How to read the result
The monthly payment is what the lender collects each month. The total of payments is that payment times the number of months, and the total interest is the part of it that is not the amount you borrowed. The all-in cost adds back your down payment, which is the number to compare with the equipment’s price and with the revenue it will produce.
In the default example, $68,400 of equipment with 10 percent down leaves $61,560 financed. At 11 percent over 60 months the payment is about $1,338 and the interest about $18,748, so the machine costs about $87,148 in total. That is the figure to weigh against what it earns or saves over the same five years.
| APR | Monthly payment | Total interest |
|---|---|---|
| 8% | $1,248 | $13,333 |
| 11% | $1,338 | $18,748 |
| 18% | $1,563 | $32,233 |
| 24% | $1,771 | $44,697 |
What sets the rate you are quoted
Equipment loans are secured by the equipment itself, which is why they price below most unsecured business loans. Published rates run from about 7 percent to about 30 percent. The low end goes to businesses with several years of history, strong credit and new equipment with a long life and a resale market. The high end goes to startups, owners with credit problems and specialized or used equipment that would be hard to resell.
Three things move a quote the most: time in business, the owner’s personal credit and the type of equipment. A quote that looks high for an established business is worth comparing with at least one other lender; a quote that looks high for a business under two years old is often the market rate for that risk.
Choosing the term
Lenders set the longest term by how long the equipment stays useful. Trucks, construction machines and manufacturing equipment often qualify for 60 to 84 months new; computers and technology rarely go past 36. Used equipment usually gets a shorter term than the same machine new.
A longer term lowers the payment but raises the interest. On the default example, 36 months costs about $2,015 a month and $10,994 of interest; 84 months costs about $1,054 a month and $26,981 of interest. If the business can carry the higher payment, the shorter term is cheaper. If cash flow is tight, a longer term with no prepayment penalty lets you pay it down faster in good months.
How much to put down
Many equipment lenders finance up to 100 percent of the price for established businesses, and ask 10 to 20 percent down from newer ones. In the example, no down payment raises the payment to about $1,487; 20 percent down brings it to about $1,190. A down payment also protects you if the equipment loses value faster than the loan balance falls.
Soft costs such as delivery, installation and training can sometimes be financed with the equipment; ask before you sign. Sales tax is usually due at purchase and may or may not be financed, depending on the lender and your state.
Loan or lease
A loan or a $1-buyout lease makes you the owner, and the payment is close to what the calculator shows. A fair-market-value lease charges less each month because you are paying for use, not ownership, and at the end you return the equipment, renew or buy it at its market value. It suits equipment you expect to replace, such as technology.
Compare leases on the total of payments plus the buyout, not on the monthly payment alone. A lease that looks cheaper each month can cost more in total if you end up buying the equipment at the end.
| Product | Amount to discuss | Time to fund | Pricing structure | Eligibility review |
|---|---|---|---|---|
| Equipment financing | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Loan interest or lease payments; compare deposit, fees and ownership terms | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business term loan | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Quoted interest and fees; compare net proceeds and total repayment | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| SBA loan | Program-specific; 7(a) maximum $5 million | Provider-dependent; confirm availability of funds | Lender-negotiated interest subject to applicable SBA program limits; fees may apply | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
| Business line of credit | Provider-specific; size to repayment capacity | Provider-dependent; confirm availability of funds | Interest or installment fees by provider; check draw and maintenance charges | Operating-history requirements vary by provider; Ask which personal and business credit checks apply |
Section 179 and the after-tax cost
Section 179 lets a business elect to deduct the cost of qualifying equipment in the year it is placed in service instead of depreciating it over several years. For tax years beginning in 2026, the limit is $2,560,000, and it is reduced dollar for dollar once the cost of Section 179 property placed in service that year exceeds $4,090,000. The limit for a sport utility vehicle is $32,000.
Financed equipment can qualify, because the deduction depends on when the equipment is placed in service, not on when it is paid off. Whether it helps depends on the business’s income and tax position, so confirm with your tax preparer before counting on it.