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Saturday, 20 Apr 2019

Glossary of Leasing Terms

LESSOR - The funding source is usually considered the Lessor.

LESSEE - The business and/or principals signing the lease are considered the lessee's.

FUNDING SOURCE - The company, or bank, that will be paying the vendor.

DOC THE DEAL - This step occurs after we obtain an approval from credit. Here, the rep requests the required leasing documents from the documentation department for the Lessee to sign.

PREFUNDING - Some vendors want to be paid at least a portion of the deal up front, usually 50% of the invoice amount. This is called prefunding. It must be approved by the funding source on a case-to-case basis. Both the vendor and the lessee must be stable for acceptance.

90 DAY DEFERRED PROGRAMS - For strong lessee's who would like to like to begin their payments after the equipment begins to generate income we can offer 90 day deferred payments. These must be approved in advance by the funding source. Only strong lessee's over 2 years in business under current ownership will qualify for 90 day deferred plans.

UCC-1 FILING - This is a filing with the state the perfects the security interest of the funder. Most funding sources will want UCC-1 filings to be recorded.

CAPITAL LEASE - Typically, $1.00 out leases are considered capital leases. This type of lease is very similar to a financing agreement, meaning that payments are similar to a bank loan. Usually, capital leases are not 100% tax deductible. The equipment is put on a depreciation schedule and written off over a period of years.

OPERATING LEASE - These leases have a buyout clause at the end of the term. , True operating leases can be 100% tax deductible. This means that all monthly payments can be written off as an expense and the equipment does not need to be depreciated over a term of years.

FINANCE AGREEMENT - With a finance agreement, the the customer owns the equipment and the financier places a security interest in the equipment.  These agreements are capitalized and depreciated.  When the last payment is made the agreement is fully satisfied.

LEASE - Leases are a simple way of obtaining money. Leases, in most cases, will have payments or security deposits due up front, and a buyout at the end of the term. Leases are very simple to set up and have many tax benefits. Leases also require very little money up front and may not require financial statements or tax returns for up to $100,000.

HARD COSTS - Equipment and it's tangible peripherals are considered hard cost. Most other expenses are soft costs.

SOFT COSTS - Freight, labor, software, and other intangible items are considered soft costs. Only a certain percentage of the total transaction can be soft costs in many cases. These costs usually cannot be recovered in case of default and therefore increase the riskiness of the deal.

All programs, conditions, and terms are subject to credit approval and can change at any time without notice.
Allstate Capital is not affiliated with The Allstate Corporation or any of its affiliates or subsidiaries, including the Allstate Insurance Company.
Allstate Capital does not offer tax advice.