Hypothetical scenario
Scenario: Flipping the Script on Funding by Comparing Offers First
Short answer
In this invented example, an $85,000 equipment package costs about $1,644 a month on a five-year equipment loan with 10% down, or about $1,123 a month on a 10-year SBA-style term, while a cash advance at a 1.35 factor repaid over nine months would take about $607 every business day, an estimated APR of about 84%.
Key points
- Same equipment, very different monthly burden and total cost.
- The cash advance is fastest, but its estimated APR is about eight times the equipment loan's.
- Longer terms lower payments but raise total interest; match to useful life.
The situation
A 60-seat restaurant in its sixth year needs to replace its range, hood components and walk-in cooler: an $85,000 package, installed. Sales are steady at about $95,000 a month, with a thin margin. The owner has $8,500 available for a down payment. Last time equipment broke, the owner took the first offer that arrived by email. This time the plan is to flip the order: get several offers, convert each to the same terms, then decide.
Three options
Rates and terms below are illustrative assumptions:
| Equipment loan | SBA 7(a)-style term loan | Merchant cash advance | |
|---|---|---|---|
| Amount | $76,500 (after $8,500 down) | $85,000 | $85,000 advance |
| Price | 10.5% for 5 years | 10% for 10 years | Factor 1.35, collected over about 189 business days |
| Payment | $1,644.28 monthly | $1,123.28 monthly | $607.14 every business day (about $12,750 a month) |
| Total repaid | $98,657 | $134,794 | $114,750 |
| Interest or finance charge | $22,157 | $49,794 | $29,750 |
| APR | 10.5% | 10% | about 84% (estimate) |
| Speed | Days to weeks | Weeks to months | Days |
Reading the table
- The cash advance looks cheaper in total than the 10-year loan, but only because it's repaid in nine months. Per year, it's roughly eight times the price, and its daily debits of about $12,750 a month would consume much of the restaurant's monthly margin.
- The 10-year term has the lowest payment but the most total interest, and runs about as long as the equipment is likely to last. That's acceptable only if the equipment really has that life.
- The equipment loan sits between: moderate payment, least total interest, and a term well inside the equipment's useful life.
Other things the owner checks
- Whether the landlord would contribute to the hood work, which is partly a building improvement.
- The equipment vendor's cash price, in case a "low-rate" vendor financing offer hides a higher price.
- The personal guarantee on each option, and whether the equipment loan's lien covers only the equipment.
The reasoning to take away
Converting each option to monthly cash, total dollars and APR side by side keeps the fastest option from winning by default. Try your own numbers in the APR calculator.
Sources
Checked November 9, 2026. Program rules and scoring models change; the source is the authority.