Acceptance: Date equipment is accepted by the client. This commences the lease and initiates lease payment.
Amortization: repayment of a loan by systematic installments.
Annual Percentage Rate (APR): APR is a percentage calculation of the finance charge portion of financing contact. Note: Consumer lending terminology.
Articles of Incorporation: Legal documents registering company with the Provincial or Federal Government, bonafide name registration.
Assignee: a third-party funding source to whom the lease may be assigned.
Assignment: the transfer of the lease and equipment to a third-party.
Authorized Signature: a signature by a person who is authorized by an organization to obligate the organization on a long-term lease or financing contract.
Bargain Purchase Option: a provision allowing the customer (lessee) the option to purchase lease equipment for a price sufficiently lower than the expected Fair Market Value so that exercise of the option appears to be virtually assured at the inception of the lease.
Buy-Out: the cost to retire the lease obligation at any point in time during the lease.
Capital Investment: monies invested by an organization in fixed assets.
Capital Lease: See financial accounting standards
Conditional Sale: a financing contract where the customer does not receive clear title to the asset until completion of the contractual payments.
Consolidated Balance Sheet: a balance sheet showing the financial condition of a corporation and all of its subsidiaries at a specific point in time.
Corporate Resolution: a properly executed legal document which defines the authority of an Officer to obligate the Corporation
Credit: Allowing immediate use of goods and service with payment deferred until an agreed future date.
Default: failure to meet a lease obligation.
Depreciation: the portion of the capital investment that can be deducted from taxable income over the useful life of the investment.
Economic or Useful Life: the time period over which one can expect to obtain the benefits of ownership and/or use of the equipment. This is not necessarily the same as depreciable life. See Depreciation.
Economic Dependency: when a company relies 25% or more of the revenue to be derived from one source.
Fair Market Value (FMV): the market value of the equipment at the time of lease term being completed.
Finance Lease: a capital lease. A financing device whereby a user can acquire use of an asset for most of its useful life. A finance lease may either be a “True Lease” or a “Conditional Sale Contract”
Full-Payout Lease: a lease where the lease payments will return to the lessor the purchase price of the equipment the cost of financing, administration costs, and an expected profit.
Funding Source: an institution with whom Capital Underwriters Inc. has an agreement to assign leases from time to time.
Incremental Borrowing Rate: the rate that, at the inception of lease, the lessee would have incurred to borrow, over similar term, the funds necessary to purchase the leased asset. Subject to interpretation by clients accountant.
Insurance: a contractual relationship that exists when an insurer agrees to reimburse the insured for any loss caused by specified event.
Interest Rate: a percentage charged for the use of borrowed money, usually stated in annual terms.
Investment Tax Credit: proportion of a company’s new capital investment that can be used to reduce its taxes.
Lease: a long-term (36 months or more) contractual obligation for the use of equipment at an agreed rental rate where the equipment serves as collateral.
Lease Rate: the annualized percentage rate on the lease payment stream exclusive of advance payments or purchase options.
Lessee: user of the leased equipment
Lessor: Owner of leased equipment.
Letter of Credit: Letter from a bank indicating it has established a credit lien for the company to draw upon under specified conditions.
Master Lease: a convenient arrangement in which the lessee can acquire equipment at a later date with the same terms and conditions without having to negotiate a new agreement.
Non-Profit Clients: Clients such as private, non-profit hospitals etc. Non-profit clients may use either of the Lease to own plans, provided they meet credit criteria.
Off Balance Sheet Financing: financing that allows for payment over time and is not shown as a liability on the company’s balance sheet.
Operating Lease: the term used to describe an off balance sheet lease. May also be used to describe a short-term lease in which a client can acquire the sue of the equipment for a portion of its useful life.
Payments: advance payments are made at the beginning of the period of use.
Present Value: discounted value of future cash flows.
Purchase Option: the option which the lessee has to buy the equipment at a stated time.
Recourse: a lease transaction supported by the vendor due to weak client credit.
Renewal Option: a contractual opportunity to renew the lease contract.
Rental: a short-term operating lease. Also description for monthly payment.
Running Rate: the annualized percentage rate on the lease payment stream, exclusive of advance payments or purchase options. A low running rate on a lease may disguise a much higher actual interest rate if several advance payments or a high balloon payment at lease-end are required.
Sale and Leaseback: a procedure in which a company sells its assets to a leasing company and then leases them back from the buyer.
Schedule to Master Lease Agreement: an attachment to a Master Lease which spells out detailed terms pertaining to the equipment listed on the Schedule. The Master Lease with Schedules is commonly used when more than one delivery is anticipated for a lease.
Title: Evidence of ownership of an asset.
True Lease: a lease defined by Tax Canada in which the lessor is deemed to be the owner, and the tax benefits of ownership may be passed on to the lessee in the form of lower payments or directly in the case of Investment Tax Credit.