Equipment financing
Loans vs. leases.
Comparison
Equipment financing vs. a working capital advance for the same purchase
Both can buy the same machine. One is priced on the machine; the other is priced on your whole business and repaid before the machine has earned its keep. Here is the same purchase both ways.
The purchase
$35,000 for a used box truck (or an oven, lift, or CNC machine; the shape is the same). Expected useful life: five years.
Side by side
| Equipment financing (illustrative: 5 years, 11% APR, 10% down) | Working capital advance (illustrative: 1.28 factor, 3% fee, 30 weeks) | |
|---|---|---|
| Cash you receive / asset funded | $31,500 financed; $3,500 down | $33,950 net of fee |
| Payment | about $685 per month | $1,493 per week (about $6,466 per month) |
| Total interest / cost | about $9,600 over 5 years | $10,850 over 30 weeks |
| Estimated APR | 11% | about 98% (nominal) |
| Early payoff | Usually reduces interest | Usually no savings unless a discount is written in |
| If the equipment fails | Lender may work with you; asset is the collateral | Debits continue regardless |
Illustrative assumptions for comparison only. Real pricing depends on credit, asset, and provider.
The cash-flow difference
In this illustration the advance takes roughly $6,466 a month out of operating cash for seven months; the equipment loan takes about $685 a month for sixty. The truck earns roughly the same either way. On these assumptions the equipment structure costs less in total and per month; your own offers will differ, so compare them the same way.
When the advance can still make sense
- The equipment is needed in 48 hours and no equipment lender can close.
- The asset is hard to finance (custom, very old, no resale market).
- You cannot make a down payment and cannot wait to save one.
Even then, plan to refinance into an equipment loan once the asset is in service.
What Fast Mula is and isn't. Fast Mula helps you compare business-funding structures and submit one inquiry. Nothing on this site is an offer, approval, guaranteed rate, or guaranteed timeline. Any funding depends on a provider's own review, and terms vary by state.
Common questions
Can I refinance an advance used for equipment into equipment financing?
Sometimes, if the equipment has resale value and the advance can be paid off. A sale-leaseback of owned equipment is another route.
Related
See which options fit your numbers
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