Yes: on an equipment loan, the financed machine is the main collateral, and the lender records a lien on it until the last payment. Some agreements add a blanket lien on other business assets or an owner signature. A Marysville, OH owner can ask which of the three an offer carries before signing; the funding partner decides what it asks for.
The financed machine secures its own loan through a lien that ends with the last payment. A blanket lien reaches further, over other business assets. An owner signature adds personal liability. Used and specialty machines can mean a larger down payment, because they are harder to value and to resell.
The financed machine as collateral
A secured loan is tied to something the lender can take and sell if the payments stop. On an equipment loan, that something is the machine being bought: the lender records a lien on it, the business uses it, and the lien is released after the last payment. An unsecured loan has no such asset behind it, and its pricing reflects that.
Illustration only, invented figures: a business buys a $58,000 machine with 10% down ($5,800) and finances $52,200 over 60 months at 11%, a payment of $1,134.95. In this example, after 24 payments about $34,667 is still owed, and if the machine would sell for $39,500 at that point, the business holds about $4,833 of value in it above the balance.
That margin is why the lender is comfortable: the machine is worth more than what is owed on it. When a machine loses value more steeply than the balance falls, the margin shrinks, and that is when a partner can ask for more down or other collateral.
Equipment that carries a title, such as a trailer, has the lien noted on the title itself. Machines without one are identified by serial number in the loan papers, which is why a quote or bill of sale that lists the serial number saves a step. Attachments and tooling bought with the machine can be listed on the same papers so the collateral description matches what was delivered.
Blanket liens and what they cover: notes for Marysville, OH owners
A blanket lien is wider. Instead of one machine, it covers a group of business assets, which can include equipment the business already owns, inventory, receivables and cash accounts, as the agreement lists them. It can come with a general business term loan or a working capital loan, where no single machine is being bought.
Points worth checking before signing one:
- Which assets the lien names, and whether equipment bought later falls under it
- Whether an existing lien from another lender already covers the same assets
- What has to happen for the lien to be released
- Whether the lien limits new equipment financing while it is in place
In Union County, OH, the 2023 County Business Patterns counted 17 depository credit intermediation establishments (NAICS 5221, the code for banks, savings institutions and credit unions). Counted by ZIP, the 2023 ZIP Code Business Patterns placed 14 depository credit intermediation establishments inside ZIP 43040. A business that already borrows from one of them can check what its current agreement pledges before adding another. A lien search shows what is already filed against a business, and a partner can run one during its review, so an old lien the owner has forgotten about is better found first.
Owner signatures and personal liability on equipment loans
An owner signature, called a personal guarantee, means the owner agrees to repay the debt if the business does not. It puts personal assets behind a business loan, alongside the machine. A partner can ask for one on an equipment loan, a term loan or a credit line, and the request can extend to every owner above a set share of the business.
- Unlimited guarantee: the owner is liable for the whole balance plus costs
- Limited guarantee: liability is capped at an amount or a share written in the agreement
- Each owner signs for themselves; a spouse who is not an owner is a separate question for the agreement
- A guarantee can outlast a sale of the business unless the agreement releases it
Reading the guarantee page before signing is the owner's job, and a lawyer can explain what it means for that owner in particular. An owner comparing two offers can set them side by side on this point alone: which assets each one pledges, and whose signature each one needs.
Collateral on used or specialty equipment
Used and specialty machines are harder to value. A used machine has a shorter life left, and a specialty machine built for one kind of work has fewer buyers if it ever needs to be sold. Either can lead a partner to ask for a larger down payment or offer a shorter term.
Illustration only, invented figures: a used specialty labeling machine costs $31,000. With 30% down ($9,300), $21,700 is left to finance in this example.
- An appraisal or a dealer valuation for the used machine
- The serial number, build year and hours from the data plate
- Service records that show how it was maintained
- For a specialty machine, a list of the parts or products it makes
Start with a phone call or the request form; the machine details come up on the call. The articles page has the posts on leases, used shop equipment and supplier machinery.
By Reedshore Credit · Updated
