Acceptance Certificate - Lessee's acknowledgement that the equipment to be leased has been received and is in satisfactory condition.

Capital Lease - A capital lease (similar to a term loan or a conditional sales contract) is usually used to finance equipment for the major part of its useful life, and there is a reasonable assurance that the lessee will obtain ownership of the equipment by the end of the lease term.

Collateral - Property being leased that is pledged as security for execution of the lease contract.

End of Lease Options - After the Initial Term of the lease expires (i.e. 24, 36, 48, or 60 months from the commencement of the lease), Lessees typically have the option to either purchase the equipment for a $1.00 ($1 Buyout), purchase for the Fair Market Value (FMV), return the equipment, or continue leasing the equipment.

Fair Market Value (FMV) Lease - A Lease that has the pre-set End-of-Lease Options.

Finance Lease - Typically, a finance lease is a full payout, non-cancelable agreement.

Hell-or-High-Water - Lessee agrees that "its obligation to pay all Monthly Rent and other sums payable hereunder, shall be absolute and unconditional and shall not be subject to any abatement, reduction, set-off, defense, counterclaim or recoupment ("Abatement") whatsoever, including without limitation, Abatements due to any past, present or future claims arising under this Master Lease, any Schedule or otherwise of Lessee against Lessor or any assignee of Lessor ("Assignee"), or against the manufacturer or seller of any Equipment or against any person or entity."

Incumbency Certificate - Identifies and authorizes respective individuals to execute binding lease documents on behalf of the corporation.

Insurance Certificate - Since the lessee does not 'own' the equipment until the lease conclusion, risk/casualty insurance will be provided by lessee for the benefit of lessor and lender (assignee).

Lease Schedule - Incorporates all of the terms and conditions of a Master Lease, as well as additional terms as Lessee and Lessor shall agree upon (i.e. Lease Payments, Term, and Equipment). Each Schedule shall constitute an agreement separate and distinct from this Master Lease and any other Schedule. In the event of a conflict between the provisions of this Master Lease and a Schedule, the provisions of the Schedule shall prevail with respect to that Schedule.

Lease Rate Factor - Once the equipment cost has been determined, the actual monthly lease payment can be computed by multiplying "the factor" by the equipment's cost.

Lessee - The entity that is using/leasing the equipment from its owner, the lessor.

Lessor - The owner of the equipment who receives lease payments from lessee for use of the asset.

Master Lease - An agreement under which the owner of the equipment (the "lessor") conveys to the user (the "lessee") the right to use the equipment in return for a number of specified payments over an agreed period of time.

Net Lease - The responsibility to pay taxes, insurance, and maintenance are incurred by Lessee, in addition to the monthly lease payment

Notice of Assignment - Document signed by Lessee and Lender, acknowledging that another party has taken an assignment of the rental payments. It also notifies Lessee that payments will be made directly to the assignor/lender.

Off-Balance Sheet Financing - Financing that does not add debt to a company's balance sheet. Since the lessee does not own the equipment, nor does the lease structure suggest ownership, the lessee is not required to enter the corresponding long-term liability.

Operating Lease - Any lease that is not a capital or finance lease. An operating lease usually finances equipment for less than its useful life, and at the end of the lease term the lessee can return the equipment to the lessor without further obligation.

Present Value - The value of a future stream of money today.

Progress Payments - A lease, typically for custom ordered items, that requires a temporary disbursement to the vendor for a percentage of the work completed.

Purchase Option - See "End of Lease Options"

PUT Option (Purchase Upon Termination) - An option requiring the purchase of the equipment at the conclusion of the lease at a fixed dollar amount or a percentage of the original purchase price.

Residual Value - The remaining (market) value of the equipment at the end of the lease term.

Sales/Use Tax - Since the Lessee is using a particular asset; a state sales/use tax is levied on the Lessee's monthly lease payment.

Sale Lease Back - Lessor purchases equipment from lessee and lessee, in-turn, releases equipment back from lessor.

True Lease (Tax or Operating Lease) - A transaction whereby the lessee expense lease payments and the lessor can claim tax benefits of ownership, such as depreciation.

UCC's/Financing Statements - A financing statements is filed with the appropriate state of incorporation agency to reduce the risk of creditors by a) establishing a security interest incurred by a debtor, so that priority of claim may be proved in case of bankruptcy or default; and b) by providing information on financing statements and liens to interested parties.

Return to Resources Page