4 Advantages of an Equipment Finance Agreement for Truck Equipment Financing

For your truck financing needs consider an Equipment Finance Agreement (EFA) with an equipment finance company. There are 4 clear cut advantages to this financing option.

What is an Equipment Finance Agreement (EFA)?

An Equipment Finance Agreement (EFA) is a version of a standard loan offered by CFIC Funding. This type of contract is our most popular product because it’s familiar and easy to understand. An EFA is in actuality a loan to the customer (debtor) using the equipment asset as collateral. The debtor usually pays for the equipment and takes all the ownership benefits and responsibilities for the term of the agreement.

It is an alternative financing option to traditional lease operating agreements. Equipment finance agreements are generally more flexible than lease agreements. With most equipment finance agreements, you have no further obligation to your financier at the end of the agreement (see individual agreements as some may vary). There are no purchase buy options or large down payments.

Advantage #1 – Less Risk on Collateral

EFAs are secured by a UCC filing specifically on the equipment financed. This means the equipment itself (and just the equipment itself) is the collateral.

Advantage #2 – Covenants

EFAs almost never contain restrictive loan covenants. They do not require your business to maintain certain Balance Sheet ratios (debt to income ratio). Therefore this means little red tape and micromanagement of your loan.

Advantage #3 – Fixed Rates

EFAs are generally fixed for the entire term of the loan agreement. No surprise increases.

Advantage #4 – Taxes… Keep More Money

There may be additional tax advantages to this option. Consult your licensed tax advisor as an EFA may allow you to depreciate your equipment over 2-5 years while writing off the interest paid within a given tax year. In addition your licensed tax professional may advise that an EFA may allow you to take advantage of the IRS’s Section 179 depreciation schedule.

(Please note CFIC Funding does not offer tax advice. The above statements are not to be considered tax advice. Consult your own licensed tax professional regarding your own tax situation.)

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