Equipment Financing Agreement

To get an EPT, you should find an independent financing partner who understands your business and can tailor your financing terms to your individual needs. At Team Financial Group, we get to know your business so we can work with you to adjust financing terms and amounts. We offer fast and flexible financing and can often provide approval and same-day financing. EFAs have distinct advantages over bank loans. If you get a simple interest-bearing loan from a bank, the bank needs guarantees. Often, they apply a lien on other assets as collateral for the loan. With an EPT, your financial partner has a security on the equipment itself, so you often don`t need an additional warranty – the funded equipment serves as a guarantee. One of the few reassuring aspects of EFA transactions as opposed to leases is that loans are inherently “hell or flood” bonds. Warranty exclusions, unconditional mandatory language and offsetting prohibitions rarely appear in conventional credit documents.

On the other hand, the protection of the lessor lost in an EPT is the status of “leasing” under Article 2A of the CDU. It is probably a good idea to leave at least one simple UCC warranty exclusion and the statement that the transaction is free of set-off and other rights, especially in the case of equipment financing by a tied seller or whenever the EPT is to be based on a lease form. . The security right should be perfected, if possible, as collateral interest in the purchase price, which means, inter alia, that the purchase price of the equipment is paid to the seller and not as repayment to the borrower and that a UCC-1 financing statement is submitted within 20 days of delivery of the equipment to the borrower. However, given the specialized nature of equipment financing, loans from traditional lenders do not have the flexibility and customization required to meet the value of Equipment Financing Agreements (EFAs). While EFAs and business loans may look like the untrained eye, there are important differences that your business should be aware of before seeking financing. If you don`t need 100% financing, consider a simple interest-bearing loan. On the other hand, if the equipment requires frequent upgrades or has been obsolete for several years (example: computer), then owning the equipment does not offer many advantages. An operating lease is usually the best financing option for this type of equipment. Equipment financing solutions, including EFAs, are extremely popular among small business owners. According to the Equipment Financing and Leasing Association, 79% of companies in the United States use some form of financing when purchasing equipment. Some of the reasons why business owners like to finance equipment are: Ultimately, AGEs tend to close much faster than other types of business loans, provide funds faster, and allow for a faster start to the equipment manufacturing process.

Since many EFAs do not require a down payment, the secure payment process is eliminated, making it easier to finance faster while preserving your cash reserves. Replacing “lessor” and “tenant” with “lender” and “borrower” may be quite simple, but it raises the question of the extent to which the parties want to make the EPT look like a bank loan agreement. Similarly, the decision to replace the term “rent” with “payment” or a similar word or with an expression of “principal and interest” involves both the question of whether the implied interest rate should be disclosed and whether the DFC transaction should be distinguished from a competing bank loan. “Our financing team is constantly discussing with each other how we can find the best solutions for our clients,” noreen said. “There are always ways to help them adapt their conditions to their needs.” A bank loan can also have variable interest rates linked to market rates, which brings more risk and uncertainty. If the market interest rate increases over the life of your loan, your financing interest rate will also increase. At first glance, using an existing equipment rental form to document an EFA transaction seems pretty straightforward. The economy of a CFC should be similar to that of a lease intended to serve as collateral: full payment with implied interest and either a mandatory lump sum payment or no additional payment at the end, with the borrower/lessee owning the equipment subject to a security for the lender/lessor.

However, as many practitioners have noted, it is more complicated than it seems to take a client`s standard equipment lease and create an equipment financing contract. We can rightly say that the popularity of equipment financing agreements is an indication of the general shift from leasing to equipment financing. This subtle but increasingly pronounced change raises many questions for the industry. This goes hand in hand with pressure from some banks to include equipment financing in their product line and a blurring of the boundaries between bank loans and equipment financing departments. An equipment financing agreement (EPT) with Regents is treated as a loan where the borrower of the security holders and regents is a secured creditor of the financed equipment. Regents EFAs have 3 distinct advantages over traditional bank loans: Traditional banks may be a well-known source of funding for your business, but they don`t have the specialized products you need to meet your specific business needs. While EFAs and loans may look the same at first glance, an EPT offers significant benefits that provide better value from your initial application at the end of the repayment period. However, thanks to the simple requirements of accompanying and documenting an EPT, these agreements can be approved in just four hours of application. Ultimately, EFAs provide your business with the equipment they need as quickly as possible and support your bottom line. This is not the case with a CFC that uses your equipment as collateral to simplify the loan eligibility process.

This approach to obtaining financing is one of the reasons why EFA approvals are much more flexible and expedited than traditional credit product offerings. One of the biggest advantages of EFAs is their flexibility. If your business has unique needs, . B such as seasonal fluctuations in cash flows specific to your industry, your financial partner should be able to adjust a payment structure to meet these requirements. According to the Equipment Leasing and Finance Association, more than 80 percent of all U.S. companies use some form of equipment financing. Ready to get started? The application is easy! Simply visit our application page, enter your contact information and one of our trade finance experts will contact you to guide you through the application process and determine which option is right for you. What commercial equipment lease financing conditions do you offer? An EPT can be described as a loan and security agreement and a promissory note, which is summarized in a document with several important provisions that are not typically found in standard security arrangements. These provisions are often used in the equipment financing and leasing industry to protect equipment warranties. Their absence affects both the lender`s guarantee and the negotiability of an EPT on the secondary financing market (syndication). Unlike an EFA (Equipment Finance Agreement), a $1 call option lease is if the lender owns the equipment at the end of the term.

The tenant (customer) then has the option to return the new equipment or purchase it for $1. Some industries or companies prefer this type of rental product because it can have accounting advantages. Two types of rental programs are usually available from a lender. One for companies that wish to use and return the equipment for a certain period of time (as stated in the contract, usually cannot be returned prematurely). The other is a rental program with a short-term purchase option, for companies that want to rent and buy the equipment later. Small business owners opt for financing over direct purchase of equipment for many reasons, including: The content provided here is for informational purposes only. For financial advice, please contact our trade finance experts. If the equipment you want to buy retains its value and remains in use for many years, you`ll probably want to own that equipment. An EPT makes a lot of sense in these situations. It`s more than just a few optimizations for creating documents. Now that our small steps into the world of credit are becoming a competitive sprint, it may be wise to think about what equipment financing means and what we`re doing in the near and distant future. .