Commercial Equipment Financing: Lease vs. Buy vs. Section 179

Buying a commercial kitchen means writing checks — a lot of them. A single Vulcan floor fryer is over a thousand dollars, a decent two-door reach-in is north of five thousand, and a proper combi oven can push forty. If you're standing up a new concept or upgrading an aging line, you're not doing it out of the register drawer. You're financing it. The question is how.

This guide walks through the four ways most restaurant operators pay for equipment — cash, bank/SBA loans, equipment financing agreements, and true leases — and how IRS Section 179 and bonus depreciation change the math for whichever route you pick. There's no single right answer. There's a right answer for your kitchen, and it depends on cash flow, tax posture, and how long you plan to keep the gear.

If you're still shopping the equipment itself, our companion Restaurant Startup Equipment Budget and 7 Must-Have Pieces of Equipment guides pair well with this one — start there for the sticker prices, come back here for how to pay for them.

The four ways to pay

Every deal boils down to one of these:

1. Cash — you write a check (or ACH) from working capital.
2. Bank loan or SBA loan — you borrow money and buy the equipment outright. The equipment is yours; the bank has a lien.
3. Equipment Financing Agreement (EFA) — looks and feels like a lease, but you own the equipment from day one. Also called a "$1 buyout lease" or "capital lease." Payments are structured, title is yours.
4. True lease (operating lease / FMV lease) — you rent the equipment for a term (usually 36–60 months), then either return it, buy it out at fair market value, or roll into new gear.

The industry uses "lease" loosely for all four of the last three, which is where operators get confused. The tax treatment of a $1-buyout EFA is completely different from a FMV lease, even though the monthly payment looks similar on the quote sheet.

Cash: cleanest, but not always smartest

Paying cash is the cheapest way to own a piece of equipment — no interest, no fees, no lender in the middle. If you can afford it and you have healthy reserves, you should probably pay cash for small stuff: a $1,142 Vulcan LG300 fryer, a $4,260 Hoshizaki KM-350MAJ ice head, a countertop mixer, some prep tables. Anything under about $5,000 is usually not worth financing — the origination fees and interest eat the savings.

Where cash gets dangerous is on the big-ticket items. That $39,559 Blodgett INVOQ combi oven is a real piece of capital. If writing that check drains your operating cash below one month of payroll and rent, you're doing it wrong — a single slow week or a broken compressor could sink you. The rule of thumb we give operators: never let equipment spending drop your cash reserves below 60 days of fixed expenses.

Bank loans and SBA loans

For larger buildouts — think a full restaurant equipment package for a new location — a traditional bank loan or an SBA 7(a) loan is often the right shape. SBA loans in particular offer 10-year terms on equipment (25-year on real estate), rates in the mid-single digits when prime is reasonable, and are backed by the U.S. Small Business Administration to reduce lender risk.

The tradeoffs: paperwork, time, and personal guarantees. An SBA 7(a) loan typically takes 45–90 days to close, requires two to three years of tax returns and financial statements, and will require the owner to personally guarantee the note. You'll also need 10–20% down.

The upside is you own the equipment outright the day it lands on the dock. That means you can take Section 179 or bonus depreciation on the whole thing in year one (more on that below), and there's no residual, no buyout, no return-condition inspection at end of term. It's yours.

Equipment Financing Agreements ($1 buyout)

An EFA is the workhorse of restaurant equipment financing. Structurally it's a loan dressed up as a lease — the finance company owns the paper, but you own the equipment from day one, and you make fixed monthly payments over 24 to 84 months. At the end of the term you pay $1 (or nothing) and the finance company releases their lien.

Approval is fast — often same-day for deals under $250,000, application-only up to $150,000 with no financial statements required. Rates run higher than a bank loan (typically 8–15% APR depending on credit) but the speed and paperwork tradeoff is real. If you need a Hobart HL200 20-quart mixer in your kitchen next week because your old one seized, you're not waiting 60 days for an SBA underwriter.

Because you own the equipment for tax purposes on day one, an EFA is Section 179-eligible. That's the killer feature: you can finance the whole purchase, put nothing down, and still write off the entire cost in year one. More on that in a minute.

True leases (operating / FMV leases)

A true lease — sometimes called a fair market value (FMV) lease or operating lease — is genuine rental. You pay a monthly fee to use the equipment for 36 to 60 months, and at the end of the term you choose to (a) return it, (b) buy it at fair market value (typically 10–20% of original cost), or (c) roll into new equipment on a fresh lease.

True leases have three advantages:

• Off-balance-sheet. Under most accounting frameworks, an operating lease is a rental expense, not a capital asset. That matters if you're trying to keep debt ratios clean for a future SBA loan or franchise conversation.
• Full payment deduction. Because it's rent, 100% of every payment is a deductible business expense on your Schedule C or corporate return. No depreciation schedule to track.
• Built-in upgrade path. At end of term you can just… get new gear. This matters for tech-heavy items like combi ovens, POS-integrated equipment, or high-speed ovens where a 5-year-old unit is meaningfully behind the current generation.

The tradeoff: you don't own the equipment, you can't take Section 179 on it, and if you keep paying and eventually buy it out, you'll pay more in total than a cash or EFA purchase. FMV leases make the most sense for equipment where obsolescence is real — high-tech ovens, refrigeration with rapidly changing energy standards, or warewashing systems where chemistry and controls keep evolving.

Section 179 and bonus depreciation

Here's where financing gets interesting for restaurants. Under Section 179 of the Internal Revenue Code, a small business can deduct the full purchase price of qualifying equipment in the year it's placed in service, up to an annual limit. For tax year 2026, the Section 179 deduction limit is $1,250,000, with the phase-out beginning at $3,130,000 of total equipment purchases — well above what any single-unit restaurant will ever hit.

To qualify, the equipment must be:

• Tangible personal property used more than 50% for business (yes, commercial fryers and reach-in refrigerators qualify).
• Purchased and placed in service by December 31 of the tax year you're claiming.
• New or used — used equipment qualifies too, as long as it's new to your business.
• Financed as ownership, not as a true lease. Cash, bank loan, SBA, and EFA all qualify. FMV lease does not.

Bonus depreciation is a separate but related provision that lets you deduct a percentage of the remaining basis after Section 179. For property placed in service in 2026, bonus depreciation is currently 40% (phasing down annually — check with your CPA for the current-year rate). Between Section 179 and bonus depreciation, most restaurant operators will write off the entire purchase price of any equipment they buy in year one.

Real numbers: three scenarios

Let's put math on it. Assume you're outfitting a small QSR line with the following core equipment:

Scenario A — cash. Write a $27,627 check. Take Section 179 in year one, deducting the full $27,627 against restaurant income. At a 24% effective tax rate, that's about $6,630 in tax savings. Net cost: roughly $21,000. But you're down almost $28K in the bank on day one.

Scenario B — 60-month EFA at 10% APR. Monthly payment ~$587. First-year payments: $7,044. You still get to Section 179 the full $27,627 in year one. Tax savings: ~$6,630. So in year one, you're out $7,044 in payments but you've saved $6,630 in taxes — net year-one cash outlay is about $414. Total interest paid over 5 years: roughly $7,589. Total cost of ownership: about $35,220 gross, ~$28,590 net of tax savings.

Scenario C — 48-month FMV lease. Monthly payment ~$675 (leases are usually a bit cheaper monthly because the residual isn't being paid down). No Section 179. You deduct each monthly payment as rent — $8,100 of deduction in year one. Tax savings: ~$1,944. At end of term you either return it, buy it for ~$5,500 FMV, or roll it. If you buy it out, total cost ~$38,000 gross.

The EFA usually wins on total after-tax cost if you plan to keep the equipment past 5 years. The lease usually wins on year-one cash preservation and on flexibility. Cash wins on total dollars but ties up capital that could be earning elsewhere or covering a rough month.

Which financing type for which equipment?

Not everything wants the same financing shape. Here's how we generally advise operators:

Manufacturer financing and 0% promos

Big-brand manufacturers — Hobart, True, Hoshizaki, Middleby, and the like — routinely run captive-finance promotions through their dealer networks. Watch for 0% APR for 24–36 months, deferred first payment (no payment for 90 days), or "same as cash" offers. These are real, and when they align with a piece of equipment you were going to buy anyway, they can make financing effectively free.

The catch: promo terms often require perfect payment history, and the deferred interest is retroactive if you miss a payment or don't pay it off by the end of the promo period. Read the paperwork and set up autopay.

Practical steps to finance a purchase

1. Build the equipment list first. Get real quotes from a dealer. Don't guess.
2. Talk to your CPA before you sign anything. Section 179 vs. bonus depreciation vs. lease treatment is not a decision to make on the sales floor. Even a 30-minute call before a five-figure purchase pays for itself.
3. Get two financing quotes. One from a bank or SBA lender, one from an equipment finance company. USA Restaurant Suppliers works with multiple finance partners and can pull a fast quote for you at the point of sale.
4. Look at total cost of ownership, not monthly payment. A $587/month payment on a $27,000 package is a $35,220 total commitment. A $675/month lease payment for 48 months plus a $5,500 buyout is $37,900. The monthly numbers look close; the totals don't.
5. Sign before December 31 if you want the current year's Section 179. The equipment has to be "placed in service" by year-end. In practice that means installed and operational, not just ordered.

Common mistakes to avoid

• Signing a FMV lease thinking you'll Section 179 it. You can't. If the sales rep tells you otherwise, walk away or get it in writing.
• Financing $2,000 of small equipment. The origination fees and interest will eat any tax benefit. Just pay cash.
• Ignoring the personal guarantee. Almost every restaurant equipment finance deal requires a personal guarantee from the owner. Understand what you're signing.
• Buying more equipment than the kitchen can support. A big Section 179 deduction is nice, but it doesn't help if the equipment sits unused because the kitchen isn't ready. Match purchases to the actual buildout timeline.

Keep reading

• Restaurant Startup Equipment Budget: Real Numbers for 2026
• The 7 Must-Have Pieces of Equipment for Every Commercial Kitchen
• Walk-In Cooler vs. Reach-In Refrigerator: Which Does Your Kitchen Need?
• Commercial Oven Buying Guide: Convection vs. Deck vs. Conveyor (2026)

Ready to spec the gear?

Whichever financing route you choose, the first step is a real equipment quote. Browse the full USA Restaurant Suppliers catalog, or contact our team for a package quote with financing options attached. We'll pull EFA and lease numbers side-by-side so you can see the real cost before you sign.