Business Banking. Equipment Loan

Equipment loans are similar to term loans, but they are secured by the equipment. For example, a construction company takes a loan to buy a crane. The crane itself becomes the collateral for the loan. Due to the presence of a collateral, it is easier to receive an approval and the interest rates are typically lower compared to unsecured loans. A 10-30% downpayment is typically required.

When considering an equipment loan application, the lender will look at the following:

• The revenue of the business

• Net profit

• Length in business (typically at least 2 years under the same ownership is required)

• Assets of the business (typically the business must have some reserve working capital to qualify)

• The business credit score

• The credit score of the guarantor(s)

• The assets of the guarantor(s)

• The value of the equipment

• The type of the equipment

• The downpayment amount

• The industry of the business. High risk industries will be scrutinized more heavily or be outright rejected.