nothing else. Run the total cost over the term, including fees and lost time — not the headline rate.

Key takeaway: Compare total cost of financing, not the interest rate alone. A lower bank rate that takes six weeks to close can cost more than a higher private rate that funds in five days.

What happens when the bank says no

This is the most common road to a private lender: you start at the bank because it seems obvious, and two or three weeks later you get a decline — or a request for more documents, then a decline. If it happens:

1. Ask why. The usual reasons: score too low, not enough time in business, debt ratios too high, equipment too old, thin cash-flow documentation.
2. Organize your documents. A private lender asks for less, but having it ready speeds things up.
3. Go to a broker or private lender. A broker like IronFinance matches your deal to the lender whose criteria fit the specific reason the bank balked.
4. Be upfront about the decline. Private lenders work with bank declines every day — it is literally the business model. Hiding it just slows you down.

Most contractors declined by a bank are approved by a private lender within a week. Different terms, same outcome: the machine gets bought and the revenue starts.

Real scenarios

Can you use both?

Yes — and smart operators do:

• Bank for the core fleet. Machines you will run for years — your main excavator, your primary dozer — go to the bank where the lower rate compounds over five-plus years.
• Private lender for opportunistic buys. A used machine you cannot pass up, or a contract that needs iron you do not have. Use a private lender for speed, then refinance to a bank later if it pencils out.
• Private lender to build credit. If you are a bank decline today, finance through a private lender, make 12–18 months of clean payments, and come back to the bank stronger for the next one. (More on that rebuild path in our bad-credit guide.)

How to choose

Five questions:

1. Credit score? Above 680, try the bank. Below 650, go straight to a private lender. In between, it depends on the rest.
2. How soon do you need it? Under three weeks, private. Over six weeks, a bank is fine — and BDC fits the middle.
3. How old is the equipment? Under five years, either. Over seven, a private lender is likelier to say yes.
4. Time in business? Under two years, private. Over three with good financials, bank.
5. How much documentation can you produce? Audited financials ready? The bank goes smoothly. A shoebox of receipts and a half-built QuickBooks file? A private lender's lighter requirements are your friend.

Key takeaway: There is no universally better option — only the lender that matches your credit, timeline, and machine. The costly mistake is burning four weeks at a bank only to learn you should have gone private from the start.

Sources: Industry scale and structure — Canadian Finance & Leasing Association; bank vs. non-bank regulation — Baker McKenzie Canada regulatory guide; bank fees — RBC; BDC terms and timelines — Business Development Bank of Canada; non-bank approval speed — Accord Financial; PPSA security — Government of Ontario; prime rate — Ratehub. The CFLA scale figure is the association's own 2018 total, the most recent it publishes. Rate ranges are directional market conditions as of June 2026 that float with prime — not quotes or guarantees.

Next steps

If you are not sure which lane your deal belongs in, the fastest way to find out is to talk to someone who works with all three — banks, BDC, and private lenders. At IronFinance, we match contractors to the right lender on the full picture: credit, business, equipment, and timeline. One application, multiple options, and an honest recommendation on which one fits. You can also read our down payment guide to see what each lender expects you to bring, or our rate comparison guide to evaluate offers apples-to-apples.