How Equipment Loans Work

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When you need equipment for your business, getting a small business loan can be a smart move.

These loans allow you to buy any type of business equipment, but how much you can borrow depends on the equipment you’re buying and whether it’s new equipment.

If you’ve had a car loan, you have a basic idea of how an equipment loan works. The equipment serves as collateral to secure your loan, so you won’t have to put up extra collateral. Most equipment loans for small business are usually fixed interest rate loans, between 8% and 30%. They also offer a fixed term length so your payments stay the same. 

The nature of the equipment and its expected life affect how long you can extend the term of the loan. Few lenders are willing to extend the term of the loan beyond the equipment’s life expectancy.

An alternative option is to lease equipment instead of getting a loan. There are advantages to leasing, but with an equipment loan, you can own the equipment after you’ve paid off the loan.

Business Equipment Loan

The equipment you’re looking for is critical to your business operations and future growth. Being able to get the right equipment allows you to provide reliable and accurate service for years.

The question arises…should you buy or lease?

You’ll need to consider the depreciation of the equipment, the long term and short term costs, and tax benefits. You usually want to buy the equipment if it depreciates over 5 to 10 years. If you need technology and equipment that needs frequent upgrades, then you’ll want to lease it. Either way, Certified Business Loans can help you get the business equipment loan you need.


Keep in mind equipment financing prevents you from paying the cost of the equipment upfront. Although you will pay more to finance the equipment, you’ll be able to spread the cost over an extended period. If you’d like to buy equipment that costs $10,000. As well, the lender has requested you pay back the loan in 3 years (or 36 months). With a 12% APR, this means a $10,000 equipment will cost you $11,957.15 ($1,957.15 in financing fees). With monthly payments coming in at $332.14.

Who Qualifies?

Most businesses qualify for equipment loans. The amount you qualify for and the interest rate you pay depend on the value of the equipment, your history, and credit rating.

Equipment financing is a great solution for those have a less than optimal credit rating, since the equipment works as collateral.


  • Quick access to cash
  • Limited paperwork
  • Equipment serves as collateral
  • Builds credit
  • Potential tax benefits
  • Bad credit is okay


  • Equipment could be obsolete by the time the loan is repaid
  • Could tie up credit, preventing you from applying for other loans
  • May need to depreciate equipment, so you can’t deduct full cost each year
  • Requires extra expenses, like insurance and maintenance

Which Loan Is Right For You?

One Of Our Experts Will Be Happy To Discuss The Many Options With You.

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