Equipment financing refers to a loan used to purchase business-related equipment or machinery, such as restaurant equipment, commercial trucks, or construction equipment. These loans provide for periodic payments that include interest and principal over a fixed term
A considerable number of businesses use equipment financing to replace, upgrade, or purchase new equipment while at the same time retaining cash flow and working capital. Getting an equipment loan involves a lender that is willing to finance from 80% to 100% of the equipment.
The loan is self-secured, meaning that the piece of equipment or machinery works as collateral. As a result, lenders tend to offer lower interest rates with longer terms.
How much you can borrow and the interest rate will depend on the value of the equipment you will buy and the strength of your loan application. Also, the term of the loan will not exceed the length of the useful lifetime of the financed equipment.
With the capital that businesses borrow they can get everything from computers, trucks, ovens, desks, furniture, copiers, forklifts, farm machinery—without having to pay the full cost up-front.