$1 Buy Out
An end of lease option where you have the option to purchase the equipment for the sum of $1 provided all terms of the agreement have been met.
Advanced Payments (Advance Rentals)
Lease payments made prior to start of the lease term. Usually 1st and last monthly payment.
"Application-Only" Credit Review
Most lessors grant credit using only the information submitted to them on Lease Applications. This document along with bank and trade references and independent credit bureau reports is used to review credit up to a certain transaction size (with Chase Industries it is up to $200,000). Written financial statements are generally not required from the applicant because the Lessors usually make a decision based on the use of "Credit Scoring" systems and/or bank and trade references.
Automated Clearinghouse (ACH)
Commonly known as Direct Deposit. A system used to electronically transfer funds through a clearinghouse facility directly into the payees bank account.
Bankruptcy (Chapters 7, 11, and 13)
The legally declared condition of being unable to pay an individuals debts.
Buy Out
The purchase of leased equipment by the lessee during the term of the lease.
Capital Lease
A type of lease which is treated as a purchase by the Lessee and by the Lessor as a sale or financing. Generally Capital Leases can be identified if it meets the following criteria:
a) The lessor transfers ownership or title to the lessee at the expiration of the lease term.
b) The lease term is equal to 75% or more of the estimated economic life of property (there are exceptions for used property leased toward the end of its economic life).
c) The lease contains an option to purchase the asset at a bargain price.
d) The present value of the required lease rental payments are equal to 90% or more of the estimated Fair Market Value of the leased asset at lease inception. If you plan on owning the equipment at the end of lease term or your long term goal is to own the equipment this might be a good lease for you. Please contact your accountant.
Cash Flow
Money that is not tied up and is available for use. Typically a measure of a businesses ability to meet lease obligations. Usually figured by adding the business net income to its depreciation expense for a certain period of time, and subtracting the current portion of long-term debt. The remainder of this formula is the available cash to assist new lease obligations.
Collateral
Any property designated as security for the payment of a debt or for execution of a contract.
Commencement Date
The date that certifies delivery and acceptance of the equipment.
Corporate Resolution (Certificate of Secretary)
The corporate resolution is a document that must attest that individual executing a Lease Agreement on its behalf is duly authorized to do so. The resolution identifies those officers authorized by the board of directors to enter the corporation into the lease. A signatorys authority is commonly confirmed by the execution of a "corporate resolution or certificate of secretary". This document should be certified by the corporate secretary or assistant secretary and usually the "Lessees Corporate Seal" is ordinarily required for large transactions over $75,000.
Credit
The power to obtain money, materials or services by promising to pay for them as some definite date in the future.
Credit Bureau Report
A report from a credit service generally provided by one of the following (Equifax, Transunion, and Experian formerly known as TRW) that scores an individuals credit history with retail establishments, financial institutions, or trade references.
Credit Scoring
A system used for evaluating credit history to determine acceptability based on assigning values to various credit criteria creating a score based generally on points.
Default
The failure to carry out a legally binding promise
Delivery and Acceptance (Acceptance Certificate)
A document where the lessee acknowledges that the equipment to be leased has been delivered is acceptable, and has been manufactured or constructed according to specification. This starts the lease and signals the lessor to make payment to the vendor.
Depreciation
An allowable tax deduction for assets or property that are used up over their economic life period of time. Ex. Section 179
Documentation (Leasing Documents,Docs)
Lease agreements are set forth in documentation often comprising of several forms. Documentation varies from company to company, as do requirements depending on the type of lease, equipment, equipment cost, term, equipment configuration and additional provisions if any.
Documentation Fee
A fee charged to the lessee for the processing of the lease and other insurable costs which typically include filing the UCC with the local and state facilities usually the Secretary of State or County Clerks office.
Dun & Bradstreet (D & B)
A commercial credit agency that compiles and provides, for a fee, a variety of historical information relating to the management, operating trends and credit worthiness of business organizations.
Equipment
The specific items or property that is leased by the Lessee as covered by a selected lease agreement.
Equipment Schedule
A document that describes in detail the equipment being leased. It will generally include model and serial numbers and it may also state the lease term, commencement date, repayment schedule and location of the equipment.
End of Term Options (End of Lease Options)
Options stated in the lease agreement which give the lessee flexibility in treatment of the leased equipment at the end of the term provided the lessee has complied with their responsibilities under the lease.
Evergreen Clause
A contractual provision that the contract is automatically renewed unless a party gives notice to the contrary. Chase Industries never includes evergreen clauses
Exemption Certificate
A document exempting a lessor or lessee from paying sales tax on the equipment being leased. A lessor is buying the equipment for re-sale as would a vendor or supplier while a lessee may be tax exempt for other reasons like being a non-profit organization or a bank.
Fair Market Value (FMV)
An end of lease option to purchase leased property at its then fair market value
Full Financials
The process of checking and verifying the references provided by a prospective lessee which typically include financial institutions, Dunn and Bradstreet reports and review of tax returns.
Guaranty (Personal, Corporate)
Sometimes individuals and or business owners may be required to personally guarantee a leasing transaction. An agreement to obligate oneself for the debt of another. The guarantor is obliged to pay the obligation in the event of default or non-payment by the entity being guaranteed.
Hard Costs
In a lease transaction, leased assets which are considered to be "tangible" (hardware, equipment, facilities, etc.) rather than intangible (software, services, consulting, training, etc.).
Insurance
Most lessors require the Lessee to insure the equipment against casualty loss, all risk and damages, and require that the lessee indemnify the Lessor against any liability incurred from the possession, operation, or usage of the equipment.
Interim Rent
The prorated daily rental accruing from the date of delivery, acceptance, and/or funding, until a later starting date of the basic term of a lease. Often occurs in leases where new equipment is acquired over a range of time prior to the commencement of the basic term, or where new equipment can be periodically (e.g., quarterly) added to the lease, and where the equipment is placed in service before the commencement of the new period. Or, another way some companies extract addition payments from the lessee. Chase Industries never charges Interim Rent, It is not ethical
Late Charges
A financial penalty that is imposed when there is a delinquency of a payment due that exceeds the grace period.
Lease
A lease is a contractual document in which one party (The Lessor) conveys the use of an asset to another party (The Lessee) for a specific length of time (lease term) at a predetermined schedule of payments.
Lease Payment (Lease Rate)
A fixed periodic rental payment to a lessor for the use of assets or equipment over a fixed period of time.
Lessee
The individual, partnership, or corporation using the equipment being leased from the lessor (owner).
Lessor
The party to a lease agreement who has legal or tax title to the equipment for the lease term and is entitled to the rental payments.
Master Lease
A continuing lease agreement that provides for property or equipment becoming subject to the terms of a single lease over a period of time. Schedules or addendums are then added to reflect property becoming subject to the terms of the master lease.
Operating Lease
Any lease that is not a Capital Lease. Generally used with equipment that rapidly depreciates or becomes obsolete in a short period of time. The Lessor books and depreciates the equipment as an asset, and the Lessee expenses the lease payments (usually classify these payments as an operating expense). An operating lease is considered an off-balance sheet liability and contains a provision to purchase the equipment at the end of the lease for the Fair Market Value. This is typically considered the most tax friendly form of leasing. Please contact your accountant.
Present Value
The equivalent current value for money which is expected to be received (or dispersed) in the future, either by means of a single payment (or payout) or a stream of payments (or payouts) over time.
Purchase Option
A document of a lease in which the lessee is granted the right to purchase the leased equipment , asset, or property at the end of the lease term.
Put Option (10% put)
A provision in a lease with the requirement to purchase equipment at a particular time and at a predetermined price at the ending of the lease term. Usually 10%.
Residual Value
The estimated value of an asset at the end of the lease.
Soft Costs (Air/Soft Charges)
In a lease transaction, leased assets which are considered to be intangible (software, services, consulting, training, etc.)rather than tangible (hardware, equipment, facilities, etc.)
Uniform Commercial Code Financing Statement UCC
A standardized document that is filed with the Secretary of States office and in some cases the County Clerks office in the state where the leased equipment is located. The filing defines the security interest and secures ownership of the leased equipment to the lessor. The filing defines the nature of the relationship between the lessor and lessee and also the specific assets for public record.
Vendor (Supplier/Dealer)
The company, firm, or equipment supplier is the seller or manufacturer of the equipment to be leased.