Take advantage of flexible loan terms spanning 36, 48, 60, or 72 months with predictable monthly payments. Enjoy the freedom to settle your loan ahead of schedule without incurring any penalties, while retaining complete ownership of your purchase. This structure provides clear budgeting, along with the added benefit of depreciation deductions that may enhance your overall financial strategy. Plus, you can easily customize repayment plans to fit your business needs. Our streamlined application process ensures a quick and hassle-free experience from start to finish.
EFA grants immediate ownership of your equipment while clearly outlining your financial responsibilities. You assume full accountability for the loan repayment and any associated obligations, including depreciation or potential equipment loss. This transparent arrangement empowers you to leverage depreciation benefits while maintaining straightforward financial oversight. With this flexible structure, you can bolster your bottom line through tax advantages and a stable, predictable payment schedule. Enjoy improved cash flow management to support growth. This ensures you acquire assets without slowing your operations.
Financial institutions generally provide two core leasing options, although the various terms and titles can make the process appear more complex than it truly is. According to FASB guidelines enforced by the IRS, each lease must be designated as one of two types for both tax and accounting purposes. This classification ensures straightforward compliance and uniform reporting, reducing potential confusion around how leases are recorded or taxed.
This lease structure provides the lessee with the option to acquire full ownership at the end of the lease term, typically between 24 to 60 months, by paying an agreed amount, typically 10% or 20% of the original cost. It’s often referred to as an Operating Lease, True Lease, TRAC Lease, or Fair Market Value (FMV) Lease. In this setup, the funder holds title and claims depreciation, while the lessee treats payments as rental expenses. Because the borrower is “operating,” not “owning,” the Equipment finance loan offers more substantial tax advantages, as it qualifies for larger write-offs. When the lease term concludes, you can pay the agreed-upon amount to assume ownership or choose to return the equipment and potentially upgrade to a new model, ensuring you stay aligned with the latest technological advances without committing to long-term ownership.
In contrast, an equipment financing loan with a residual payment structure involves committing to ownership from the outset. This option is typically structured with a final “balloon” fee, set at 1% or 10% of the original cost, and is commonly referred to as a Finance Lease, Dollar-Out Lease, Capital Lease, or Lease-to-Own. Here, the borrower maintains technical ownership and claims depreciation, while the lender retains a lien on the equipment. Unlike a standard loan, where an initial 10% down payment is required, this financing shifts the payment to the final balance. You usually pay only the first and last installments, with the final payment being the key to full ownership. For accounting and tax purposes, this arrangement is treated as an Equipment Finance Agreement (EFA financing), reflecting its nature as a true finance or capital lease.
In this guide, we’ll walk you through the different equipment financing loan options available, including equipment finance agreements (EFA financing), and discuss how these financing solutions can support your business’s growth.
Equipment financing loans are financial solutions designed to help businesses acquire the tools, machinery, or vehicles they need without a significant upfront cash outlay. With equipment purchase financing, businesses can access the necessary funds to purchase or lease equipment, repaying the amount over a set period. The two primary types of equipment financing are equipment loans and equipment leases.
An equipment finance loan generally involves borrowing money to purchase equipment, with the equipment itself acting as collateral for the loan. In contrast, equipment leasing offers businesses the option to rent equipment for a specified term with the option to purchase it at the end of the lease term.