The business equipment financing option is very similar to term business loans, the only difference being it’s specifically for purchasing equipment. Because equipment financing is so advantageous, small business owners can purchase what they need with a low or no down payment, easy repayment terms, and save money with competitive rates. In general, equipment loan alternative lenders and most equipment financing lenders will use the asset being purchased as collateral, so they’re protected; thus, the rate is lower and could increase the loan amount they’re willing to give. All of these points can help cash flow when you need to purchase equipment for your business. How much can you borrow with business equipment loans? Typically, the small business can get up to 100% of the loan amount needed to purchase equipment and equipment leasing. In some cases, a down payment and minimum credit score may be required for equipment financing. Since the asset is used as collateral, you’ll save money with equipment financing because the interest rate would be lower than other equipment finance options like unsecured business credit lines, invoice factoring, merchant cash advances, or other types of small business loans.

How it Works

Let’s say you’re a baker. To increase your baking productivity by 3x, you need an industrial oven, which costs $75,000. You can get a five-year term with as low as 3.5% APR interest (SBA) by applying for an equipment loan. But, again, because you’re using the oven as collateral, you’ll save money by getting a lower rate and potentially higher loan amount than you would with other funding products. Also, you most likely won’t need a personal guarantee with equipment finance. After making your regular equipment financing loan payments for five years, the balance is paid off, and you own the equipment outright. Equipment financing is the best way to acquire expensive machinery for your business needs.