Equipment Loan Calculator

An equipment loan is a secured business loan specifically designed to finance the purchase of business equipment, machinery, vehicles, or technology. The equipment itself serves as collateral, which typically allows for better interest rates than unsecured loans. You make regular monthly payments over a set term (usually 1-7 years), and you own the equipment outright once the loan is paid off.

Equipment loans can finance a wide range of business assets including construction equipment (excavators, bulldozers), manufacturing machinery, medical equipment, restaurant equipment, farm equipment, commercial vehicles, office technology, printing presses, and more. Most lenders require the equipment to be essential to business operations and have a useful life that extends beyond the loan term.

Equipment loan interest rates typically range from 4% to 15%, depending on your credit score, business financials, loan amount, equipment type, and whether the equipment is new or used. Businesses with strong credit (700+) and established revenue can expect rates of 4-8%, while newer businesses or those with challenged credit may see rates of 9-15% or higher.

Most equipment lenders require a down payment of 10-20% of the equipment cost, though some may finance up to 100% for well-qualified borrowers or new equipment purchases. Larger down payments (20%+) can help you secure lower interest rates, reduce monthly payments, and demonstrate financial stability to lenders. Used equipment often requires larger down payments.

Equipment loan terms typically range from 1 to 7 years (12 to 84 months), depending on the equipment's expected useful life and value. Smaller equipment purchases under $25,000 may have terms of 2-3 years, while large machinery over $100,000 can extend to 5-7 years. Lenders generally won't offer terms longer than the equipment's useful life.

Equipment loans are better if you plan to use the equipment long-term, want to build equity, need ownership for tax benefits, or the equipment retains value. Leasing is preferable if you need equipment temporarily, want to upgrade frequently, prefer lower monthly payments, or want to conserve capital. Consider your business needs, cash flow, tax situation, and the equipment's depreciation rate when deciding.

Most equipment lenders require a minimum credit score of 600-650 for approval, though some may work with scores as low as 500 with compensating factors like strong revenue or larger down payments. Scores above 700 typically qualify for the best rates and terms. If your credit is low, consider applying with a co-signer or improving your score before applying.

Yes, equipment loan interest is generally tax-deductible as a business expense. Additionally, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment (up to $1,160,000 for 2023) in the year it's purchased, rather than depreciating it over time. Consult your tax advisor to maximize your equipment purchase tax benefits.

Lenders typically require business tax returns (2 years), personal tax returns (if applicable), bank statements (3-6 months), profit and loss statements, balance sheets, business plan, equipment quote or invoice, and possibly personal financial statements. Established businesses with strong financials may need fewer documents, while startups need more comprehensive documentation.

Yes, many lenders finance used equipment, though terms are generally less favorable than for new equipment. Used equipment loans typically have higher interest rates, shorter maximum terms, and larger down payment requirements. The equipment's age, condition, and remaining useful life affect approval and terms. Most lenders won't finance equipment older than 10 years.

Defaulting on an equipment loan can result in late fees, damage to business and personal credit, and ultimately repossession of the equipment, which disrupts your business operations. If you're struggling with payments, contact your lender immediately to discuss options like payment restructuring, temporary forbearance, or refinancing. Being proactive can prevent default and maintain your lender relationship.

Most equipment loans allow early payoff, but some lenders charge prepayment penalties to recoup lost interest. Before signing, confirm whether prepayment penalties apply and calculate whether early payoff makes financial sense. If there are no penalties, paying extra toward principal or making a lump sum payment can save significant interest and free up cash flow sooner.