An equipment loan is when a third party provides you with the funds needed to purchase business-related equipment. As with equipment leasing, this can be any tangible asset that isn’t property. You then repay the value of the loan over a predetermined period as well as interest on the principal sum. The faster you pay off the loan, the less your overall interest will be.
A lender may place a lien on the financed equipment as collateral against your debt. They may also require a personal guarantee. Depending on the value of the loan, they may impose a lien against other assets as well. Another important thing to note is that an equipment loan does not always cover the soft costs related to purchasing new equipment, such as shipping and installation. It also usually requires a deposit up front, or a percentage of the total sum as a one-off down payment.
