Programs
Equipment Finance Agreement (EFA)
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The most common structure for equipment purchases. Under an Equipment Finance Agreement, you own the equipment from the day it's delivered, with the lender holding a security interest until the financing is paid in full. The equipment appears on your balance sheet, you depreciate it for tax purposes, and you have full ownership flexibility from day one.
This structure fits most equipment purchases where you intend to keep the equipment for its full useful life. It pairs well with Section 179 deduction and bonus depreciation strategies, allowing you to capture significant first-year tax benefits on qualifying equipment. Terms typically range from 36 to 84 months matched to the equipment's expected useful life, with fixed rates that give you payment predictability for project bidding, bonding capacity calculations, and general cash flow planning.
I recommend this structure when you want straightforward ownership, predictable monthly payments, and the ability to depreciate equipment fully for tax purposes.
$1 Buyout Lease
Functionally similar to an Equipment Finance Agreement (classified as a Finance Lease under ASC 842) but structured as a lease with a $1 purchase option at the end of the term. You depreciate the equipment, pay fixed monthly payments throughout the term, and own the equipment outright for $1 when the lease ends.
The economic outcome is nearly identical to an Equipment Finance Agreement, but some lenders offer more competitive pricing on the lease form due to how the structure interacts with their portfolio accounting. I might recommend a $1 buyout lease over an Equipment Finance Agreement when the lender's pricing favors the lease form, when state-specific tax considerations make the lease structure preferable, or when your accountant has a specific preference based on your overall tax planning.
I compare both structures on every applicable transaction and recommend whichever produces the best terms for your specific situation.
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Fair Market Value Lease
A true lease structure that gives you flexibility at the end of the term. You make fixed monthly payments throughout the lease, and at the end of the term you can purchase the equipment at its fair market value, return the equipment to the lessor, or renew the lease at adjusted terms.
This structure is particularly valuable when you want to deduct your equipment payments as an operating expense rather than depreciating the asset on your balance sheet. It also fits situations where you plan to refresh equipment on a regular cycle, such as service vehicles for HVAC, plumbing, electrical, or mechanical contractors who want to maintain a modern fleet without the long-term ownership commitment of traditional financing.
I recommend Fair Market Value structures when your tax situation favors operating expense treatment, when you want flexibility to refresh or return equipment at end of term, or when the equipment is in a category where fair market value is genuinely meaningful and tracks predictably.
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10 Percent Purchase Option Lease
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A structural middle ground between a $1 buyout and a Fair Market Value (FMV) lease. You make predictable, fixed monthly payments throughout the term and retain the option to purchase the equipment at exactly 10 percent of the original cost at the end. This versatile structure is unique because its accounting treatment under ASC 842 depends on your intent: it could be classified as either a Finance Lease or an Operating Lease depending on whether you are reasonably certain to exercise the buyout option at commencement.
This program fits situations where you prefer to lock in your end-of-term purchase cost upfront rather than relying on future fair market value calculations. It is particularly common for businesses that want a predictable path to ownership but desire lower monthly payments during the lease term than a traditional $1 buyout provides.
We recommend this structure when you want a fixed, known buyout cost but still want to evaluate your accounting and tax options with your CPA. Note: Tax and accounting classifications vary based on corporate criteria and asset types; we always recommend consulting your tax professional to determine how this structure will impact your specific balance sheet and tax deductions.
A Master Lease Agreement is a framework that sets the core legal terms of your relationship with a lender once, so you can add equipment over time without renegotiating a new contract for each acquisition. Each piece of equipment is added through a short schedule that references the master agreement and states that schedule's equipment, payment, term, and end-of-term option.
This approach fits contractors who acquire equipment throughout the year rather than all at once. When you win a bid that requires an additional excavator, a skid steer for a new crew, or a service truck for an expanding territory, a master agreement lets you move from approval to funding faster because the legal groundwork is already done. Individual schedules can use different structures under the same master agreement, so a $1 buyout on a long-life loader and a Fair Market Value schedule on a truck you plan to rotate out can sit side by side. Many master agreements are paired with a pre-approved credit line, which gives you a clear picture of available capacity when you are planning bids and bonding.
It is important to understand what a master agreement does and does not lock in. Rates and terms are generally set at the time each schedule is funded, not when the master agreement is signed. Most master agreements also include cross-default provisions, meaning a problem on one schedule can affect all of them, and many require periodic financial reporting to keep the credit line active. I review these provisions with you before signing so there are no surprises later.
I recommend a Master Lease Agreement when you expect to add equipment in stages over the next one to three years, when speed of funding matters for winning and mobilizing on projects, or when you want to manage multiple pieces of equipment under one lender relationship with consistent terms.