CHOOSING A TERM
Choosing the right equipment lease term.
The structure matters less than the fit. A term that matches how long the equipment will be earning, and a payment that matches when the money actually arrives, is the difference between financing you never think about and financing you feel every month.
WORKING LIFE
Match the term to the working life
Terms run from 18 to 60 months on every structure we write. The useful question is not the shortest term you can bear. It is how long this particular machine will be earning.
Do not outlive the equipment
A term that runs past the machine's useful life means paying for something that has stopped earning. Finish the payments while the equipment still has work in it.
Do not pay it down too fast
A term far shorter than the working life crowds the whole cost into the first few years, while the machine is only beginning to earn. The payment ends up larger than the work it does.
The payment should come out of what it earns
The right term is usually the one where the monthly payment sits comfortably inside what the equipment brings in, rather than the one that clears the balance soonest.
Longer terms trade payment for total
A longer term lowers the payment and raises the total paid. That trade is worth making when the machine will be earning for the whole of it, and not otherwise.
THE CONTRACT
If the machine was bought for a job, match the term to the job
Plenty of equipment is financed for one specific piece of work. When that is the case, the contract is a better guide to the term than the equipment is.
Let the term end when the revenue does
If the contract runs three years, a three-year term means the equipment is paid for by the time the work that pays for it stops.
Decide now what happens when the job ends
Will you keep the machine for the next job, or hand it back? That answer points to a structure, and it is far easier to settle at the start than at the end.
Flag a renewal or option year early
If the contract has a renewal or an option year, say so on the first call. It can change the term that makes sense, and changing the term after documents are issued means new documents.
When the work starts after the equipment arrives
Equipment often has to be on site before the contract pays anything. A deferred start keeps the first payments from landing before the first invoice to your customer goes out.
CASH FLOW
Match the payment to when the money arrives
Almost no business earns in twelve equal instalments, and the payment schedule does not have to pretend otherwise. If you know when your tight months are, the structure can be built around them — but only if you say so before the documents are issued.
Seasonal schedules
A slow winter, or a business that earns its year in a six-month season, can pay more in the busy months and less in the quiet ones.
90 days deferred
When the contract starts a quarter out, the first regular payment can wait 90 days, so the equipment is earning before it is paying. See 90 days deferred.
Step-up payments
For equipment that takes time to ramp up, payments start lower and rise as the machine settles into full work.
THE FOUR
Four endings to choose from
Once the term and the schedule fit, the remaining question is what you are holding at the end. These are the transaction types on our own application form; a specialist will tell you which your equipment and your business qualify for.
Fair market value lease
You pay for the use of the equipment, and at the end you return it, buy it at what it is then worth, or extend. Lowest payment of the four for the same machine, and the right fit when you expect to upgrade.
Fair market value with a purchase option
The same three choices at the end, except the buyout is capped at a share of the original cost and agreed at signing, so you know in advance what keeping it would cost.
Nominal buyout lease
Written so that buying the equipment at the end is a formality at a small fixed figure. The payment is higher, because you are paying towards ownership the whole way through. The fit when you already know you will keep it.
Equipment finance agreement
The loan-shaped one. You own the equipment from the first day and we hold a security interest until the term ends, so there is no end-of-term decision to make. See lease vs. loan.
Two more terms you will meet reading elsewhere: a capital or finance lease is one that behaves like a purchase, and an operating lease is one that behaves like a rental. They are accounting labels rather than products on a menu — which label your agreement earns depends on its terms and on the standards you report under.
IN COMMON
What all four share
Terms from 18 to 60 months
The right term is usually the one that matches the payment to what the equipment earns, rather than the shortest one you can bear.
No down payment
Two advance payments are due when you sign, and that is the whole of what you pay up front, on every structure here.
Any vendor, new or used
We buy the equipment from the vendor you choose and pay them directly. New or used makes no difference to the structures available.
The soft costs can go in
Freight, rigging, installation, staff training and support can be written into the agreement instead of arriving separately.
Payments can follow your year
Seasonal schedules, step-up structures for equipment that takes time to ramp, and a 90-day deferred program.
One page to apply
From $10,000 to $150,000 on Application Only, with no financial statements at all. Larger transactions take a fuller package.
TAXES
The structure changes the tax answer
This is the part worth a phone call to your accountant, because it is the one place where picking a structure has a consequence you cannot see from the payment schedule. A lease payment is generally an operating expense rather than a capital purchase, and Section 179 applies to financed equipment as well as equipment bought outright.
How your particular agreement is treated depends on how it is structured and on your own tax position. We finance equipment; we do not advise on taxes. Bring your accountant the structure before you sign it, not the invoice afterwards.
QUESTIONS
Structures, asked plainly
What are the main types of equipment lease?
Fair market value leases, fair market value leases with an agreed purchase option, nominal buyout leases where the end purchase is a small fixed figure, and equipment finance agreements, which are the loan-shaped version where you own the equipment from day one.
What is a fair market value lease?
A lease where you pay for the use of the equipment rather than paying it down to nothing, and at the end of the term you return it, buy it at what it is then worth, or extend the lease. It carries the lowest payment of the structures we write for the same machine.
What is a $1 buyout lease?
The industry name for a nominal buyout lease: one written so that buying the equipment at the end is a formality at a small fixed figure agreed at signing. Our version of this structure is a fixed nominal buyout. The payment is higher than a fair market value lease, because you are paying toward ownership the whole way through.
What is the difference between a capital lease and an operating lease?
They are accounting labels, not products. A capital or finance lease behaves like a purchase and generally sits on your balance sheet; an operating lease behaves like a rental. Which label an agreement earns depends on its terms and on the standards you report under, which makes it a question for your accountant.
Which lease structure has the lowest monthly payment?
A fair market value lease, for the same equipment and the same term. You are paying for the years you use rather than for the whole machine, and the residual value stays with us instead of being paid down by you.
Can I change the structure after I sign?
No, and that is the point of agreeing it first. The structure, the term and the end-of-term option are all written into the agreement before you sign it, so nothing about the ending is decided later or decided for you.
How long are equipment lease terms?
From 18 to 60 months on every structure we write. Longer terms lower the payment and raise the total; the useful question is which term matches the payment to what the equipment earns.
Which structure should I choose?
Answer one question first: at the end of the term, do you want to be holding the machine or holding the option? If you know you will keep it, a buyout structure. If you expect to upgrade, a fair market value structure. If you are not sure, say so on the call — that is a normal answer.
Three steps to your equipment
01
Fill out an application
Complete our simple, one-page application. No mountain of paperwork.
02
Receive a custom plan
We contact you, typically within 24 hours, with a lease structure tailored to your needs.
03
Get your equipment
We purchase your new or used equipment from any vendor you wish.
Newer business, or no financials to hand? We have programs for both — startup financing and no financials required.
FREE QUOTE
Get a custom quote in minutes
Tell us what equipment you need and roughly what it costs. An ACG specialist follows up, typically within 24 hours, with options built around your business.
Business equipment financing. $10,000 minimum. We do not finance personal or household purchases.
- — NO OBLIGATION, NO HARD CREDIT PULL
- — NEW OR USED, ANY VENDOR
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Keep reading
Lease vs. loan
Who owns the machine, and what that changes about everything else.
What moves the payment
The seven things that decide the number on the quote.
The blog
Articles on financing equipment, tax season and running the business.
Common questions
Twenty of the questions we are asked most, with the actual answers.
Want the equipment running before the first payment? Ask about 90 days deferred.
Decided? It is one page.
31 years financing equipment for small business. Apply, or call and talk it through first.