Scaling has a cost most founders underestimate.
Every hard tech company hits the same wall eventually. The prototype works. The pilot is funded. Now it's time to scale, and scaling means equipment: more CNC machines, more test rigs, more production tooling, sometimes a whole new facility's worth.
The instinct is to pay for it the same way you paid for everything else: equity. It's the capital you have, and it's the capital you know how to raise. But equipment is a different kind of asset than the rest of what your equity funds. It depreciates. It doesn't build enterprise value the way your IP or your team does. And there's a financing structure built specifically for it.
This isn't a new idea. But most founders treat it as a one-time purchase decision instead of an ongoing part of how they manage capital as they grow.
Equipment financing as part of the capital stack, not a one-off decision.
The companies that scale fastest tend to think about capital in layers. Equity funds growth: talent, product, customer acquisition. Grants and strategic partnerships fund specific milestones. And equipment financing funds the physical infrastructure that makes production possible, separately from either of those.
The goal isn't to avoid debt. It's to match the financing to the asset, so every dollar of equity is working on what actually builds your valuation.
This matters more as a company matures. A pre-seed company financing its first test rig has different needs than a Series C company scaling a production line ahead of a raise. But the principle holds at every stage: the equipment itself can carry its own financing, structured in a way that doesn't touch your cap table.
What this looks like in practice.
Three structures come up most often:
- Lease Lines: A pre-approved facility, from $100K to $50M, that you draw on as equipment needs arise. Instead of a new financing conversation every time, you have a resource ready when production demands it.
- Sale Leaseback: If you've already bought equipment with equity, a sale leaseback lets you sell it to a financing partner and lease it back, often recovering close to the full purchase price. It turns a sunk cost into working capital without disrupting operations.
- Hardware-as-a-service (HaaS): For companies whose own customers need expensive equipment, HaaS bundles that hardware into a subscription, turning a one-time sale into recurring revenue.
All three are non-dilutive. No equity changes hands, no warrants, no covenants that restrict how you run the business. They sit on the balance sheet as a structured obligation, separate from the equity stack, and work alongside venture capital, grants, and government contracts without friction.
Who this is for.
This isn't only a founder's decision. Investors are increasingly the ones raising it.
For founders, it's a way to extend runway and preserve equity ahead of a raise, without waiting for a down round or a dilutive bridge to solve an equipment problem.
For VCs and PE firms, it's a tool to recommend to portfolio companies carrying equipment on the balance sheet that could be financed separately, improving capital efficiency without adding board complexity. For banks and other referral partners, it's a financing need you may not service directly but your clients have, and a relationship worth having on hand.
The best time to put a lease line in place is before you urgently need it. Companies that establish one early have it ready the moment a contract, milestone, or production need arrives.
What to look for in a financing partner.
Not every equipment financing provider is built for hard tech.
- Flexibility in underwriting. Will they work with pre-revenue and early-stage companies, or only established ones?
- Speed. In this sector, timing determines outcomes. How fast can a partner move from term sheet to funded?
- Clean terms. No equity components, personal guarantees, or covenants. Clean lease structures exist. Don't accept anything less.
- Sector fluency. A partner who understands what the equipment costs, what it's worth, and how it's used will underwrite more accurately and move with more confidence.
- Staying Power. The right partner supports you at $500K in equipment needs and is still the right partner at $20M.
Two companies. Two approaches.
Same outcome: more capital, more speed.
Defense Tech Company Expands Facilities to Be Mission-Ready.
The Situation: A defense technology company serving NATO and the US Department of Defense was expanding its manufacturing facilities. The company needed to fund the build-out at a lower cost of capital — without further diluting equity ahead of its next growth phase.
What CSC Did: CSC structured a $4 million sale leaseback alongside direct procurement of new manufacturing equipment, including CNC machines and 3D printers. The company unlocked liquidity from equipment already on its books while adding new production capacity — no warrants, no covenants.
Outcomes:
- Equipped existing facility for future expansion
- Acquired capital equipment at a lower cost of capital
- Preserved equity ahead of next growth phase
- Established an ongoing partnership with CSC to scale
Manufacturer Leverages Assets to Boost Pre-Raise Valuation.
The Situation: A next-generation manufacturer commercializing 3D metal-printing technology for government and commercial applications was approaching an equity raise. The company needed capital to hit production milestones — without diluting investors before demonstrating progress.
What CSC Did: CSC structured a $3.4 million sale leaseback on existing equipment, converting sunk costs into operating runway. A follow-up $7.5 million tranche monetized additional assets under the same terms — giving the company extended runway to meet key milestones before going to market.
Outcomes:
- Extended runway without additional equity dilution
- Met production milestones ahead of equity raise
- Entered raise with a stronger valuation position
- Opened doors to new venture relationships
Questions about whether this applies to your company? Thomas can help.
Thomas works with founders, operators, and investors across hard tech to find the right financing structure for their stage and goals. He'll be at 47G's Hard Tech Week and Zero Gravity Summit at the end of October. If you're attending, find him there, or reach out any time before.
Own Your Growth.
For more information, contact our Director of Originations, Thomas Cottrell.