Depreciation spreads the cost of equipment; amortization spreads intangibles or loan principal. They change reported profit, but funders reviewing bank statements focus on actual deposits and cash flow.
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Amortization and depreciation both spread a cost over time, but one applies to loans and intangible assets and the other to physical equipment. Both affect what lenders see.
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$85,000.00
Funding range$25K to $5M
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Depreciation spreads the cost of a physical asset, like a truck or an oven, over its useful life. It lowers reported profit each year without any cash leaving the account. Amortization does the same for intangible assets such as software licenses or a purchased customer list, and the word is also used for paying down a loan in scheduled installments.
This matters for financing because banks and SBA lenders read your profit-and-loss statement and tax returns, where depreciation can make a healthy business look less profitable. Many lenders add depreciation back when they calculate cash flow available for debt. Revenue-based funders, by contrast, mostly read bank deposits, so these accounting entries have little effect on their review.
When you finance equipment, the equipment usually depreciates while the financing is paid down. Matching the payment term to the equipment life keeps you from still paying for something that has stopped producing. Ask your accountant how a purchase will be depreciated before you sign, since it affects both taxes and how future lenders read your statements.
Here is a simple check for an equipment purchase financed over a short term, to see whether the added profit covers the payment.
| Funding for the project | $125,000 |
| Total payback (factor 1.38) | $172,500 |
| Term | ~48 weeks |
| Payment per week | $3,594 |
| Monthly payment the project must cover | $15,561 |
| Your estimate of added monthly profit | $15,000 |
| Verdict | Does not pay back in time — reduce the amount or rethink |
Illustrative. Replace the estimate with your own numbers before applying.
| Applies to | Physical assets vs. intangibles or loan payoff |
| Cash leaves the account? | No, it is an accounting entry |
| Effect on reported profit | Lowers it in both cases |
| What banks often do | Add it back to cash flow |
| What revenue-based funders read | Bank deposits, not these entries |
Good fit:
Probably not yet:
It lowers reported profit, which banks read, but many add it back. Revenue-based funders focus on deposits, so it matters less there.
In lending, amortization means paying a loan down with scheduled payments that cover interest and principal. In accounting, it also means spreading the cost of intangible assets.
Ideally the term should not exceed the useful life, so you are not paying for equipment that no longer earns money.
Usually yes, and some rules allow faster deductions for certain equipment. Ask a tax professional for your situation.
Revenue-based funders rarely do. Banks and SBA lenders may see it through your tax returns and financial statements.
Example uses for illustration only.
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