Equipment Financing vs. SBA Loans: Compare Business Funding
Equipment financing vs. SBA loans — compare speed, rates, and use cases for funding business equipment purchases.
Equipment Financing: Equipment financing uses the purchased equipment as collateral, making it one of the most accessible forms of business funding for asset-heavy industries. SBA Loan: SBA 7(a) and 504 loans are government-backed programs offering some of the lowest rates and longest terms available for qualifying small businesses.
Equipment Financing vs. SBA Loan — side by side
| Equipment Financing | SBA Loan | |
|---|---|---|
| Typical amount | $5,000 – $5,000,000 | $50,000 – $5,000,000 |
| Typical term | 2 – 7 years | 5 – 25 years |
| Rate | 6% – 24% APR | Prime + 2.25% – Prime + 4.75% |
| Minimum time in business | 1 year | 2 years |
| Minimum credit score | 600+ | 650+ |
Which is right for your business?
- Equipment Financing tends to fit best when you need machinery or vehicles.
- SBA Loan tends to fit best when you need business acquisition or real estate purchase.
Frequently asked questions
Is equipment financing or SBA cheaper for a 5-year hold?
For a 5-year term, SBA rates (prime + 2.25–3.75%) are typically lower than most equipment financing rates for strong borrowers. However, SBA has origination fees and closing costs that equipment financing often avoids. Model both scenarios with all-in costs to compare accurately.
