What a 50-Year Mortgage Teaches Us About Equipment Loans

Understanding how interest compounds (and what it means for your bottom line)

I don't typically watch the news. I'll read articles here and there, track stories regarding the market and government moves, BUT when talk of 50-year mortgages hit the news, I really wanted to see what everyone was saying. Face value, it seems like it would help expand purchasing power without putting much downward pressure on home prices. Then you look at the numbers, and first thought was the same: “That’s a lot of interest, and the payment moves very little"

Stretching out any loan makes the payments smaller — but it also means you pay a lot more over time. The same principle applies to equipment financing, just on a shorter scale.

Let’s look at what that actually means for your business.

How Term Length Affects Total Payback

Most equipment loans run between 48 and 72 months, so let’s use a simple example:

Loan amount: $100,000

Rate: 9.5% fixed

Term	Monthly Payment	Total Paid	Total Interest
48 months	$ 2,514	$ 120,672	$ 20,672
60 months	$ 2,103	$ 126,180	$ 26,180
72 months	$ 1,859	$ 133,848	$ 33,848

The difference between 48 and 72 months isn’t massive month to month — about $650 — but that extra two years adds $13,000 more in interest.

That’s the compounding effect in action. You’re not paying a higher rate, just paying it longer.

Why Longer Terms Still Have Their Place

It’s not always bad to take a longer term — sometimes it’s exactly what’s needed to make everything come together.

If the equipment increases your production capacity or brings in steady revenue, a longer term can help smooth cash flow while you ramp up output.

The key is knowing what you’ll actually pay, and how the loan is structured if you decide to pay it off early.

The Deferral Strategy

In some cases, a shorter term can still work if payments start once the equipment is in service.

Since most equipment has production, shipping, and installation lead times; getting financing in place early to cover step payments to the vendor covered by your financing agreement, then making smaller initial payments (for example 3 months of payments at $99) while you wait for the equipment can help bridge the gap.

This allows your business to take a shorter term without those higher payments eating cash flow while you wait.

Prepayment Terms: The Fine Print That Matters

This is where many borrowers get caught off guard.

No prepayment penalty:

You can pay off the balance at any time — typically by taking the sum of remaining payments minus a small discount for interest not yet earned. It’s clean, predictable, and gives you full control.

5-4-3-2-1 policy:

Some lenders charge a declining fee based on how early you pay off. For example, 5% if you pay off in year one, 4% in year two, and so on.

It’s not “bad” — it’s just a cost of flexibility you should be aware of before signing.

The Bottom Line

Interest isn’t the enemy — misunderstanding how it works is. A well-structured loan should match your revenue cycle, fit your cash flow, and leave you options to pay down early when business is strong.

And that’s what equipment financing should do: help you grow, not weigh you down.

   About the Author

   Jared Holmes is the founder of Brilliance Funding Partners, where he helps business owners navigate the commercial lending landscape with confidence. With 10 years of hands-on experience in SBA lending, equipment financing, and working capital solutions, Jared focuses on asking the right questions and delivering financing strategies that make sense for each business. Connect with Jared for a personalized conversation about your options.