What a Second-Look Approval Really Costs: How to Read the Offer and Work Out the APR

October 21, 2026 · 8 min read · Equipment Funding Network

Many equipment approvals, and most second-look or subprime approvals, arrive as a payment and a term rather than a rate: so much down, so many months, so much a month. That is not a trick in itself, but it means the cost is left for you to work out. It takes one formula and about two minutes, and it is the most useful thing you can do before you sign.

The numbers on every approval

• The price of the equipment, and the down payment you put in.
• The amount financed: the price, plus any taxes, fees or warranties rolled in, minus the down payment.
• The term: how many monthly payments.
• The payment: what you pay each month.
• Any payments due at signing, such as the first payment or the first and last.
• Fees: documentation, filing or origination fees, and whether they are paid up front or rolled in.
• What happens at the end: for a lease, whether you own the equipment for a dollar, for a set percentage, or at fair market value.

Start with the total of payments

Multiply the payment by the number of payments. That is what you will pay the lender over the life of the deal. Subtract the amount financed, and what is left is the finance charge: the cost of borrowing, in dollars.

Here is a worked example. Say an approval finances $82,000 at $4,000 a month for 30 months. The total of payments is $120,000. The finance charge is $120,000 minus $82,000, which is $38,000. Seeing that number in dollars is often the moment a borrower decides whether the deal makes sense.

Turn it into an APR

The annual percentage rate puts the cost on a yearly basis, so you can compare it with other offers and other kinds of borrowing. You do not need a finance degree to work it out. In any spreadsheet, type this into a cell: =RATE(30,-4000,82000)*12. The first number is the count of payments, the second is the payment (entered as a negative), the third is the amount financed. The result for this example is about 0.32, an APR of roughly 32 percent.

On a financial calculator, enter 30 for the number of payments, 82000 as the present value and -4000 as the payment, solve for the interest rate, and multiply the monthly figure by twelve. Online loan calculators that solve for the rate will give the same answer.

Why the quick math misleads

A common shortcut is to divide the finance charge by the amount financed and by the years: $38,000 divided by $82,000, divided by 2.5 years, is about 18.5 percent a year. That number is not the APR, and it understates the cost badly. It treats you as owing the full $82,000 for the whole term, when in fact you pay the balance down every month. The real yearly cost of the money you actually have the use of is much higher.

The same goes for a factor rate. Some offers are stated as a factor, such as 1.46: multiply the amount financed by the factor to get the total of payments ($82,000 times 1.46 is roughly $120,000). A factor sounds small. Run it through the RATE formula with the term to see what it really is.

Fees and payments at signing raise the real number

If you pay a fee up front, you received less money than the amount financed, so the real cost is higher. Subtract up-front fees from the amount financed before you run the formula. In the example, a $595 documentation fee paid at signing makes it =RATE(30,-4000,81405)*12, and the APR rises to about 32.5 percent. Payments due at signing do the same: if the first and last payments are collected up front, you are effectively borrowing $74,000 and repaying it over 28 payments, and the APR climbs toward the high thirties. Always ask what is due at signing.

The same total can be two very different costs

Now take a second offer on the same $82,000: $2,000 a month for 60 months. The total of payments is also $120,000, and the finance charge is also $38,000. But the APR, =RATE(60,-2000,82000)*12, is roughly 16 percent, about half the first offer's, because you have the use of the money for twice as long. Which deal is better depends on more than the APR: the first costs the same dollars but frees you of the payment two and a half years sooner, while the second leaves you $2,000 a month more to run the business. That is why both numbers matter: the total in dollars and the APR.

When a high-cost approval can still make sense

A costly approval is not automatically a bad one. If the equipment earns well more than the payment, if the term is short, and if you have a realistic plan to refinance or pay it off once your credit or time in business improves, a second-look deal can be the bridge to a better one. It is a poor deal when the payment only works in your best month, when there is a heavy penalty for paying early, or when the equipment would not earn its keep even at a lower cost. Work out the APR and the total either way, so the decision is yours and not the paperwork's.

Questions to ask before you sign

1. What is the exact amount financed, and what fees or products are rolled into it?
2. What is due at signing, and is any of it a payment rather than a fee?
3. Is there a penalty, or a requirement to pay all remaining payments, if I pay the deal off early?
4. For a lease, what does it cost to own the equipment at the end?
5. Are there late fees, and how are they calculated?
6. Is the lien on this equipment only, or on other business assets too?

Where EFN fits

EFN is not a lender, and it does not approve or fund deals. You describe the equipment and the business in one short application, and the first step is a soft credit pull that does not affect your score. When a lender sends terms, they come to you to read and decide on; nothing is accepted for you. A person reviews every file before it goes to a lender, and it goes to one lender at a time, not out to a list. If nothing fits, we tell you so. EFN's service is free to you.

Common follow-up questions

How do I calculate the APR on an equipment loan?
In a spreadsheet, enter =RATE(number of payments, -payment, amount financed)*12. Subtract any up-front fees from the amount financed first for the true figure.

Why doesn't my approval show an interest rate?
Many equipment approvals, especially second-look ones and leases, are stated as a payment and a term. You can still work out the cost from those numbers.

What is a factor rate?
A multiplier: the amount financed times the factor gives the total you repay. It is not an annual rate, so run it through the RATE formula with the term to compare it with other offers.

Is a lower APR always the better deal?
Not always. A longer term can have a lower APR and still cost more dollars in total. Compare the APR, the total of payments and the monthly payment together.

Do up-front fees change the APR?
Yes. Fees paid at signing mean you received less than the amount financed, so the real cost is higher. Subtract them before you calculate.

Can I refinance a high-cost equipment loan later?
Often, once your credit, time in business or payment history improves. Check whether the current deal has a prepayment penalty before you plan on it.