Should Your Small Business Get an Equipment Loan?

Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith Wood is the editor-in-chief at Fundera. She has specialized in financial advice for small business owners for almost a decade, and is sought out frequently for her expertise in small business lending. Meredith’s advice has appeared in the SBA, SCORE, Yahoo!, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, and more.
Meredith Wood

No matter what kind of small business you run, there’s a good chance that at some point you’ll need to buy equipment, whether that ends up being desks, computers, cars, machinery or more.

As a responsible business owner, you know to save and invest so that you can afford to purchase new equipment regularly. But what if something unexpected happens? Say your computers get infected with a nasty virus, the company car breaks down, your office is flooded, or worse. Whatever the reason, what are your options if you need to upgrade your gear and you don’t have the cash right now?

Well, at that point, you may want to consider securing equipment financing. An equipment loan can be a smart and sensible option; you can use the equipment while you make monthly payments, and you own your equipment once you’ve paid back the loan.

Depending on what you’re buying, the loan amount can be as much as 100% of the value of the equipment, with the term of the loan ranging from six months to 10 years depending on the expected life of the purchase. When using an alternative lender, the interest rate will likely vary between 15% and 30%.

Let’s say you’re a successful veterinarian preparing to open a second office. You’ll need equipment to fill the space and make it functional — computers, chairs, tables, lights, and more. The more capital equipment you buy, and the better your credit score, the more money that a lender will be able to put up for you.

There are some downsides to keep in mind. First of all, equipment loan could lead you to owning gear that is obsolete by the time the loan term ends, and it could tie up a chunk of your credit, preventing you from getting other loans.

Keeping that in mind, there are some significant, additional upsides to an equipment loan from an alternative lender, including quick access to capital and very little paperwork. Moreover, lenders use the equipment you are purchasing as collateral, while also potentially giving you lower overall costs than other forms of financing.

As with any loan, you should always carefully consider your financial situation before making a commitment, but an equipment loan is an excellent way to finance your next big purchase.

The business loan application process for equipment financing is actually easier than the one for traditional loans, but let’s walk through what requirements you can expect.

Download “Your Equipment Loan Application Cheat Sheet” Here

Editorial Note: Fundera exists to help you make better business decisions. That’s why we make sure our editorial integrity isn’t influenced by our own business. The opinions, analyses, reviews, or recommendations in this article are those of our editorial team alone. They haven’t been reviewed, approved, or otherwise endorsed by any of the companies mentioned above. Learn more about our editorial process and how we make money here.
Meredith Wood

Meredith Wood

Editor-in-Chief at Fundera
Meredith Wood is the editor-in-chief at Fundera. She has specialized in financial advice for small business owners for almost a decade, and is sought out frequently for her expertise in small business lending. Meredith’s advice has appeared in the SBA, SCORE, Yahoo!, Amex OPEN Forum, Fox Business, American Banker, Small Business Trends, and more.
Meredith Wood

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