When your business needs a certain piece of equipment to get started or reach the next level, a small business equipment loan could be the right move—especially when you don’t have cash on hand to purchase the piece of equipment upfront.
You can use the proceeds of business equipment financing loans to purchase almost any kind of business equipment, from computers to cars—and everything in between.
How much you can borrow through a business equipment loan depends on the type of equipment you’re buying and whether that equipment is new or used, since this very equipment ultimately serves as collateral to secure your loan.
If you’ve ever had a car loan, you’re already pretty familiar with the structure of a business equipment loan:
The price of that equipment dictates the amount and terms of your equipment financing, and you won’t need to put up any extra collateral.
This is because a business equipment loan is a self-secured loan, which means that the equipment itself acts as collateral for the loan. The self-collateralized nature of equipment financing can make these loans slightly easier for some business owners to qualify for.
Why? Because the equipment provides security for the lender. If you can’t afford to pay back your business equipment loan, the lender can simply seize the piece of equipment and liquidize it for cash to recoup their losses.
And here’s another good thing to know:
Most small business equipment loans are made at fixed interest rates—usually between 8% and 30%—with set term lengths, so you can expect the same payment each and every month.