Equipment Finance Agreement (EFA)
The Equipment Finance Agreement (EFA) is, simply put, an equipment loan. Ownership of the equipment is transferred to you immediately upon loan funding. For tax purposes, the equipment financed is treated as a depreciable asset and the interest on the loan payments can be expensed*. This option allows you to plan your budget accordingly as monthly payments are fixed, and out of pocket expenses are minimal. Soft costs such as installation, training, and sales tax can be financed as well.
$1 Purchase Option Lease
With the $1 Purchase Option Lease, ownership of the equipment transfers to you at the end of the lease term once the residual of $1 has been paid. The lease payments should be deducted as a capital expense, and the equipment should be capitalized and depreciated just like a loan or cash purchase*. This option also allows for low out of pocket expenses and has level monthly payments for budgeting purposes.
10% Purchase Option Lease
The 10% Purchase Option Lease is virtually identical to the $1 purchase option lease with the exception of the residual amount. Equipment ownership is transferred to you after the 10% purchase option payment is made at the end of the lease term. The monthly payments may be 100% tax deductible*. At the end of the lease term you may return the equipment or purchase it for 10% of the original cost.
Fair Market Value Lease (FMV)
The Fair Market Value (FMV) lease option features the lowest monthly payment available. The monthly payments may be 100% tax deductible*. At the end of the lease term you may return the equipment or purchase it at Fair Market Value, which will be determined at the end of the lease.
Recent Purchase Reimbursement
The Recent Purchase Reimbursement can be used to finance equipment that you have purchased in full within the past 30 days. You can be reimbursed up to the amount you paid to the seller of the equipment. This option can be useful in an auction situation, for example.
Secured Working Capital
The Secured Working Capital loan can be used to finance equipment that you own free and clear, regardless of how long you have had it in operation. With this type of contract, you can get money back for equipment that you own. Preferred collateral would be items such as trucks, trailers, manufacturing and construction equipment. The loan proceeds would be funded directly to your bank account.
*Union Credit Corporation does not offer tax advice. Always consult a qualified tax professional.