Equipment financing is a type of small-business loan designed specifically for the purchase of machinery and equipment essential to running your business. You can use an equipment loan to purchase anything from office furniture and medical equipment to farm machinery or commercial ovens.
The size of the loan should match the price of the equipment you’re purchasing, while the loan term should match how long you expect to use the new equipment. The equipment also serves as collateral for the loan. If you’re buying commercial ovens that you expect to use for 10 years, get a loan with a 10-year term. A shorter term may have you scrambling to make payments, and a longer term means you’ll be paying for the equipment after you stop using it.