Head to head
Equipment financing vs SBA 504 loan
Both finance long-life equipment. One is a specialist lender pricing against the resale value of the asset, the other is a government-backed structure built for large fixed-asset projects.
| Equipment financing | SBA 504 loan | |
|---|---|---|
| Typical amount | $5,000 to $5 million+ | Typically up to $5.5 million in the SBA portion |
| Cost | 6%-30% APR, credit- and asset-dependent | Fixed, pegged to a bond sold at funding |
| Time to funding | 1 day to 2 weeks | 60-120 days |
| Term | 2-10 years, matched to useful life | 10, 20, or 25 years |
| Relative expense | $$$ | $ |
Cost bands are editorial judgements expressed in APR-equivalent terms so products quoting factor rates and discount fees can be compared with products quoting interest. They indicate relative expense, not quotes. Methodology.
Equipment financing
Usually chosen when
- The purchase is a single machine or vehicle and speed matters
- You want to preserve bank lines and SBA eligibility for something else
- The asset has a deep secondary market, which prices well even with mediocre credit
SBA 504 loan
Usually chosen when
- The project is large and includes property as well as equipment
- A fixed rate for 10 to 20 years materially changes the economics
- The equipment has a long useful life and specialist lenders are quoting short terms
Common questions
- Is a $1 buyout lease the same as a loan?
- Functionally yes, with different accounting and tax treatment. A fair-market-value lease is a true rental. Confusing the two is the most common error in this category.
Other comparisons
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