Equipment Financing Down Payments in Canada: When Required (and How to Reduce Them)

By Brent Finlay, Business Finance Specialist (CPA,CMA MBA)
Originator of $150M+ in Loans & Leases for 100’s of Canadian SME’s | Creator of the BFE 5-Step Strategic Funding Process | Fractional CFO & Change Management Expert.
Published:  Feb 2, 2026.   Updated: Feb 16, 2026

Down payments are one of the most misunderstood parts of equipment financing.

Many business owners assume a down payment is “just the lender’s rule.” In reality, it’s usually a risk-control tool tied to cash flow confidence, equipment value, structure, and lender mandate.

Below are the most common questions I get — and how to think about down payments in a way that improves approval odds and preserves cash.

Part of: Equipment Financing & Leasing — Answers

Answers Navigation

Business Financing — Answers
Equipment Financing & Leasing — Answers
Refinancing & Working Capital — Answers
Fractional CFO — Answers
All Answers 

Do you always need a down payment for equipment financing in Canada?

Answer:
No. Some deals can be structured with little to no upfront cash — but it depends on lender type, the equipment, and the overall risk picture.

Down payments are more likely when the lender sees uncertainty in any of these areas:

  • The business’s ability to support the payment (cash flow stability)
  • The equipment’s resale value or remarketability
  • The borrower’s credit profile or limited history
  • The deal structure (term length, amortization, balloon, seasonal payments)

So “down payment required” isn’t a universal rule. It’s a signal that the lender needs more certainty or a stronger structure.

What factors most often trigger a down payment requirement?

Answer:
In most cases, down payments show up when one or more of the following are true:

  1. Used equipment or private sale transactions
    The lender may be less confident in value, condition, or resale pathway.

  2. Specialized or harder-to-resell equipment
    The lender wants a buffer in case they ever need to recover value.

  3. Startups, newer corporations, or thin financial history
    Less historical performance means less certainty.

  4. Higher leverage or tight debt service coverage
    If cash flow is stretched, a down payment reduces payment size and increases the lender’s margin of safety.

  5. Credit issues or recent major changes
    Even if the business is strong, recent disruptions can cause lenders to add upfront equity.

What’s the real purpose of the down payment from a lender’s perspective?

Answer:
It’s usually one (or more) of these:

  • Alignment: you have “skin in the game”
  • Risk buffer: the equipment value can fall and the lender still has recovery coverage
  • Payment control: a down payment reduces the amount financed, lowering the monthly payment and improving affordability
  • Fraud/verification control: upfront contribution can validate transaction legitimacy (especially in private sales)

The key insight: a down payment is often the lender’s substitute for certainty. If you can provide certainty another way, you can often reduce it.

How can you reduce the down payment without hurting approval odds?

Answer:
Here are practical approaches that often work:

  1. Choose the right structure (loan vs lease, term, seasonal payments)
    Sometimes the down payment is really a structure problem. A better-aligned structure can reduce or eliminate the upfront requirement.
  2. Improve equipment value confidence
  • Buy from an established dealer
  • Provide a clear invoice and serial/VIN details
  • Use equipment with strong resale markets
  • Provide third-party appraisal or market comps when appropriate
  1. Strengthen the approval package
  • Current interim financials (not just year-end)
  • Updated AR/AP aging
  • A simple use-of-equipment rationale tied to revenue/efficiency
  • A payment affordability view (what changes with the new equipment)
  1. Use a trade-in (or cash you’re already spending) as the “equity”
    Trade-in value or documented deposit can sometimes satisfy the lender’s equity requirement.
  2. Avoid “stacking” financing changes at the same time
    If you’re also refinancing, taking on new debt, or changing ownership, lenders may add down payment as a cushion. Sequencing the moves can reduce friction.

If you’re being asked for a down payment, what should you do next?

Answer:
Treat it as a diagnostic signal, not a dead end.

Ask (or determine) which constraint is driving it:

  • Is it equipment value (used/private/specialized)?
  • Is it cash flow coverage?
  • Is it credit / time in business?
  • Is it structure (term/payment alignment)?

Then respond with the right fix:

  • If it’s value → strengthen documentation and comps
  • If it’s cash flow → adjust term/structure or provide current performance support
  • If it’s lender mandate → switch lender category (bank vs non-bank vs captive vs specialty)
  • If it’s structure → redesign the proposal

In many cases, the best path is running two versions: one that minimizes upfront cash and one that optimizes approval certainty — and then selecting the best overall outcome, not just the lowest down payment.

If you’re trying to preserve cash and still secure equipment financing, the fastest wins usually come from matching the right structure to the right lender type — and presenting a lender-ready package that reduces uncertainty.

Related Answers

Equipment Leasing vs. Equipment Loan (Canada): How to Choose
Decision rules to pick the structure that fits cash flow and approvals.

How to Finance Used Equipment in Canada (Age, Condition, Private Sale, Auction)
What changes approvals on used assets: age, condition, vendor, valuation.

Equipment Financing and Leasing Checklist For Private Sales
Documentation lenders need to approve a private-sale equipment purchase.

If you’re working through a finance decision and want help mapping the best path forward for your situation, start with the Business Finance Answers above ... or contact us to discuss your goals and constraints.

**Three ways to move forward:**

1. Access my free 5 Step Strategic Funding Process through this link 
2. Email your situation through my contact form
3. Book a 15-minute discovery call through this calendar link

Or call: 905-690-9874

Business Financing

**About the Author**

Brent Finlay helps Canadian SMEs locate, secure, and manage business capital ...lines of credit, loans, and leases ... across working capital and tangible asset financing (AR, inventory, equipment, and real estate). He also provides fractional CFO support to improve cash flow visibility, financing readiness, and decision-making through growth, stress, and transition.