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Grow your business with financing for vehicle and equipment purchases

In a competitive market, many small businesses need up-to-date vehicles and equipment to stay on top. Discover how a vehicle or equipment secured loan may help grow revenue and manage expenses.

Published: January 21, 2014
Updated: February 07, 2017

Growth is a natural – and essential – part of the small business lifecycle. And oftentimes purchasing additional vehicles or equipment goes hand in hand with the type of growth needed to stay competitive in today's business landscape.

A vehicle or equipment secured loan can allow you to make purchases now, while paying off the loan over a defined period of time, with the goal of having a zero balance at the end of the loan period. 

To help you determine which type of vehicle or equipment financing is right for you, it's important to understand the differences among all the options available. And if you're considering purchasing a vehicle for your business, please reference this additional resource: "Buying a vehicle for your business."

Personal loan vs. business loan

Taking out a vehicle or equipment secured loan in your business's name ensures your personal and business expenditures are kept separate. When you separate the two, you have a clearer sense of how your business is performing because business activities are separated from personal expenditures.

Also, by making loan payments on time, you're establishing a positive credit history and showing banks and lenders you can manage your business finances responsibly. This can ease qualifying for business credit in the future.

Purchasing vehicles or equipment in your business's name may also offer tax advantages.* For example, the IRS allows deductions for the depreciation of most business vehicles and equipment.

For vehicles, the IRS allows tax deductions attributable to the business use of a vehicle – meaning gas, maintenance, and other expenses related strictly to business use. To support this deduction, you can use one of two calculation methods:

  • The actual expenses method: This method is based on the expenses you track multiplied by the percentage of time the vehicle is used for business only.

  • The standard mileage rate method: This method is based on the total number of business miles you log multiplied by the IRS-approved business mileage deduction rate.

And for new equipment, there might be special tax allowances. Benefits will vary by case, so be sure to discuss all of your potential tax benefits with a tax advisor.

Collateral secured vs. unsecured loans

When you apply for financing secured by the vehicle or equipment you can realize several cost and time savings benefits by seeking a multiple advance loan. Generally, this type of loan lets you make multiple vehicle or equipment purchases, from multiple vendors or suppliers up to your available credit limit, while still receiving lower cost secured loan interest rates. This means you no longer have to shop around for financing for each vehicle or equipment purchase, and you can have the convenience of one loan with a single monthly payment. You also may be able to finance other related costs, such as delivery, installation, or any nondeductible tax fees.

Once you're approved for a vehicle or equipment secured loan, you can shop with more certainty. Because these loans can offer up to 100% of the vehicle or equipment invoice price depending on your lender, you're able to hold onto more of your cash and working capital. This means you have financial flexibility and can decide what to do with your money – whether that's saving for future needs or spending funds now on other areas of your business.

On the other hand, an unsecured business loan is typically best for situations that don't require collateral purchases, such as buying inventory, emergency vehicle repairs, purchasing an additional business, or other opportunities requiring an immediate use of funds.

Equipment Express Loan

Wells Fargo's Equipment Express® Loan is designed to help you meet your vehicle and equipment financing needs and give you financial control by offering both fixed rates and fixed monthly payments for the life of the loan. This loan provides flexibility – a term length of between two and six years depending on the collateral – and the assurance that each monthly payment will reduce your balance, unlike interest only loans.

A typical equipment loan lasts 60 months, and loan terms for new vehicles can extend to 72 months. Once the loan is completely paid off, you're the owner of the vehicle or equipment – perhaps the greatest payoff.

Business vehicles or equipment can play a key role in helping you to attract customers and generate revenue to propel your small business forward. You should work with your banker to identify the loan that fits your needs. Once you've made a decision, you'll be on your way to securing those important assets to meet your business goals.

*Please consult your accountant or tax advisor to learn how the tax laws work for you.