SBA equipment loans: terms, rates and down payment

What can you finance with an SBA equipment loan?

SBA loans can pay for most of the equipment a business uses to operate, including:

• Machinery and production equipment
• Vehicles used in the business, such as delivery vans, trucks and work vehicles
• Technology, such as computers, servers and point-of-sale systems
• Specialized equipment for your industry, from dental chairs and imaging systems to commercial kitchens
• Furniture and fixtures
• Delivery, installation and setup costs

An equipment purchase can be its own loan or part of a larger 7(a) loan that also covers working capital or a building. If the equipment comes with a business you’re buying, see SBA loans to buy a business. If you’re buying the building too, see commercial real estate loans.

Equipment must be used in the business, not for personal use.

Should you use a 7(a) or 504 loan for equipment?

Both programs finance equipment, but they’re built differently:

Feature	SBA 7(a)	SBA 504
Structure	One loan from one lender	A bank loan plus an SBA-backed loan from a Certified Development Company (CDC), typically split 50% / 40% / 10% (bank / CDC / you)
Maximum	$5 million	$5 million SBA portion; $5.5 million for small manufacturers
Interest rate	Variable or fixed, capped by the SBA	Fixed on the SBA portion
Term for equipment	10 years, or up to 15 years if useful life supports it	Fixed debenture terms; equipment needs at least 10 years of useful life
Down payment	Set by the lender, except for start-ups and business purchases	10%, or 15% for a new business
Best for	Mixed needs and shorter-lived equipment	Large, long-lived equipment

A 7(a) loan is usually simpler: one lender, one set of documents, and it can bundle equipment with working capital and other costs. A 504 loan takes more coordination, but it locks in a fixed rate on the SBA portion for big, long-lived equipment. 504 projects also have to meet job-creation or public-policy goals, generally 1 job per $95,000 of SBA financing.

How long can you finance equipment with an SBA loan?

Under 7(a), equipment loans run up to 10 years as standard, and up to 15 years when the equipment’s useful life under IRS guidelines supports it. The term can also include a limited installation period before regular payments begin.

A lender won’t set a term longer than the equipment’s useful life, and it may choose a shorter term than the maximum. A longer term lowers the monthly payment, which matters when new equipment takes time to pay for itself.

Under 504, equipment must have a useful life of at least 10 years. 504 loans use 10-, 20- or 25-year debentures, and equipment projects generally use the shortest of these.

How much down payment do you need for equipment?

It depends on the program:

• 504: at least 10% of the project cost, rising to 15% for a business that has operated for 2 years or less.
• 7(a): the SBA sets no minimum when an existing business buys equipment, so the lender decides. Some lenders ask for cash down; others finance the full cost when cash flow and collateral are strong. Start-ups must inject at least 10% of the total project cost.

The equipment itself is usually the main collateral. On larger loans, lenders also take other available business assets and, if the loan still isn’t fully secured, may take a lien on personal real estate.

What are SBA equipment loan rates and fees?

7(a) rates are set by the lender but capped by the SBA at a base rate (usually prime) plus a margin that depends on loan size. With the prime rate at 7.00%, the maximums are:

504 rates on the SBA portion are fixed when that portion is funded and are based on U.S. Treasury yields. The bank portion’s rate is negotiated with the bank.

Fees differ by program:

• 7(a): an upfront guaranty fee on the guaranteed portion, based on loan size and shown below. Most borrowers finance it into the loan.
• 504: an upfront fee of 0.50% of the SBA portion and an annual fee of 0.203% on its balance. In FY2027 the upfront fee is waived for manufacturers, food-supply-chain businesses and rural businesses. The CDC and the bank also charge their own processing and closing costs.

How does an SBA loan compare with dealer or bank equipment financing?

The main alternatives are conventional equipment loans from a bank, financing from the dealer or manufacturer, and equipment leases. In plain terms:

• Speed and paperwork. Conventional financing and leases are usually faster and need fewer documents. SBA loans ask for more, especially when the SBA reviews the loan.
• Term and payment. SBA loans can match the term to the equipment’s useful life, which often means a lower monthly payment. Conventional equipment loans often have shorter terms.
• Rate. SBA rates are capped, but a manufacturer’s promotional rate can beat them on a short term. Compare the total cost, not just the rate.
• Flexibility. A 7(a) loan can bundle equipment with working capital, installation and other costs in one loan.
• Ownership. With a loan, you own the equipment and the lender holds a lien. With many leases, you don’t own it unless you buy it at the end.

SBA financing tends to make the most sense for expensive equipment with a long useful life, or when you want to combine equipment with other needs. For a quick, smaller purchase, a dealer loan or lease may be simpler.

What do lenders need for an equipment loan?

Most lenders will ask for:

• A quote or invoice from the vendor, including delivery and installation
• A description of the equipment and its expected useful life
• Business and personal tax returns and year-to-date financial statements
• A business debt schedule and a personal financial statement (SBA Form 413)
• A business plan and projections, if the business is new

Owners of 20% or more must personally guarantee the loan, and for 7(a) and 504 loans all owners must be U.S. citizens or nationals. The SBA doesn’t set a minimum credit score; each lender sets its own standards.

How do you find the right lender for equipment financing?

Equipment lending varies a lot by lender and industry. A lender that regularly finances dental chairs, commercial kitchens or production lines understands the equipment’s value and useful life, which usually means fewer surprises in underwriting. For a 504 loan, you’ll also work with a CDC alongside the bank.

SBA Loan Connect ranks lenders using the SBA’s public 7(a) and 504 loan records, so you can see which lenders actually fund businesses like yours before you apply. Partner lenders are clearly labeled. See how we rank lenders.