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Equipment Loan Calculator

Calculate equipment financing payments and compare leasing vs buying.

Free equipment loan calculator for business machinery and vehicles.

Calculator

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Results

Monthly Payment
$0.00
Total of All Payments
$0.00
Total Interest Paid
$0.00
Origination Fee Amount
$0.00
Total Cost (Payments + Fees)
$0.00
Effective APR (Including Fees)
0.00%

Loan Cost Breakdown

Principal (Borrowed)$250000.00
Total Interest$0.00
Origination Fee$0.00

Business Loan Types

SBA 7(a): General-purpose small business loans, up to $5M, 10-25 year terms, competitive rates (currently 9-12%).

SBA 504: Real estate and equipment financing, up to $5.5M, 20-25 year terms.

Term Loans: Traditional bank loans, fixed or variable rates, 1-10 year terms, typically 7-15% rates.

Equipment Financing: Secured by equipment, 3-7 year terms, rates similar to SBA.

Lines of Credit: Revolving credit, interest-only payments, 8-20% rates.

Choose based on purpose, amount needed, and qualification requirements.

Current Business Loan Rates (2025)

SBA 7(a) loans: Prime Rate (7.25%) + 2.25-4.75% spread = 9.5-12% typical.

SBA 504 loans: Fixed rates around 6-8% for real estate portion.

Conventional term loans: 7-15% depending on creditworthiness and collateral.

Equipment financing: 8-12% typical.

Business lines of credit: 10-20% variable rates.

Rates vary based on: Credit score (higher = better rate), time in business (2+ years = better rate), revenue (higher = better rate), collateral offered, loan amount and term.

How Loan Term Affects Cost

Longer term = Lower monthly payment BUT more total interest.

Example: $250K at 10% for 5 years = $5,312/month, $68,748 total interest.

Same loan for 10 years = $3,303/month, $146,359 total interest (over 2× more!).

For 15 years = $2,686/month, $233,563 total interest (over 3× more!).

Choose longer term if: Cash flow is tight, need lower monthly payment.

Choose shorter term if: Can afford higher payment, want to minimize interest, build equity faster.

Most business loans: 5-10 years for working capital, 10-25 years for real estate.

Understanding APR vs Interest Rate

Interest Rate: The rate charged on the principal balance only.

APR (Annual Percentage Rate): Includes interest + fees (origination, guarantee fees, closing costs) = true cost of borrowing.

Example: $250K loan at 10% interest with 3.75% origination fee.

Simple interest rate: 10%.

Effective APR: ~10.4% (accounting for $9,375 fee).

SBA loans: Typically have 3.75% guarantee fee (for loans $150K-$500K), raising effective APR.

Always compare APR when shopping loans, not just interest rate.

SBA Loan Advantages

Lower down payment: 10% typical vs 20-30% conventional.

Longer terms: Up to 25 years vs 5-10 years conventional = lower monthly payment.

Better rates: Often 2-4% lower than conventional business loans.

Higher approval rates: SBA guarantee reduces lender risk = easier to qualify.

Flexible use: Can use for working capital, equipment, real estate, acquisitions.

Disadvantages: Slower approval (45-90 days vs 2-4 weeks), more paperwork, guarantee fees add 2.5-3.75% to loan cost, stricter requirements (2+ years in business, good credit).

Origination Fees and Closing Costs

Origination fee: One-time fee for processing loan, typically 0.5-5% of loan amount.

SBA guarantee fee: 2% for loans <$150K, 3% for $150K-$700K, 3.5% for $700K-$1M, 3.75% for $1M+.

Closing costs: Title insurance, appraisal, legal fees, environmental reports = $5K-$25K typical.

Packaging fee: Some lenders charge $500-$2,500 to prepare SBA application.

Total upfront costs: Often 3-8% of loan amount.

Example: $250K loan = $7,500-$20,000 in fees.

Can these be financed?

Some lenders roll fees into loan (you pay interest on them).

Budget accordingly - you won't receive full loan amount!

Debt Service Coverage Ratio (DSCR)

DSCR = Net Operating Income / Annual Debt Service.

Lenders typically require DSCR ≥ 1.25 (income 25% higher than debt payments).

Example: $250K loan at 10%, 10 years = $3,303/month = $39,636/year debt service.

Required annual NOI: $39,636 × 1.25 = $49,545 minimum.

If business earns $100K/year NOI: DSCR = $100K / $39,636 = 2.52 (excellent!).

If business earns $40K/year NOI: DSCR = $40K / $39,636 = 1.01 (likely denied).

Calculate DSCR before applying to know if you qualify.

How to Get the Best Business Loan Rate

Improve credit score: 720+ gets best rates (2-3% better than 650).

Increase time in business: 2+ years = better rates than startups.

Show strong revenue: $500K+ annual revenue improves rates.

Offer collateral: Real estate or equipment backing = 1-2% better rate.

Increase down payment: 20-30% down vs 10% can reduce rate 0.5-1%.

Shop multiple lenders: Rates vary 2-5% between lenders for same borrower.

Consider SBA loans: Often 2-4% lower than conventional.

Improve debt-to-income: Pay down existing debt before applying.

Have solid business plan: Shows lender you'll succeed and repay.

Sources & References

SBA - Small Business Loans
https://www.sba.gov/funding-programs/loans
Federal Reserve - Small Business Credit Survey
https://www.fedsmallbusiness.org/

Understanding Equipment Financing

Equipment loans provide businesses with capital to purchase machinery, vehicles, technology, and other business assets without large upfront cash outlays.

These specialized loans use the equipment itself as collateral, making them accessible even for newer businesses with limited credit history.

Equipment financing typically covers 80-100% of equipment cost, comes with terms matching useful life (1-10 years, typically 3-7 years), carries interest rates of 5-30% depending on creditworthiness and equipment type, and requires down payments of 0-20%.

The equipment serves as collateral, reducing lender risk and enabling more favorable terms than unsecured business loans.

Types of equipment financing include: term loans (traditional installment loans, you own equipment immediately), equipment leases (essentially renting, with purchase option at end), sale-leaseback (sell owned equipment, lease it back, freeing up capital), and lines of credit (revolving access to funds for multiple purchases).

The benefits are significant: preserving working capital for operations and emergencies, potential tax advantages (Section 179 allows deducting up to $1,160,000 in equipment costs in 2024 rather than depreciating over years), building business credit, and matching payments to equipment's productive life.

Equipment loans make sense when equipment generates revenue exceeding loan payments, when paying cash would strain operations, and when tax benefits offset interest costs.

Industries heavily using equipment financing include construction (heavy machinery, vehicles), healthcare (medical equipment, imaging devices), restaurants (commercial kitchens, POS systems), manufacturing (production equipment), transportation (trucks, fleets), and technology (servers, computers).

Calculate the return on investment: will the equipment increase revenue, reduce costs, or improve productivity enough to justify the loan payments?

The best equipment purchases pay for themselves through increased business value.

Optimizing Equipment Financing Decisions

Choosing the right equipment financing structure requires analyzing total costs, tax implications, and business needs.

Compare loan versus lease: loans mean higher monthly payments but eventual ownership and equity building; interest is tax-deductible; and you control the asset completely.

Leases have lower monthly payments, are easier to upgrade equipment as technology evolves, and 100% of payments may be tax-deductible as business expenses.

However, you never own the equipment and total cost over time is typically higher.

For rapidly depreciating technology (computers, software, some medical equipment), leasing often makes sense.

For appreciating or slow-depreciating assets (real estate, certain vehicles, quality machinery), buying wins.

Optimize interest rates by shopping multiple lenders: traditional banks (typically lowest rates, 5-12%, but strictest requirements), online lenders (faster approval, higher rates 10-30%, more flexible criteria), equipment manufacturers (convenient, competitive rates, but limited to their equipment), and SBA loans (government-backed, favorable terms, extensive paperwork).

Your credit score dramatically impacts rates—improving score from 650 to 720+ can save 3-7 percentage points, worth thousands annually.

Structure terms strategically: match loan term to equipment's useful life (don't finance 5-year equipment over 10 years), consider seasonal payment structures if business has cyclical revenue, and negotiate prepayment terms to pay off early if cash flow allows.

Maximize tax benefits: Section 179 deduction allows immediate expense deduction up to $1,160,000 (2024), bonus depreciation allows additional deductions on new equipment, and interest is fully deductible as business expense.

Consult tax professionals to optimize timing and structure.

Avoid common mistakes: don't overleverage—keep total debt service under 30% of revenue, don't ignore total cost of ownership (maintenance, insurance, operating costs), and don't finance depreciating equipment for longer than its productive life.

The goal is using financing as a tool to grow business profitably, not accumulating debt that constrains operations.

Key Financial Terms

Understand the essential concepts behind this calculator

Equipment Collateral

Using purchased equipment as security for a loan, making it easier to get approved and often at better rates.

Learn more →

Section 179

A tax deduction that allows businesses to deduct the full cost of qualifying equipment in the year it's purchased.

Learn more →
View all financial terms in our glossary →

Frequently Asked Questions

Common questions about the Equipment Loan Calculator

An equipment loan calculator helps you estimate the monthly payments for financing equipment. It takes into account the loan amount, interest rate, and loan term.
Learn More

Section 179 Deduction Limits

The Section 179 deduction allows businesses to deduct up to $1,160,000 in equipment purchases in 2024, with phase-out beginning at $2,890,000 in purchases.
→Source: IRS - Section 179 Deduction(2024)

Equipment Financing Rates and Terms

Equipment loan rates typically range from 5-30% depending on creditworthiness, with terms of 1-10 years matching equipment's useful life.
→Source: Equipment Leasing and Finance Association - Industry Report(2024)