Personal Loan vs. Commercial Equipment Loan: Which Is Better for Your Business?

When business owners need to purchase equipment — trucks, trailers, machinery, forklifts, or specialty tools — one of the most common questions we hear is: “Should I get a personal loan or a commercial equipment loan?”

On paper, personal loans can often look more attractive because the interest rate is typically lower — but the rate is only one piece of the equation. The long-term impact on your business credit, tax deductions, and your ability to qualify for future financing can make commercial equipment financing the far more strategic option.

Below we break down the pros, cons, and key differences so you can choose the option that aligns with your business goals — not just the lowest APR.

Why Business Owners Compare Personal vs. Commercial Loans

• Many business owners qualify for both types of financing, especially if they have:
• – Good personal credit
• – Strong income
• – Stable cash flow
• – Has borrowed in the past

Since personal loan ads focus only on the monthly payment and APR, it’s easy to assume that the lowest rate = the best deal. But equipment financing is structured entirely differently — and comes with benefits personal loans simply can’t match.

If you’re planning to finance trucks or machinery, understanding the difference is crucial before you apply through programs like equipment financing or semi truck financing.

Option 1: Personal Loans — Lower Rates, but Major Limitations

Personal loans are based entirely on you — your income, your DTI, and your credit score. No business documentation required, no collateral, and no revenue verification.

• ✔️ Pros of Personal Loans
• – Lower interest rates (on average)
• – Simple application
• – No business paperwork

• ❌ Cons of Personal Loans
• – Loan is tied to your personal credit — not the business
• – Does not build business credit
• – Lower maximum loan amounts
• – Often shorter terms → higher monthly payments
• – High utilization on your personal credit report can drop your score

According to the Consumer Financial Protection Bureau (CFPB), personal loans are categorized as consumer credit products, meaning they lack the commercial-use flexibilities that business loans offer, such as collateral-based structures and business tax deductibility.

In short: the rate may be lower, but the long-term financial strategy is weaker.

Option 2: Commercial Equipment Financing — Designed to Grow Your Business

Equipment financing exists for one purpose: to help businesses acquire revenue-generating equipment while preserving cash flow. Unlike personal loans, the loan is tied to the business — not just the owner.

• ✔️ Pros of Commercial Equipment Financing
• – Builds business credit for future equipment purchases
• – Section 179 tax deductions
• – Higher approval amounts than personal loans
• – Longer terms (24-72 months) → lower monthly payments
• – Based on strength of the business and the equipment, not just personal credit
• – Better for repeat financing (fleets, expansion, upgrading)
• – Keeps your personal DTI clean

According to the IRS, businesses can deduct the full purchase price of qualifying equipment in the year it’s placed into service through Section 179 — even if it’s financed.

This is a massive tax deduction personal loans don’t offer.

• ❌ Cons of Commercial Equipment Financing
• – Interest rate can be higher than personal loan APR
• – Requires business ownership and potentially, documentation
• – May require down payment (depending on credit and equipment)

For most business owners, the long-term benefits easily outweigh the higher rate.

Why Choosing a Personal Loan Can Hurt You Later

Many business owners don’t think long-term when buying their first piece of equipment. But the consequences add up:

• 1. No business credit history
• When you return for a second truck or machine, lenders see:
• – 0 years of business credit
• – 0 business tradelines
• – No prior commercial borrowing history
• This can force you into higher rates or lower approval amounts

• 2. Personal credit risk increases
• Large personal loans increase your:
• – DTI
• – Utilization
• – Revolving exposure
• This can drop your score or cause other lenders to tighten future approvals.

• 3. No tax advantage
• A $50,000 equipment purchase financed personally = no Section 179 deduction. That alone can cost you thousands in missed tax benefits.

When Commercial Financing Is Clearly the Better Choice

• You should strongly consider a commercial equipment loan when you:
• – Want to build business credit
• – Plan to buy more equipment in the next 1-3 years
• – Want the tax write-off
• – Don’t want to impact your personal credit profile
• – Need a longer term and lower monthly payment
• – Want to preserve cash for operations

When a Personal Loan Could Make Sense

• To be fair, a personal loan can be the better choice in rare situations:
• – You’re buying something small (under $10k)
• – You don’t care about business credit
• – You want to avoid business documentation (if applicable)

If your business is tiny or the purchase is minor, the simplicity might outweigh the benefits of a commercial loan.

So… Which Should You Choose?

Here’s the bottom line: Personal loans have lower rates, but commercial equipment loans have higher long-term value.

• If you see yourself:
• – Growing
• – Purchasing more equipment
• – Scaling operations
• – Needing repeat financing
• – Wanting tax advantages
• …then commercial equipment financing is the smarter investment in your business.

At Truecore Capital, we help business owners compare both options, understand their tax benefits, and choose the structure that sets them up for long-term success — not just the lowest monthly payment.

Not Sure Whether a Personal Loan or Commercial Loan is Right For You?

Let our team walk you through the numbers so you can make the choice that supports your long-term business growth. Give us a call at (805) 422-7342 or submit a quick contact form below and one of our specialists will reach out to you shortly.

• Sources:
• – Consumer Financial Protection Bureau (CFPB), “What is a personal installment loan?” [https://www.consumerfinance.gov/ask-cfpb/what-is-a-personal-installment-loan-en-2114/].
• – IRS, “Publication 946 (2024), [https://www.irs.gov/publications/p946].