As you know if you’ve ever taken out a loan for a car, the equipment acts as the loan collateral.

Most equipment loans come at fixed interest rates and have a fixed length, which means you will always have the same monthly payments.

The length you set will likely depend on the expected life of the equipment, or how long you expect to use it. You do have the option of leasing equipment rather than taking out a loan. There are some advantages to leasing, but with a loan, you eventually own the equipment when you have finished your payments, whereas you never own the equipment while leasing.

A cost-effective option for franchise owners

The biggest benefits of equipment financing are the lack of having to pay the full cost of the equipment upfront, and the idea of full ownership once the loan is paid back. Ownership is particularly important when you compare what happens in a loan to what happens in a lease. If you intend to have the equipment for a long period of time and know it will not quickly become outdated or obsolete, taking out a loan makes the most sense, because you won’t be continuing to pay for the equipment past its useful lifespan, as you very well could end up doing in a long-term lease.

You would be likely to take out loans for building projects, office equipment like desks and chairs or certain types of vehicles. Meanwhile, you’d be more likely to lease pieces of technology that have relatively short terms in which they are top-of-the-line devices, or other types of vehicles depending on your needs.