AMERICAN INDUSTRIAL LEASING COMPANY
10% Buy Out - Guaranteed purchase agreement by lessee. Purchase price is ten percent of the original equipment cost. (This is often referred to as a 10% PUT.)
10% Purchase Option - Lessee has the option to purchase the equipment for ten percent of the original purchase price or extend the lease.
Add-On - Enhancements and equipment that may be added to an existing lease at any point during the lease term.
Advance Payment - Payments required to be paid to Lessor at the beginning of the lease. Leases usually require two equal payments to be made in advance, the first month’s payment and a refundable security deposit equal to one payment.
Authorized Signature - The signature of a person authorized by the company to obligate the company to a lease. Usually this person is an officer, partner or owner.
Buyout - The dollar amount a lessee must pay at the end of lease in order to receive title to the equipment.
Credit Approval - The process of qualifying a perspective lessee for a lease.
Deferred Payments - A payment schedule that allows a lessee to defer their initial payment(s) by an agreed upon term. Usually 60 or 90 days.
Down Payment - An amount required by a bank to help secure an equipment loan.
Equipment Acceptance & Disclaimer Agreement (D & A) - A lease document in which a Lessee acknowledges that the equipment on said lease has been delivered, and is in properly working order, and thus is accepted by the lessee. This is used as part of the process by which the leasing company will release funds to the supplier/vendor.
Fair Market Value (FMV) - The value that a willing buyer would pay a willing seller for the equipment at the end of the lease.
Full Pay Out Lease - A lease where the title to the equipment is transferred automatically to the lessee after all lease payments are made. (Oftern referred to as a “dollar out” lease.)
Funding - The process of paying the vendor for the equipment on behalf of the lessee.
Lease - A contract by which the owner of the equipment conveys the right of use to another party. (Usually for a term of 1 to 5 years)
Lessee - The user of the equipment that is the subject of a lease agreement.
Lessor - The owner of equipment that is the subject of a lease agreement.
Operating Lease - A lease that meets all requirements of FASB 13.
Purchase Option - An option at the end of the lease that allows the lessee to purchase the leased equipment for either a predetermined price or the then fair market value.
Renewal Option - An option given to the lessee to renew the lease after its original term has expired.
Residual Value - The value of leased equipment at the end of the lease.
Sale-leaseback - When the lessor reimburses the lessee for equipment the lessee has already purchased. Generally this must be done witin 90 days of the lessee purchasing the equipment.
Seasonal Payments - No payments are made during certain months of every year. As an example, golf courses would not make payments during the cold weather months.
Step Payments - A lease that contains payments that either increase (step-up) or decrease (step-down) by dollar amount over the term of the lease. Amounts are determined at the beginning of the lease. Can be used for equipment that is placed into service and will not generate revenues for a given period of time.
UCC (Uniform Commercial Code) - A set of laws governing various business transactions including the sale of goods (personal, not real, property) and secured transactions.
Upgrade - The ability to trade-up, trade-in and enhance the leased equipment during the original or extended lease term.
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