Equipment financing is a secured loan, where the equipment you purchase acts as collateral. Since your equipment serves as collateral, failure to make payments could result in the lender repossessing it. But once you repay the full loan amount, you’ll own the equipment outright, without any liens.
Lenders typically cover at least 80% of the equipment cost, which means that you pay the remaining amount via a down payment. You’ll repay the loan over a fixed period of time plus interest.
Equipment financing companies typically offer rates from 5% to 30%. For example, if you run a printing business and need a new digital press, it may cost you $100,000. You could apply for a heavy equipment loan equal to 80% of the equipment’s cost ($80,000), plus 5% interest (a total of $84,000). You’d pay back the loan on a fixed schedule until it’s paid off.