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Equipment finance agreement EFA
Also called EFA, equipment finance contract.
A single-document equipment financing in which the business owns the equipment from day one and the funder takes a purchase-money security interest, functioning as a loan while reading like a lease.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
An EFA collapses note, security agreement and schedule into one document. The customer is the owner and the funder is a secured party, perfected by a UCC-1 filed against the specific equipment. There is no residual, no return option and no end-of-term decision, because there is nothing to hand back.
Because title sits with the customer, the tax and accounting consequences follow ownership: depreciation, including Section 179 and bonus treatment where available, belongs to the business, and sales tax is generally assessed on the purchase price up front rather than on each payment. A true lease reverses much of that.
EFAs sit outside UCC Article 2A, which governs leases, though the documents still carry hell-or-high-water language making payment unconditional.
Where this one catches people
Vendors and brokers use "lease" and "finance agreement" interchangeably in conversation, and the two produce different tax outcomes, different sales tax timing, different balance-sheet treatment and different end-of-term positions. The finance rep quoting the payment usually cannot explain any of it. Send the document to whoever prepares the return before signing, not in March.
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Equipment finance agreement — common questions
What does equipment finance agreement mean?
A single-document equipment financing in which the business owns the equipment from day one and the funder takes a purchase-money security interest, functioning as a loan while reading like a lease.
Where does equipment finance agreement catch people out?
Vendors and brokers use "lease" and "finance agreement" interchangeably in conversation, and the two produce different tax outcomes, different sales tax timing, different balance-sheet treatment and different end-of-term positions. The finance rep quoting the payment usually cannot explain any of it. Send the document to whoever prepares the return before signing, not in March.
Is equipment finance agreement the same as an interest rate?
Equipment finance agreement is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does equipment finance agreement apply to?
Equipment Financing.
Is there a worked example of equipment finance agreement?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside equipment finance agreement?
End-of-term option, Equipment financing, Equipment lease, Hell or high water clause, Purchase-money security interest.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.