From the Author

We often get this question with our new (and sometimes returning) clients. In the following article, we break down the structures of these agreements (FMV and EFA), talk about their value to you (the client), and even give some real-life examples of how we use them to help our clients.

What is an FMV Lease?

A Fair Market Value Lease (FMV) is a lease where the lessee pays for the use of the equipment during the financing term, essentially a rent-to-own program. At the end of term, the lessee is presented with an option to purchase, continue financing or upgrade the equipment.

How it works

The FMV structure of financing is more important than ever. The technology in the equipment that you plan to purchase today will probably be of much less value to you, and the market, in as little as three years from now. What do you do then? Here is where the FMV’s beauty comes into play – you just choose the option that works best for you! 

Ex: Three years have gone by, and your FMV term is coming to an end. Your equipment is still functioning but could use an upgrade because of your business’s growth or change in use or function. Luckily, this is the time that you get presented with your FMV options: 

  1. Continue to lease the equipment month-to-month, as long as you need
  2. Return the equipment and either upgrade the equipment or move in a different direction
  3. Purchase the equipment at Fair Market Value (hence FMV)

In this case, you now have the flexibility to choose the option that will work best for your company’s particular needs. Maybe your equipment can manage for a few months, and so you decide to keep financing it. It’s also possible that you think the equipment needs an upgrade as soon as possible to help with your growth, so you decide to upgrade. There is also a case where the equipment may be something you are ready to buy and keep, and so you have the option to purchase it too.


  • Payments are more affordable than EFA
  • Keeps equipment up to date; you can return old equipment and lease newer equipment when the lease term ends
  • Scales well with your business’ needs; you can get the right amount and type of equipment you need now and then adjust as needed. 
  • Your financing partner deals with equipment management and disposal; this is particularly important for IT equipment that stores data
  • Option to walk away from the equipment when the lease ends
  • Shorter lease terms; upgrade or purchase your equipment sooner rather than later
  • Tax benefits; deduct monthly lease payments as an operating expense

Client Example

The second-largest Cancer Research Facility in the US was undergoing a $4 million renovation of their R&D lab space. This client wanted to try multiple manufacturers’ product lines over 18 months to decide which products were the best fit for their specific needs.

Without incurring the equipment’s total cost, Blue Street Capital tailored an FMV rent-to-own program where they could have six different products on-site over 18 months. At the end of term, the client had the flexibility to purchase the desired equipment at a discounted cost and return the undesired equipment.

This structure allowed them to leverage their entire budget for renting, staffing and operations to expand while only incurring a portion of the equipment cost with the flexibility to purchase or return. 

What is an EFA?

An Equipment Finance Agreement (EFA) is a financing agreement in which the lessee pays to own the equipment at the end of the term. In short, Blue Street Capital pays for the purchase on your behalf, and you pay Blue Street Capital back on a schedule that fits your needs. 

How it works

EFAs are an excellent option for purchasing equipment that your business will use for a long time. The reason for this is that you own the equipment during and at the end of the term.

If you are purchasing equipment that has little need to be upgraded in the short term, an EFA may be right for you. With an EFA, you are simply paying for your newly acquired equipment over time. Rather than spending cash up-front, you now have a payment structure that spreads the payment out over the time of the agreement. At the end of the payment term, you will own the equipment.

Another significant feature of an EFA is that, in most cases, the services and software that come with the equipment can also be included in the agreement. Bringing all of the equipment, services, and software into one agreement means that you will not have to worry about paying anything up-front for your entire purchase.


  • You own the equipment during and at the end of the term
  • Excellent tax benefits; you may be able to take 100 percent bonus depreciation in the first year on the equipment
  • Software and Soft Costs may qualify; wrap your software and hardware costs together on the same agreement
  • No down payment; many business owners can get 100 percent financing with no down payment

Client Example

A Blue Street Capital client in the healthcare industry was looking to renew their data security software.

While searching for their best fit solution, Blue Street’s client realized that they could save 20% on this purchase by committing to a three-year agreement. This client knew that they would use the software well over three years and decided to finance the purchase with an EFA to secure their data and the 20% discount.

Blue Street Capital was able to get their financing agreement approved for the software and the services at 5%, giving the client an all-in savings of 15%, paid over three years.

Downloadable PDF

Looking for more information on this topic? Blue Street Capital has laid out all of the information in this article in a PDF for you! Follow this link to download the PDF.