Active Lease: A lease that has been activated and whose initial lease term has not expired. This is the period when rent is billed.

Assumption: The original Lessee assigns the lease and all its privileges to another company. This is usually used when a company is sold and is subject to credit approval on the new company.

Buyout: The purchase of leased equipment by the lessee during the term or upon expiry of the lease.

Collateral: Any property designated as security for the payment of a debt or for execution of a contract.

Commencement Date: A lease has commenced when all the equipment is installed and up and running to the lessee's satisfaction.

Conditional Sale: A purchase agreement that presumes the customer to be the owner of the equipment immediately upon signature - provided all payments/conditions are met. (This contract allows immediate ownership for tax treatment and gives the seller a security interest until payments are completed.)

Credit: The power to obtain money, materials or service by promising to pay for them at some definite future date.

Credit Bureau Report: A report from a credit service, such as TRW or Equifax, which summarizes an individual's credit history with retail establishments and financial institutions.

Credit Investigation: The process of gathering and verifying the references provided by a prospective lessee (for example, obtaining credit reports, Dun and Bradstreet reports, checking bank and trade references, etc.)

Default: Failure to carry out a legally binding promise.

Delivery & Acceptance: A receipt signed by the lessee to certify that the equipment has been delivered, installed and is operating properly. D&A certification is usually necessary for the equipment vendor to receive payment and the terms of the lease begin.

Dun and Bradstreet: A commercial credit agency that compiles and provides, for a fee, a variety of information relating to the management, operating trends, and credit worthiness of business organizations.

Early Purchase Option: The pre-determined percentage or dollar amount the lessee may exercise to purchase the equipment at a specified month prior to the lease expiry.

Expiration/Expiry Date: The date the original lease term ends.

Fair Market Value: The price for equipment that a buyer would be willing to pay a seller in the open market.

Finance Lease: A lease that extends through the major portion of the equipment's useful life. The lessee assumes the risk and responsibilities of ownership over the duration of the lease and usually has the option to purchase the equipment for a nominal amount at the end of the lease.

Financial Statements: Reports, usually a balance sheet and an income statement, which show the financial position of a business for a specific time period, and the operating results by which it arrived at this position.

Guarantor: A person or business promising to perform all lessee obligations - including making payments - should the lessee fail to do so.

Guaranty: A written promise by one party to perform some duty or pay a debt if another party should fail to do so.

Initial Payment: A cheque for the first period's rental; some monies to be exchanged to bind the contract.

Lease: A contract between a lessor who owns the asset and the lessee who uses the asset, where the lessor provides temporary possession and full use of the asset to the lessee, for a specified period of time, in exchange for rent payments.

Lease Assignment: The lessor signs the lease to another party giving the assignee the rights, power, privileges and remedies specified in the lease.

Lease Factor: The rate used to determine the monthly payment a leased item, usually expressed as a decimal fraction that is multiplied by the item cost (i.e. 0.0360 X $5,000 = $180 per month).

Lessee: The individual or entity that is leasing the equipment.

Lessor: The party that holds the title for the equipment (the leasing company).

Operating Lease: A lease in which the lessor, in determining the lease rates, projects that the equipment will have a necessary market value at lease-end to provide for an adequate rate of return.

Payout: A right given to the lessee by the lessor. The sum of all the remaining payments (less the unearned interest). The equipment is then returned.

Personal Credit: The credit a retailer, bank or finance company extends to an individual in connection with the sale of goods or borrowing of funds.

Personal Guaranty: A written agreement by a third party to be responsible for the lease payments in the event that the original lessee defaults.

Pre-Authorized Payment: A system used to transfer funds electronically through a clearinghouse facility directly into the payee's bank account.

Present Value: Refers to today's value of money to be received in the future. For example, how much is the right to receive $10,000 in five years, worth today?

Purchase Option: A provision in the lease, which gives the lessee the right to purchase the equipment at the end of the lease for either a specified amount or its future fair market value.

Renewal Option: A right given by the lessor to the lessee under a lease to continue using the equipment for a period of time, for an agreed upon rental payment, after the expiry of the original term of the lease.

Repossession: The process of taking back equipment that is pledged as security to the lessor, due to non-payment or other contractual breech by the lessee.

Residual Recourse: A guarantee from a third party (usually the vendor or broker) to purchase the equipment, regardless of its condition for a specified residual amount.

Residual Value: The net book value of the equipment at the conclusion of the lease. Generally referred to a position taken by the lessor in the equipment.

Sale Leaseback: The lessee has already purchased the equipment but now wants to lease it. The lessee sells the equipment to the lessor and we in turn lease it back to them.

Stretch Lease: A lease in which the lessee may either exercise the purchase option at the option time specified in the contract, or continue to make rental payments for the remaining term of the contract.

Trade-Up/Upgrade: Exchanging equipment and entering into a new lease obligation.

True Lease: The lessee expenses the entire lease payment and cannot capitalize the asset for tax purposes. No early purchase option is stated. Fair Market Value is only quoted at lease maturity. A transaction recognized in law and by tax authorities as providing the lessor with the benefits and risks of ownership - with the basic qualification that the lessee may not build an equity position in the asset during the term of the lease.

Vendor: The seller of the equipment to the lessor for lease to a third party (lessee).