# Equipment Financing During Business Acquisition

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Last modified: 2026-05-29T19:39:17+00:00
Type: efin_guide

## Summary

Equipment Financing During Business Acquisition. Comprehensive guide.

## Content

When acquiring a business, equipment is often a major part of the purchase price. Financing the equipment portion (separate from goodwill and real estate) can stretch the acquisition over 5-10 years and improve cash flow. Several financing structures work depending on the deal.

How equipment financing fits in a business acquisition
Typical business-acquisition financing structures:

SBA 7(a) for the whole deal: up to $5M, covers goodwill + equipment + working capital + real estate. Single lender, single application.
SBA 504 for real estate + 7(a) for working capital + equipment financing for equipment: three financing pieces for different asset categories
Seller financing + equipment financing: seller carries part of the goodwill price; lender finances equipment separately
Conventional bank loan + equipment financing: bank covers acquisition; equipment financed separately for tax/structure reasons


Why separate equipment financing in an acquisition

Section 179 + bonus depreciation on the equipment portion: the equipment financing structure allows full §179 in year of acquisition (acquired equipment counts as "newly acquired" for §179 purposes)
Lower blended rate: equipment financing rates may be lower than SBA 7(a) rates for the same buyer
Faster closing on the equipment portion: equipment financing closes in 1-7 days; SBA takes 30-90+ days
Asset-specific underwriting: equipment financing focuses on equipment value; broader acquisition financing has more general underwriting


Allocation in the purchase agreement
The purchase price allocation (PPA) in the asset purchase agreement determines which financing structure works for which portion:

Goodwill: amortized over 15 years
Equipment (Class V personal property): §179-eligible
Real estate: depreciated over 39 years
Inventory: cost of goods sold
Customer lists and intangibles: amortized over 15 years

Working with your CPA to allocate purchase price favorably (more to equipment for §179, less to goodwill for slower amortization) is part of the deal structuring.

Example: $1.5M acquisition
Allocation:

Equipment: $400K
Real estate: $500K
Goodwill: $400K
Working capital: $150K
Inventory: $50K

Financing structure:

SBA 504 for real estate ($500K): $400K SBA + $50K bank + $50K borrower
SBA 7(a) for goodwill + working capital ($550K): SBA-guaranteed loan
Equipment financing for equipment ($400K): conventional equipment loan, §179 deduction
Inventory: paid from working capital after closing


Considerations

Lenders typically prefer all financing through one source (simpler closing, less coordination)
If you want multiple financing sources, ensure each lender knows about the others (they'll want to coordinate UCC priorities)
SBA 7(a) acquisition loans often include the equipment, making separate equipment financing redundant
For larger deals or where SBA rate disadvantage is meaningful, the separate structure can save

Apply for soft-pull pre-qualification at /apply/.Last reviewed: May 27, 2026. Not tax or legal advice; consult professionals.