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| Frequently Asked Questions |
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Q: What is an equipment lease?
A: Equipment leasing allows businesses with limited cash flow to get necessary equipment right away.
You can lease anything essential to your business — from furniture and computers to forklifts and utility vehicles.
You need only make two advance payments before your lease begins.
Here's how it works: A third party funding source (the lessor) purchases the equipment you want.
You then get the equipment and make regular payments for a period of time. If you get a finance lease, you have
the option to buy the equipment at the end of the lease for a nominal fee. With a true lease, you can either give
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up the equipment or buy it at fair market value. Another advantage to equipment leasing is you don't run the risk
of owning obsolete machinery. You can set the limits of the lease or request a provision that allows you to
upgrade the equipment during the leasing period. |
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| Q: What is “Fair Market Value”? |
A: The fair market value (FMV) is the price the equipment can be purchased for at the end of the lease term.
If it is important for your customer to expense the cost of their equipment during the lease term, the FMV product is an excellent option. |
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| Q: Can a lease be canceled? |
A: The lease is technically a non-cancelable contract. However, under some circumstances a cancellation may be negotiated.
Typically there is no financial advantage to canceling the lease. Actual figures are based on various factors
and must be determined on a case by case basis. |
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| Q: Can software be leased? |
| Yes. |
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| Q: What happens to the equipment at end-of-term? |
A: There are several options that the customer can choose at the end of their lease term, depending on the type of lease they selected.
If they have no further need for the equipment, they can return it to Lease Lender or exercise the end-of-term purchase option. |
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| Q: Can maintenance contracts an installation be included in the finance agreement? |
A: Yes, normally Lease Lender limits intangible item to not more than 20% of the total financed amount.
However, it is best to discuss any and all possible lease structures with your Lease Lender account executive. |
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| Q: What is FASB 13? |
A: Accounting rules set by the Financial Accounting Standards Board (FASB). Equipment leases that meet one or more of
the criteria are classified as a capital lease.
a) The lease transfers ownership of the property to the lessee by the end of the lease term.
b) The lease contains a bargain purchase option.
c) The lease term is equal to 75 percent or more of the estimated economic life of the leased property.
d) The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90 percent
of the excess of the fair value of the leased property.
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| Q: What is a bargain purchase option? |
A: A provision allowing the lessee, at his option, to purchase the leased property for a price which is sufficiently lower
than the expected fair market value of the property at the date the option becomes exercisable. |
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| Q: What is the estimated economic life of leased property? |
A: The estimated remaining period during which the property is expected to be economically usable by one or more users,
with normal repairs and maintenance, for the purpose for which it was intended at the inception of the lease, without
limitation by the lease term. |
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| Q: Can equipment be added to an existing lease? |
A: Yes. Provided the lessee has an acceptable payment history and there is no adverse change to their credit profile,
additional equipment can easily be added. Lease Lender offers a Master Lease Agreement, making add-ons as easy as preparing
a new lease schedule and attaching it to the original lease. |
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