Equipment Leasing vs. Equipment Financing Fair Market Value Lease, Dollar Buy-Out Lease, High-Cost Equipment, Equipment Finance Agreement (EFA)
Equipment Leasing Options
An equipment lease through Huddle Business Capital can be much more advantageous than other types of financing or bank loans. Consider below the types of leases that might be right for your business:
Fair Market Value Lease
A fair market value lease is a traditional lease agreement with lower monthly payments than a buyout lease. You have three options when the term of your equipment lease ends:
- You can purchase your leased equipment at fair market value
- Renew the equipment lease
- Return the equipment—an excellent option for customers expecting a decrease in the value of their leased equipment.
Dollar Buy-Out Lease
With this equipment lease financing option, at the end of your lease term, you “buy” your equipment for just a $1. This is an attractive option for companies who know their equipment will not lose value and are looking to keep their equipment at the end of the lease.
Equipment Finance Agreement
An equipment finance agreement (EFA) and a loan can seem like the same thing. However, a closer look reveals that the two biggest differences between an EFA and a simple interest loan are 1.) EFAs have no stated interest rates, and 2.) there is no breakdown between principal and interest in EFA contracts.
EFAs differ from loans in that the finance charges are calculated into a stream of fixed contractual payments over the course of the chosen term. You are responsible for the gross contract amount, which is the sum of the contractual payments. With an EFA, your entire equipment purchase amount can typically be borrowed with no down payment. Also, you own the equipment outright and the debt appears on your balance sheet.