How long can an SBA loan for equipment run?
Short answer
Generally 10 years, or up to 15 years if the IRS asset class useful life supports it. SOP 50 10 8.1, Appendix 17, Para. A.2 also allows up to 12 extra months for installation.
SOP 50 10 8.1, Appendix 17, Para. A.2 (p. 390) sets the limit for equipment, fixtures and furniture. It says these loans should generally not exceed 10 years. The term may reach 15 years if the IRS asset class useful life supports it.
How installation time fits
The term may include up to 12 more months when that time is needed to install the equipment. 13 CFR § 120.212(b) has the same allowance.
What the regulation adds
13 CFR § 120.212(b) allows more than 10 years only when equipment or real estate has a useful life over 10 years. Ask your lender which IRS asset class it uses and how it documents the useful life. The SOP does not list classes.
The term is a lender decision within the limit
The term must be the shortest appropriate term based on the use of proceeds and the borrower's ability to repay. A lender can choose less than the maximum, and practice varies.
A short term already in place
If existing equipment debt has a term that does not fit the asset, a 7(a) loan may be able to refinance it. Appendix 14, Para. A.1 (p. 355) gives the example of a 3-year term loan on equipment with a 15-year useful life. The other Appendix 14 tests still apply.
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