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(844) 860-2288
$1.00 buyout lease is where the borrower makes payments on the equipment, and at the end of the lease term, purchases or buys the equipment for $1. The borrower doesn’t have ownership until the equipment is purchased at the end of the lease. Such lease is not reflected on the balance sheet.
100% prefunding is when the vendor is paid by the lessee before the equipment is shipped out.
Automated clearing house is an electronic funds network that clears and settles payments between borrowers and financial institutions. Borrowers are auto debited from their account and could also receive credits from a financial institution.
The acid-test ratio uses a company’s balance sheet data as an indicator if there are sufficient short-term assets in covering short-term liabilities.
Accrual basis is an accounting method of showing income and expenses that incurred but have not yet been paid on or received.
Accounts payable is an amount owed by a business to its creditors.
Accounts receivable is an amount owed by customers to a business.
Advanced payments that are made up-front, in equipment financing transaction this would classify as the first and last payment made to the lender.
Affidavit is a sworn statement made by a person before a licensed notary public.
Amortization is the process of reducing debt obligation through a set periodic payment structure, the debt payments typically include both an interest and principal.
Annual percentage rate or APR is expressed as a percentage that represents the yearly cost of funds over the term of financing, loan or income earned on an investment. The APR provides consumers the percentage number which could be compared with other rates from lenders.
Appraisal is the evaluation of the value for an item, property or an asset, such appraisal is typically conducted by a person with expertise to such asset.
Asset turnover ratio is a measure of the value of a company’s sales relative to the value of company’s assets. It is used as an indicator to evaluate if the company is using its assets wisely to generate revenue. If the business has a higher asset turnover ratio, it means that the business is more efficient in generating revenues. Creditfy does not discourage businesses in obtaining credit with low asset turnover ratio.
Balance sheet is a financial statement which reports company’s assets, liabilities and shareholders’ equity and at a specific point such as annual or quarterly. It is an essential financial statement that shows a snapshot of what the company owns and owes along with investment by its shareholders or business owners. With Creditfy you can obtain financing with no financial statements.
Balloon payment is a payment on a loan that is significantly large comparing to other payments made and is the final payment on a loan.
Base rent is rental that is paid during the base term of the lease.
Basis point is one-hundredth of a percentage point or .01%.
Break-even analysis is a calculation of the margin of safety for a company based on revenues and costs. Business owners use this calculation to determine if their sales would be sufficient to cover total fixed costs.
Bill of sale is a written document that records the transfer of ownership of an asset.
Broker acts an intermediary between the lessee and leasing company in the equipment financing industry. In the small business financing industry, a broker acts an intermediary between the borrower and lender.
Business cycle is a measurement by aggregate economic activity that company experiences throughout its life. A business could experience an expansion phase followed by contraction as well as a recession period when the output declines along with employment, sales and income.
Buyout is an amount that a lessee must pay to the lessor or lender to terminate a lease early. Creditfy specializes in buyout leases with other financial products to retain a piece of equipment with favorable terms.
Captive lessor is a leasing company that has been established by a manufacturer or dealer to offer equipment financing to their customers or lessees.
Capital equipment is an asset with acquisition cost that exceeds a certain or set amount. In order to be classified as capital equipment, the asset must have a lifespan of more than 1 year.
Capital Expenditures or CapEx are funds that a business uses to acquire assets, maintain property or invest into technology or equipment. Such expenditures help businesses to support their operations and Creditfy provides an array of financial products to help guide businesses with such funds.
Certificate of delivery and acceptance is a document that is signed by the lessee recording that the equipment to be leased out has been delivered and accepted.
Co-lessee is an additional person who becomes as a lessee to a lease with another owner or business. Both share equal liability by the lender.
Commencement is the start date of a lease.
Commitment fee is required by the lessor or lender at the time a commitment is offered to the prospect or borrower to lock the quoted rate.
Compound interest is the interest on a loan which is calculated on both the initial principal and the accumulated interest from previous periods, another way of describing this is “interest on interest”. Small businesses tap into credit cards that provide quick capital but do not keep in mind the compounding interest.
Cost of goods sold (COGS) or cost of sales is a calculation of measuring of the direct costs of producing the goods sold by a business. Part of the calculation, the amount includes the cost of materials that are used to make a good or product and labor. COGS do not include indirect expenses.
Credit reference is when banks and suppliers used in the lessee’s business are listed part of the funding process or application in order to provide stronger credit worthiness. Lenders may utilize such references to make their credit decision and verify payment history. Such action is typically performed when the funding amount is in excess of $150,000.
Credit score model or scoring is an underwriting method of quantifying credit worthiness for a borrower. The model assigns numerical value based on certain credit factors and set criteria.
Cross collateral agreement is a legal written contract that is used during a cross collateralization process. This agreement is used then the collateral for one dent is used as collateral for another debt.
Current ratio is a liquidity ratio which measures the businesses ability to pay its short-term debt obligations. The short-term period is measured and calculated within one year. It is also referred as the “working capital” ratio and helps lenders to determine if a business has an ability to cover short-term debt.
Default is when lessee or borrower does not meet its debt obligation to pay for a loan or equipment as well as not complying with financial agreement and terms of the lease. After default, the lessor could repossess the equipment and recover money for damages. Under loan products, the lender has the right to file a judgment against the borrower.
Depreciation is accounting method that determines the useful life of an equipment. The depreciation expense is equal to the difference of the initial cost of equipment and its estimated residual or salvage value. The depreciation is useful tool to deduct from income taxes each fiscal year which results in reduction of taxes.
Due diligence is a review or an audit to confirm that the facts. Part of the due diligence process, lenders examine financial records to determine if financing would be presented. During this process, lenders might ask for additional documents and question any discrepancies that a business might have.
Earnings before interest and taxes (EBIT) is a calculation to determine businesses profitability. EBIT can be calculated by revenue minus expenses excluding tax and any interest.
Earnings before interest, taxes and amortization (EBITA) is a calculation to determine businesses profitability mostly used by investors. This calculation provides a more accurate measurement of businesses real earnings, since it eliminates taxes that are owed, interest on debt along with the effects of amortization.
Earnings before interest, taxes and amortization (EBITA) is a calculation to determine businesses profitability mostly used by investors. This calculation provides a more accurate measurement of businesses real earnings, since it eliminates taxes that are owed, interest on debt along with the effects of amortization.
Economic recovery Tax Act (ERTA) is a law in reference to tax passed in 1981 that introduced ACRS.
Equipment finance agreement that is used for titled assets in the equipment financing industry.
Equity is referred to as shareholders equity or owner’s equity for private companies, which represents the amount of money that would be returned to company’s owners if all of the underlying assets were liquidated and company’s debt would be paid off.
Fair market value (FMV) is the price of equipment or vehicle that will sell for at a neutral sale from a willing seller and buyer.
Financial statements are written records that show the businesses activities and financial performance. The statements could be filed or audited tax returns, balance sheet, income statement or cash flow statement. Such documents are essential for businesses to have when applying for a loan.
Full payout lease is when the lessor recovers from one lessee all of the costs incurred in the lease as well as acceptable rate or return.
General ledger provides records of each transaction that occurred during the life of an operating company showing financial data with debits and credits validated by a trial balance. Such data is used to compile financial statements for a business.
Goodwill is an intangible asset and is reported when a business purchases another business. The intangible asset could include the following: proprietary technology, customer accounts, businesses brand name or other assets.
Gross income for a business which is calculated by sum of all revenue minus the businesses cost of goods sold (COGS). For an individual, it’s the total earnings before any taxes and deductions.
Guarantor is an individual who makes a promise to pay a borrower’s debt in the event of default or not meeting their obligation to pay. Someone who acts as a guarantor pledges their own assets as collateral to be used against the loan or debt.
Income statement is vital written record of financial performance for a business over a specific period. It is one of the three important financial statements; the others are balance sheet and cash flow statements.
Inflation is a measurement of the rate where the average price level of certain or selected goods and services increase over a period of time. It indicates a decline in the purchasing power of nation’s currency.
Insurance certification is required on equipment financing transaction on titled assets and all lease transactions of $250K or above, insurance certification could be subject to change depending on the asset and lender requirements.
Interest coverage ratio is calculated as debt ratio and profits used to determine how a business can pay its outstanding debt or interest. The ratio is calculated by dividing businesses earnings before interest and taxes (EBIT) during a specific period of time by the businesses interest payments due within the same period. Creditfy uses this ratio to evaluate businesses risk by evaluating current debt for borrowing capacity when revieing financial statements.
Interim funding is when a vendor requires a deposit before they submit an order for an asset or deliver the piece of equipment.
Inventory turnover is a ratio that shows how much a business has sold and replaced its inventory over a specific period.
Landlord waiver is a document which a landlord acknowledges that certain property rights on tenant’s premises is owned by a third party or lender. Part of the agreement, the landlord agrees not to interfere with lenders rights.
Lease agreement is a legal document, a contractual agreement between the lessor and the lessee or borrower and lender. The agreement sets terms and conditions of the lease that outlines rights by both parties.
A contract through where the owner of the equipment or lessor conveys the right to use such equipment to another party or lessee for a specific or set time (lease term) for specific periodic payments.
Lessee is the user of the equipment that is being financed.
The owner of equipment leased to a lessee or the lender under lease agreement.
Letter of credit is a letter that is issued from a financial institution or a bank guaranteeing that buyers’ payment to seller will be received within set time along with correct amount.
Level payments are equal periodic payments that are made over the term of a lease.
Liquidity ratio is a measurement to evaluate businesses ability to pay off its current debt obligations without raising outside or external capital.
Master lease is a document that allows a lessee to secure additional leased equipment under the same terms and conditions originally agreed with the lender. The master lease allows the lessee to execute a new contract without the need to renegotiate with the lender.
Merchant cash advance is known as credit card receivable funding that is used primarily for small businesses. MCA is determined based on credit card sales and is a fast method of securing fast business funding. Creditfy is a leading lender offering merchant cash advance up to $150,000 without any financials and greater amount with review of financials. Business that struggle with cash flow and cannot obtain traditional financing could consider this product for their working capital needs.
Municipal lease is a contract that is entered by a state or local municipal government.
Net income or net earnings is calculated by sales minus cost of goods sold (COGS), general and administrative expense, operating expenses, depreciation, interest, taxes. It is also referred to as net earnings. Creditfy funds business with strong net income as well as negative net income.
Net lease is a lease where all costs in connection with use of property are paid by the lessee separate from payments made to the lessor or the landlord. The expense that are paid separately are maintenance cost, insurance and property taxes.
Net present value is the total value of all future cash inflows as well as cash outflows from an investment, when discounted as a given rate.
Off-balance sheet equipment financing is not traditional type of financing, being an operating lease, the debt is not capitalized which improves the balance sheet ratios.
Operating income measures the revenue business earns minus operating expenses such as wages, depreciation and cost of goods sold (COGS).
Operating lease is a lease that has the characteristics of usage agreement and does not meet any of the criteria under FASB 13 for capital leases. The operating lease must have certain characteristics such as the lease term must be less than 75% of estimated economic life of the equipment and present value (PV) of lease payments is less than 90% of the assets fair market value (FMV).
Option to purchase is a right set by the lender to purchase property or equipment at a future date or as an option call to purchase. Purchase option in equipment financing refers to allow lessee to purchase the leased equipment at the end of the lease term for a fixed amount or at the future fair market value (FMV).
Overdraft occurs when the banking accounts balance reaches zero and the lender grants credit. The funds could be withdrawn from the bank even if there are insufficient funds in return for a fee. The typical fee for such grant is around $35.
Private label is an agreement with a third party or a broker in which the leasing company would fund a transaction while the third party or broker would maintain the relationship.
Promissory note is a written promise (issuer) to pay another party as agreed upon terms and conditions (payee). The note must contain the sum of money and a specified future date along with legal covenants. Creditfy refinances business promissory notes and helps business owners to cover their debt obligations. Businesses that do not have enough capital to purchase other businesses, take the remaining purchase amount in the form of a note with the seller.
Profit and loss statement is a critical financial statement that shows revenues, costs and expenses associated in operating the business during a specific period of time. This statement helps underwriters to evaluate the businesses ability to generate revenue and have an insight to costs.
Quick assets are assets that are owned by a business that could be easily converted into cash. Such assets are considered highly liquid assets.
Quick ratio is businesses short-term liquidity that measures the ability to meet short-term debt obligations with the most liquid assets.
Receivables turnover ratio is a measurement to see how effectively a business collects its receivables or AR. The ratio shows how a business manages the credit that is given to customers and how fast that short-term debt is received or paid back. Creditfy understands slow receivables and offer bridge financing along with a line of credit to provide a cushion for slow turnover ratio.
Renewal option in the lease agreement allows the lessee to extend lease terms for an additional period of time even after the expiration of the initial set lease terms, this is made in exchange for lease renewal payments.
Residual value is the value of an equipment at the conclusion of a lease.
Retained Earnings (RE) is an important indicator of showing the amount of net income that is left when a business repays its debt and any dividend to shareholders. Businesses can obtain financing with negative retained earnings as well as positive depending on businesses phase.
Return on Assets is a measurement of how profitable a business is to its total assets; the return is calculated as a percentage.
Return on equity is measurement of businesses financial performance and is calculated by dividing the net income by shareholders equity.
Safe harbor lease is a form of a lease that was introduced in 1981 and repealed by the Deficit Reduction Act of 1984.
Sale-leaseback is a transaction in equipment financing where the lessee sells the property or an asset to be leased to the lessor or lender, then lease the same asset or property and continue to use it. It is known to be complex with many equipment finance lenders and this type of transaction is highly contingent on the condition of the asset and type of the asset. Creditfy is an expert when it comes to sale-leaseback of construction, agriculture and manufacturing equipment.
Section 179 is a provision of the IRS tax code; it allows businesses to deduct the full purchase price of equipment that qualifies under the tax code or financed during the tax year. Rather than depreciate the equipment over the life of the asset, business owners could directly expense it against the income in order to avoid income taxes while boosting company’s assets.
Secured loan is a transaction where the borrower pledges collateral when securing financing, with the pledged collateral the transaction becomes a secured debt loan. This type of financing is traditional and carries risk of losing collateral versus unsecured loan. Creditfy provides both secured and unsecured business loans.
Security deposit in equipment financing is an amount that is paid to the lender in order to provide the lessor with extra protection against the risk of default or delayed payments. This option is used for risk reasons and could also be used to extend the lease term and lower interest rate.
Soft cost is associated with financing equipment, cost that are part of freight or shipment, installation of equipment or sales tax. Lenders have a cap on soft costs that could be covered part of equipment financing and typically are up to 15%, certain classes of equipment have coverage of 10% and are subject to lender approval.
Solvency ratio is metric used as a measurement to businesses ability to meet its debt obligations. This ratio is used by Creditfy to evaluate business in ensuring that there is sufficient cash flow to meet short-term debt as well as long-term liabilities.
Step-up or step-down is feature in equipment financing where a lease that contains a payment stream either increases (up) or decreases (down) in payment amounts over the lease term. This feature is tailored towards businesses that experience heavy seasonality or low cashflow months during the fiscal year.
Tax lease is a where the lessor takes the risk of ownership and is entitled to tax benefits which is determined by IRS pronouncements.
Short abbreviation for time in business.
True lease is a transaction which qualifies as a lease under the IRS code guidelines, the lessee could claim rental debt payments part of the tax deductions. The lessor could greatly benefit from tax advantages with a true lease.
Uniform commercial code provides lender with the right to claim their right and take priority of security interests. UCC filing depends on lenders and their credit risk requirements and would be filed as UCC-1 during the release of funds or later after funding took place. Lenders also file a UCC to avoid borrowers to obtain additional funds and become over leveraged with debt.
Unsecured loan is a loan that is issued to borrowers without any collateral. Creditfy provides unsecured loans to businesses that do not want to pledge any collateral along with weak credit score and poor cashflow.
Upgrade in reference to equipment financing is when lessee trades in equipment for a newer and more updated version during the life of the lease with the lender.
Useful life is a period of time when an asset will have economic value and would be considered as usable equipment. The economic life of the equipment dependents on the type of equipment and condition. In equipment financing the lease term cannot exceed 75% of expected useful life, exception could be made if the equipment is in a prime industry and is considered as hard class equipment.
Yield is the interest rate earned by lessor which is measured by rate at which the cash flow permits recovery of the investment.
Vendor is a purveyor of the equipment from whom a lessor purchases the piece of equipment at a set period or request of a lessee for a lease to the lessee.
W-2 is a document that employer must send to each employee under the IRS guidelines at the end of the year.
Waiver is a voluntary relinquishment of known rights that merchant is entitled to prior to financial transaction.
Working capital also known as net working capital (NWC), is a measurement of liquidity and is the difference between operating current assets and operating current liabilities. Creditfy suggest that businesses have sufficient working capital on hand to avoid current liabilities exceeding assets.
Year to date is a period of time that starts on the first day of the calendar year up to the current date.
We take no representation of the accuracy or validity of any and all of the information contained herein, any confirmation of the information should be sought from knowledgeable experts. If you have any questions, reach out to us directly. Prior to using such information for any specific purpose, please consult with your tax or financial advisor.