Using an SBA Loan for Equipment Purchases

SBA loans can be a good option for small-business owners who want to purchase equipment, as long as they don’t need the asset immediately.
Profile photo of Lisa Anthony
Written by Lisa Anthony
Lead Writer
Profile photo of Sally Lauckner
Edited by Sally Lauckner
Assigning Editor
Fact Checked

Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.

Backed by the U.S. Small Business Administration, SBA loans can be a good option when a business needs to purchase equipment. An SBA equipment loan is often easier to qualify for than a traditional bank loan, but borrowers will still need good credit and multiple years in business to qualify with most SBA lenders.

Although the loan approval process can be longer than other equipment financing options, SBA loans offer low rates and long repayment periods.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Types of SBA loans for buying equipment

There are a variety of SBA loan types. Here are three options that can be a good fit when you want to use an SBA to purchase equipment for your business:

SBA 7(a) loan

The 7(a) loans program is the SBA’s main funding program with maximum loan amounts of $5 million. These loans can be used for a number of purposes, including the purchase of equipment and machinery as well as for working capital, real estate acquisitions and changes of ownership.

The interest rates for SBA 7(a) loans range from 11.5% to 15% and typically have repayment terms of 10 years or less when used to purchase equipment.

Funding for SBA loans can be slow, one to three months, generally. However, if you need to purchase equipment quickly, SBA Express loans, part of the SBA 7(a) program, have faster funding times, but also a lower borrowing maximum of $500,000.

To qualify

To be eligible for an SBA 7(a) loan, your business should meet the following requirements:

  • A for-profit business located in the U.S. or its territories.

  • Meet SBA small-business size requirements.

  • Unable to obtain reasonable terms from nongoverment sources.

  • Be creditworthy; generally a credit score of 650 or higher.

  • Demonstrate an ability to repay the loan.

SBA CDC/504 loan

SBA CDC/504 loans are generally associated with the purchase of commercial real estate and have maximum loan amounts of $5.5 million. However, SBA 504 loans can also be used to purchase long-term equipment — assets with an expected life of at least 10 years that will be used at a fixed location.

SBA 504 loans are made available through SBA’s community-based partners called Certified Development Companies. CDCs are regulated and certified by the SBA. Interest rates are approximately 3% of the debt and may be included in the total loan amount.

To qualify

SBA 504 loans have similar requirements as 7(a) loans, with some additional ones:

  • Business net worth of less than $15 million.

  • Prior two-year average net income of less than $5 million after federal income taxes.

SBA microloans

SBA microloans are another option for small-business owners who need funding of $50,000 or less to purchase equipment. Microloans are available to existing businesses and startups through intermediary lenders, which are nonprofit community-based organizations.

Interest rates vary for SBA microloans, but a typical range is from 8% to 13% with a maximum repayment term of six years.

Microloans can be used for the purposes of expanding, rebuilding or improving your business, including the purchase of equipment and machinery.

To qualify

Each intermediary lender will have its own qualification guidelines, but eligibility requirements for microloans can be less strict than other SBA loan programs. Although lenders will typically require a personal guarantee and collateral.

Why use an SBA loan to buy equipment?

SBA loans can be easier to qualify for than a bank loan because these small-business loans are partially guaranteed by the SBA. Because of these guarantees — as high as 90% in some cases — lenders can often be more flexible when reviewing borrower qualifications.

SBA loans offer low interest rates and long repayment terms, up to 10 years for some equipment loans. And, in the case of equipment purchases, the assets can act as collateral for business loans.

Where can I get an SBA loan to buy equipment?

SBA loans are offered through traditional banks as well as community banks, credit unions and other lenders.

You can get matched to potential lenders through the SBA by completing a short questionnaire online. After answering a few questions about your business, you'll receive an email in two days that has the contact information of lenders that are interested in discussing an SBA loan. After you talk to the lenders, you can compare loan terms and interest rates.

The lender you select will go over how to apply for an SBA loan and cover what to include in your SBA loan application. In addition to the SBA loan application form, personal financial information and business information, it can be helpful to have pricing quotes for the equipment you plan to purchase.

Alternatives to an SBA equipment loan

There are alternative funding options when an SBA equipment loan isn't the right fit for your business.

Bank loans

If you already have a relationship with a bank, you can check its requirements for in-house loans as well as SBA loans, if available.

Generally, bank loans offer the most competitive terms and rates but can be more difficult to qualify for than an SBA loan. You’ll often need multiple years in business and excellent credit to qualify for a bank loan. And similar to SBA loans, bank loans can be slow to fund.

Online business loans

Online business loans can be an option when you can’t qualify for a bank or an SBA loan or when you need funds quickly. Online lenders typically have more flexible qualification requirements, but also charge higher interest rates than banks.

Find the right business loan

The best business loan is generally the one with the lowest rates and most ideal terms. But other factors — like time to fund and your business’s qualifications — can help determine which option you should choose. NerdWallet recommends comparing small-business loans to find the right fit for your business.

Frequently asked questions

Yes, SBA loans can be used for a variety of purposes, including the purchase of equipment and machinery. SBA 7(a) loans, SBA CDC/504 loans and SBA microloans all allow for funding to be used for equipment, although each has individual requirements that will need to be met by the borrower.

SBA loans can be slower to fund than other types of loans and can take anywhere from one to three months to provide funds. If you need money quickly, some online lenders can provide funding in days to qualified borrowers.

One blue credit card on a flat surface with coins on both sides.
Smart money moves for your businessGet access to business insights and recommendations, plus expert content.
Sign up for free