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These
are lending terms are commonly used within the leasing and financing
business.
Please note these terms have been simplified for purposes of
this glossary.
Ability to Lend
This is how able the lender is to help in your situation.
Ability
to Pay Back
This is often the most determinative factor in the decision to lend to
not to lend money.
Accounts
Listing of businesses or individuals that are now or in the past have
done business with you our your company.
Accounts
Receivable
Money that is due from customers carried as
"open book" accounts. Carried in the current-assets section
of the firm's balance sheet.
Amortization
The process of liquidating a debt through installment payments or
prorating expenditures over time in order to write them off.
Angel also known as Lending Angel or Private Investor
A private investor who often has non-monetary motives for
investing as well as the usual financial ones. See: http://allworldprivatefunding.com
Asset Based Financing
Financing of an enterprise by using its hard assets for collateral
to acquire a loan of sufficient size with which to finance operations.
Widely used in leveraged buyouts.
Authority or Agency
A state or local unit of government created to perform a single
activity or a limited group of functions and authorized by the state
legislature to issue bonded debt.
Average Life
The average length of time an issue of serial bonds and/or term bonds
with mandatory sinking funds and/or estimated prepayments is expected
to be outstanding. It also can be the average maturity of a bond
portfolio.
Balance Sheet
An accounting statement showing the financial condition of a
company at a point in time; present assets, liabilities and net worth.
Basic equations: assets, liabilities, and net worth.
Bargain Purchase
A lease provision allowing the lessee, at its option, to purchase the
equipment for a price predetermined at lease inception, that is
substantially lower than the expected fair market value at the date
the option can be exercised.
Basis Point
One one-hundredth of a percent. Used when quoting interest.
Boiler Plate
Legal clauses routinely included in all contracts that, while
important, have little to do with the actual substance of the
contract.
Bridge Loan
Short-term, temporary financing used until permanent financing can
be secured.
Capital
A term commonly used as a synonym for cash. Goods: material assets,
equipment, machinery or tools. Funds: cash assets.
Capital Expenditure
Money spent for the purchase or expansion of plant or equipment.
Capital Lease
A type of lease classified and accounted for by a lessee as a purchase
and by the lessor as a sale or financing, provided it meets any one of
the following criteria; (a) the lessor transfers ownership to the
lessee at the end of the lease term; (b) the lease contains an option
to purchase the asset at a bargain price; (c) the lease term is equal
to 75% or more of the estimated economic life of the property
(exceptions for used property leased toward the end of its useful
life); or (d) the present value of minimum lease rental payments is
equal to 90 percent or more of the fair market value of the leased
asset less related investment tax credits retained by the lessor.
(Also see Finance Lease.)
Cash Flow
This describes the amount of dollars in and out of a business or
project during a stated period of time. From a credit perspective,
cash flow is a critical indicator how well a company can meet its
immediate payment obligations. Cash flow can be negative or positive.
Certificates of Participation also known as COPs
A form of lease revenue bond that permits the investor to participate
in a stream of lease payments, installment payments or loan payments
relating to the acquisition or construction of specific equipment,
land or facilities. In theory the certificate holder could foreclose
on the equipment or facility financed in the event of default, but so
far no investor has ended up owning a piece of a school house or a
storm drainage system. A very popular financing device because COP
issuance does not require voter approval. COPs are not viewed legally
as "debt" because payment is tied to an annual appropriation
by the government body. As a result, COPs are seen by investors as
providing weaker security and often carry ratings that are a notch or
two below an agency's general obligation rating.
Closed-End Lease
Commonly found in auto leasing, this is a true lease in which the
lessor assumes the depreciation risk. The lessee bears no obligation
at the end of the lease. This term is used to distinguish the lease
from an open-end lease.
Closely Held Corporation
A corporation owned by a few individuals, who also own all the stock.
No stock in the corporation is publicly traded. State regulations
administer the establishment of corporations.
Collateral
The asset(s), such as real property or an automobile, which is offered
as security for a loan.
In other words, if the loan is not paid, the collateral is taken by
the lender in default.
Commercial Loan
This is a formal agreement in which a lender provides a borrower with
funds for a stated purpose, and which is backed by the full faith and
credit of the borrower. Loans may be secured by the particular asset
being purchased, and/or with additional assets of the company (i.e.,
accounts receivables, property, other tangible assets, etc.).
Company Sponsored Foundation (Corporate Foundation)
These
are private foundations whose assets are come from contributions of a
for-profit business. They are independent organizations with its own
endowment and is subject to the same rules and regulations as other
private foundations, in spite of close ties with its parent company,
it. See also private foundation.
Conditional Sales Agreement
An agreement for the purchase of an asset in which the borrower is
treated as the owner of the asset for federal income tax purposes
(thereby being entitled to the tax benefits of ownership, such as
depreciation), but does not become the legal owner of the asset until
the terms and conditions of the agreement have been satisfied. Also
known as a security agreement.
Convertible Bonds
Bonds that may be exchanged for other securities of the corporation,
usually common stock. The buyer of a convertible bond or preferred
stock has the security of the promised interest or preferred dividend
yet can enjoy profits from the rise in price of the stock into which
the convertible security can be converted once that stock's price
exceeds the stipulated conversion price.
Covenant
A legally binding commitment by the issuer of municipal bonds to the
bondholder. An impairment of a covenant can lead to a Technical
Default.
Current Assets
Cash or property that can be converted to cash in a short period of
time; usually accounts receivable, inventory and short-term notes
receivable.
Debenture
A company's long term IOU (bond) backed by the general credit of the
firm, rather than by a lien on any specific asset.
Debt Service
The money needed to pay the amount due on a loan.
Debt Service Reserve Fund
A bank trustee account established by the trust indenture and used as
a backup security for an issuer's obligations. It usually amounts to
one year's debt service, and can be drawn on by the Trustee in the
event of an impairment of the Trust indenture.
Demand Deposit
Money placed with a financial institution that must be returned upon
demand by its owner; checking account is the most common form.
Denomination
The face or par amount - nominally $1000 or $5000 but can be $100,000
or more in the case of a note - that the issuer promises to pay at a
specific bond or note maturity.
Depreciation
The process of allocating the actual cost of a tangible fixed asset,
less salvage value, over its estimated useful life in a rational and
systematic manner. Land cannot be depreciated.
ESPC (Energy Service Performance Contracts)
An agreement with a private energy service company (ESCO). The ESCO
will identify and evaluate energy-saving opportunities and then
recommend a package of improvements to be paid for through savings.
ESPCs come in many variations. In general, performance contracts
contain three component parts: (a) a project development agreement,
(b) an energy services agreement, and (c) a financing agreement.
Performance contracts come in many varieties and may differ greatly in
their content and coverage.
Equity
Total assets minus total liabilities equals equity or net worth.
Raising equity capital implies ownership.
Escrow
Placing money in a special and separate account under the control of
another party, usually a financial institution, to be held until the
completion of conditions set forth in an agreement.
Evergreen Lease
This is a lease that automatically renews itself each year unless the
lessee gives notice of its termination within a specified period of
time.
Factor
Financial institution that buys accounts receivables from a firm and
bills customers directly, in contrast to a bank that only lends on
accounts receivable.
Factoring
(1) the selling of accounts receivable; (2) selling invoices at a
discount.
FASB 13
Statement issued by the Financial Accounting Standards Board
establishing financial accounting standards for reporting leases for
both lessees and lessors.
Fair Market Value Purchase Option
An option to purchase leased property at the end of the lease term
at its then fair market value. The lessor does not have the ability to
retain title to the equipment if the lessee chooses to exercise the
purchase option.
Finance Lease (Lease/purchase)
A rental agreement backed by the full faith and credit of the
lessee ("borrower"). Typically, a finance lease is a
full-payout, non-cancelable agreement, and the lessee is responsible
for maintenance, taxes, and insurance. Finance leases are easily
recognized by their "bargain purchase options" (typically
$1.00) which may be exercised by the lessee at the end of the lease
term.
Financial Accounting Standards Board (FASB)
A seven-member organization which was established by the accounting
profession to establish accounting principles which represent
generally accepted reporting practices.
Financial Advisor
Generally an investment-banking company, independent consulting
firm or bank that advises the issuer on all financial matters
pertaining to a proposed issue and is not part of the underwriting
syndicate.
Financial Statements
Periodic accounting reports of a company's activities. Usually
includes balance sheet, income statement, accountant's cover letter,
changes in cash flow and notes.
Fixed Asset
Property with relatively long life, such as land, buildings and
equipment.
Full Payout Lease
A lease in which the lessor recovers, through the lease payments, all
costs incurred in the lease, plus an acceptable rate of return,
without any reliance on the leased equipment's future residual value.
(see Capital Lease)
Government Accounting Standards Board (GASB)
GASB was organized in 1984 by the Financial Accounting Foundation (FAF)
to establish standards of financial accounting and reporting for state
and local governmental entities. GASB standards guide the preparation
of external financial reports of those entities.
General Obligation Bonds
A bond secured by a pledge of the issuer's taxing powers (limited or
unlimited). More commonly the general obligation bonds of local
governments are paid from ad valorem property taxes and other general
revenues. Considered the most secure of all municipal debt.
Goodwill
The difference between the market value of a firm and the market
value of its net tangible assets.
Guaranteed Savings Agreement
This agreement combines the lower rates usually found with
conventional financing agreements backed by the full faith and credit
of the borrower (i.e., a lease or loan) with equipment performance
guarantees. The guarantees may be provided by either the installing
company and/or an insurance policy may be issued by an insurance
company. This may be a cost effective alternative to true Shared
Savings Agreements, and is available for larger transactions.
Hard Assets
Assets with liquidating value, such as equipment and machinery.
"Hell or High Water" Clause
Phrase common within the lending industry used to underscore the
unconditional repayments of any financing agreement by the borrower,
regardless of outside influences, acts of God, performance of
equipment, etc.
Holding Company
A corporation that owns either a controlling interest in another
company or all of its shares. The accounts of a wholly-owned
subsidiary may be consolidated with those of the parent company.
Normally a company whose main assets are securities in other
companies.
Income Statement
A financial statement that shows the amount of income earned by a
business over a specific accounting period. All costs (expenses) are
subtracted from the gross revenues (sales) to determine net income,
which outlines the profit-and-loss financial statement (P & L).
Incremental Borrowing Rate
Is the interest rate that, at the inception of the lease, the
lessee would have incurred to borrow the funds necessary to purchase
the leased asset over a similar term. Used when determining whether a
lease qualifies as an operating or capital lease.
Internal Rate of Return
The discount rate that equates the net present value of cash
inflows and outflows to zero.
Initial Public Offering (IPO)
A company's first registration and sale of stock to the public.
The reasons for an IPO are: 1) to provide an opportunity for existing
investors to turn a profit, since for the first time their shares will
be given a market value reflecting the expectations for the company's
future growth, and, 2)to potentially raise significant amounts of
capital to fuel the planned and/or continued growth of the privately
held company.
Interest
Is the cost of using money expressed as a rate over a period of
time. Care should be taken when comparing rates, as there are many
different types of interest including simple, compounded, discounted,
implicit, stream (running rate), etc.
Internal Rate of Return
The average annual yield earned by investment during the period
held. It is the rate that adjusts the value of future energy
savings generated by the equipment (“cash inflow”) is equal to the
original installed equipment cost (“cash outflow”). This is
commonly used as a decision making tool when prioritizing competing
investments.
Investment Banker
Serves as a middleman between the supplies of capital and the
users of capital; also known as an underwriter.
Issuer
A state or local unit of government that borrows money through the
sale of bonds and/or notes.
Investment Grade
Bond issues that the three major bond rating agencies, Moody's,
Standard & Poor's, and Fitch rate BBB or Baa or better. Many
fiduciaries, trustees, some mutual fund managers can only invest in
securities with an investment grade rating. See "Ratings."
Junk Bonds
Bonds of a speculative grade which represent a higher risk to
investors but offer the opportunity for higher interest. Looked upon
as undervalued assets and used as money source in takeover attempts.
Leveraged Buyout also known as LBO
The purchase of a company financed by borrowing on its assets.
Lease
A contract in which one party conveys the use of an asset to
another party for a specific period of time at a predetermined rate.
Leasehold Improvement
An improvement to leased property, considered an intangible asset
to the lessee, that becomes the property of the lessor at the end of
the lease.
Lease Financing
Financing the acquisition of plant or equipment by leasing it
rather than buying it.
Lease-Rental Bond
Bonds whose principal and interest are payable exclusively from
rental payments from a lessee. Rental payments are often derived from
earnings of an enterprise that may be operated by the lessee or the
lessor. Rental payments may also be derived from taxes levied by the
lessee. Also see Certificates of Participation.
Lease Rate Factor
The percentage of the equipment cost that will be paid every
period (monthly, quarterly, etc.) during the base term of the lease.
Letter of Credit
A bank's written guarantee of funds available of drafts written on
it.
Leverage
An activity that borrows funds at a specified interest rate with
the expectation of using these funds to earn a higher rate of return
for the benefit of the enterprise.
LIBOR
LIBOR is an abbreviation for "London Interbank Offered
Rate," and is the interest rate offered by a specific group of
London banks for U.S. dollar deposits of a stated maturity. LIBOR is
used as a base index for setting rates of some adjustable rate
financial instruments.
Line of Credit
Short-term financing usually granted by a bank up to a
predetermined limit; debtor borrows as needed up to the limit of
credit without need to renegotiate the loan.
Legal Opinion
A written opinion from counsel that an issue of bonds and/or
leases was duly authorized and issued. The opinion usually includes
the statement, "interest received thereon is exempt from federal
taxes and, in certain circumstances, from state and local taxes."
Leveraged Lease
A lease agreement that involves at lest three parties: a lessor, a
lessee and a funding source. The lessor (owner) purchases the
equipment by making an equity investment and then finances the
remaining balance by issuing non-recourse note(s) to the lender(s).
Limited Partnership
Form of partnership composed of both a general partner(s) and a
limited partner(s); the limited partners have no control in the
management of the company and are usually financially liable only to
the extent of their investment in the partnership.
Master Lease
A contract where the lessee leases currently needed assets and is
able to acquire other assets under the same basic terms and conditions
without negotiating a new contract. Master Leases can include
operating, capital, true or tax exempt municipal leases.
Merchant Wholesaler
Wholesaler who takes title to goods he/she buys for resale to
institutions that intend to either resell the goods as they are or
process them in some way for resale.
Mortgage
A loan secured by a conveyance of an interest in real property as
security for the repayment of money borrowed. A second mortgage holder
is more at risk than a first mortgage holder because, should the
borrower default on the loan, the second mortgage holder must buy out
the first mortgage holder or forfeit their secured position.
Municipal Bonds
Debt obligations of states, cities, counties or statutory
authorities. Often called "tax exempts" because they are
free from federal income tax and usually free from state income taxes
in the state where issued.
Municipal Lease
A conditional sales contract in the form of a lease and available
only to municipalities, states, counties and certain special
authorities. Because the interest earnings are tax exempt to the
lessor, rates on Municipal Leases are lower than conventional
commercial lease rates. This lease structure can direct operating
funds into capital purchases and is an excellent financing alternative
to floating a bond issue to pay for a particular project. Unlike a
conventional lease (which is non-cancelable for the lease term), a
Municipal Lease typically allows the Municipality to return the leased
asset to the lessor without penalty prior to the end of the lease term
should funding become unavailable (non-appropriations clause).
Municipal Futures
A municipal index futures contract that has been traded at the
Chicago Board of Trade since June 11, 1985. The futures contract is
based on an index, known as The Bond Buyer Municipal Bond Index,
composed of 40 bonds which are priced at the close of trading each
day. This is no market for amateur speculators; it is used primarily
by professional money managers to hedge their municipal portfolios.
Net Present Value
The value in current (today’s) dollars of future cash flows. In
order to make this calculation, an interest rate must be identified.
Usually, this interest rate is the organization’s opportunity cost;
in other words, the expected return if these funds could be invested
in an alternative project or investment.
Net Lease
A lease in which all costs in connection with the use of the
equipment, such as maintenance, insurance and property taxes, are paid
for separately by the lessee and not included in the lease rental paid
to the lessor.
Open-End Lease
(See also Closed-End Lease.) A lease which provides the provision
for extending the lease on predetermined terms after a set period of
time.
Operating Lease
Any lease which is not a capital lease. From a financial reporting
perspective, it is a lease that has the characteristics of a rental
agreement and also meets certain criteria established by the FASB.
Such a lease is not required to be shown on the balance sheet of the
lessee. The term is also used to refer to leases in which the lessor
has taken a significant residual position in the lease pricing and,
therefore, must salvage the equipment for a certain value at the end
of the lease term in order to earn its rate of return.
Operating Foundation
A
501(c)(3) organization classified by the IRS as a private foundation
whose primary purpose is to conduct research, social welfare, or other
programs as determined by its charter or governing body. Most of the
foundation funds are used for the foundation's own programs. Operating
foundations may award grants, however the amount of the grants is
generally small.
Original
Issue Discount
Some maturities of a new bond issue that
have an offering price substantially below par; the appreciation from
the original price to par over the life of the bonds is treated as
tax-exempt income and is not subject to capital gains tax.
Partnership
Business association of two or more people. There are two types of
partnerships, the general and the limited partnership.
Par Value
The face value or principal amount of a bond, usually $5,000 due
the holder at maturity. It has no relation to the market value. For
pricing purposes it is considered 100.
Payments in Arrears
A payment stream in which each payment is due at the end of each
period during a lease or loan period.
Performance Contracts
(See shared savings agreements).
Personal Financial Statements
Individual's balance sheet and tax returns for three years.
(Sometimes required by prospective investors/lenders of the
founders/managers of the start-up or closely held businesses.)
Positive Cash Flow
Cash flow is the total money received and paid out by a company
during a specific period of time. A company's cash flow is positive
when the money received (deposited or saved) exceeds the money paid
out or expensed.
Preferred Stock
A corporate security that has preference over common stock in
receiving dividends and as to assets. Its dividend is usually stated
as a fixed percentage of par value or as a stipulated sum each year,
but the company has no legal liability to pay it if the company has
not earned the money to pay it. Cumulative: if the dividend is not
paid when due, it accumulates as a backlog that must be paid before
common stockholders receive dividends. Noncumulative: if the dividend
is missed, it is not required to be paid at a later time.
Participating: can enjoy additional dividends after the common
stockholders are paid a stated amount. Nonparticipating: cannot
receive any dividends other than the fixed amount offered. Voting: has
voting privileges.
Prime Rate
The interest rate that banks lend to their best customers. This
rate is determined by the banks themselves and is published in
financial periodicals.
Private Deals
These
are deals or loans made outside the normal processes, usually by
individuals to small businesses or other individuals, even family
members. See http://allworldprivatefunding.com
Private
Foundation
These
are nongovernmental, nonprofit organizations with funds usually
provided by a single source (such as an individual, family, or
corporation). Their programs are managed by its own trustees or
directors. Private foundations maintain or aid social,
educational, religious, or other charitable activities serving the
common welfare, primarily through the making of grants.
Privately
Held
Describes a corporation which
does not offer shares to the public. It does not have to publish an
annual report or comply with SEC regulations. (There are some
exceptions.)
Private
Loans
These
are loans usually made by individuals instead of public companies. See
http://allwordlprivatefunding.com
Public
Charity
These
are nonprofit
organizations that qualifies for tax-exempt status under section
501(c)(3) of the IRS code and are the recipients of most foundation
and corporate grants. Some public charities also make grants.
Purchase Option
A provision by which a lessee has the right to purchase the
equipment at the end of the lease. The purchase option may be stated
as a specific dollar amount or at fair market value.
Ratings
Various alphabetical and numerical designations used by
institutional investors, Wall Street underwriters, and commercial
rating companies to give relative indications of bond and note
creditworthiness. Standard & Poor's and Fitch Investors Service
Inc. use the same system, starting with their highest rating of AAA,
AA, A, BBB, BB, B, CCC, CC, C, and D for default. Moody's Investors
Services uses Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C, and D . Each of the
services use + or - or +1 to indicate half steps in between. The top
four grades are considered Investment Grade Ratings.
Residual Value
The value of an asset at the conclusion of a lease.
Return on Investment also known as ROI
The return per dollar of investment used to measure the efficiency
with which capital resources are employed.
Revenue Bonds
Revenue bonds are issued to finance a specific revenue generating
project. Revenue bonds may be backed by an insurer but are typically
secured solely by the revenue generated through the project for which
they are issued. For instance, a bond could be issued to retrofit an
old building with new energy saving technologies such as windows,
lights, or heating systems. Energy cost savings would then be used to
pay back the bond issue. However, if the bond was not insured and
energy savings were not realized the bond would default.
Revolving Line of Credit also known as Revolvers
a loan in which the amount of the money borrowed is constantly
changing due to the repayment and re-borrowing of the monies. A
working capital credit line or credit card are examples of a revolving
loans. While "revolvers" are normally open for one year,
they are demand loans and may be "called" at any time during
the loan period by giving the borrower notice.
RFP
An
acronym for Request for Proposal. RFPs is part of a common bidding
process in the public sector and for large projects. They normally
list the project specifications and procedures, and are issued to
agencies or organizations that might be qualified to participate.
Sale
and Leaseback
An arrangement where equipment
is purchased by a lessor from the company owning and using it. The
lessor then becomes the owner and leases it back to the original
owner, who continues to use the equipment.
Share of Stock
A unit of ownership in a corporation, which can be held privately
or publicly.
Short-term Debt
Loans that are to be repaid within one year.
Shared Savings Agreement
The installing company/finance source installs the equipment and
receives payments from the end-user/host company based on the energy
savings produced by the equipment. There are two types of agreements,
"fixed" and ."true" shared savings contracts.
"Fixed" shared savings contracts define the savings based on
engineering studies or one-time verifications of savings at the time
of project completion and the savings-based payment is not subject to
change following project acceptance by the customer. "True"
shared savings contracts require the savings be verified periodically
and the saving-based payment is subject to change. Shared Savings
Agreements are considered by many to be "off balance sheet
financing".
Simple Payback
The time required to recover the capital investment out of the savings
of the installed energy efficiency equipment. It does not take
into consideration any savings beyond the payback period; therefore it
tends to penalize long life projects and favor projects that offer
high savings over a short time. It is commonly used when funds
are limited.
Sinking Fund
Money set aside on a periodic basis to retire term bonds at or prior
to maturity.
Sole Proprietorship
A business firm owned by only one person and operated for his/her
profit.
Stipulated Savings
Energy savings values which are stipulated based on engineering
calculations using typical equipment characteristics and operating
schedules developed for particular applications, without on-site
testing or metering. This may be a cost effective approach for
lighting efficiency and controls projects. Also know as "deemed
savings."
Stream Rate (Interest)
A stream rate, also known as the running rate of interest, may be
quoted on leasing transactions. It reflects only the payment
stream and excludes the cost of the purchase option at term-end, so it
will usually be lower than the APR. This is not an incorrect rate, but
it may be misleading when comparing it with an APR.
Subordinated Debt
Debt whose claims on assets are somehow inferior to the claims of
another class of debt. The superior debt has first claim to the assets
used as collateral for the debt, e.g., a second mortgage on a home
gets nothing until the first mortgage has been fully satisfied in case
of default.
Super ESPC
To streamline the procurement process, the U. S. Department of
Energy's Federal Energy Management Program (FEMP) awarded
indefinite-delivery, indefinite-quantity (IDIQ) contracts — the
Super ESPCs — to a number of energy service companies (ESCOs). These
competitive awards were made in compliance with all applicable Federal
Acquisition Regulations (FAR) requirements.
There are two types of Super ESPCs: Regional, "all-purpose"
Super ESPCs and Technology-Specific Super ESPCs. Regional Super ESPCs
are intended for implementing a wide range of technologies. And the
Technology-Specific ESPCs give Federal agencies access to new or
emerging technologies that are not yet fully established in the
marketplace but have outstanding potential for saving energy and money
at Federal sites."
Synthetic Operating Lease
A lease agreement that qualifies as a leasing transaction for purposes
of financial reporting and as a secured financing for purposes of
income tax reporting. These leases are structured to pass FASB 13
tests for operating leases and are sometimes used for equipment which
might not normally hold a high residual value necessary for
traditional FASB 13 operating leases (e.g., lighting, HVAC, etc.).
Tax Exempt Energy Service Agreement
Similar to the Energy Service Agreement above (see Performance
Contracts section), this fixed payment shared savings agreement can
combine the rate benefits of a tax exempt financing vehicle with the
marketing advantages of a shared savings agreement, and may be popular
with schools.
Tax Lease / True Lease
A lease where the lessor can claim tax incentives of ownership and
the lessee can claim rental payments as tax deductions. Because the
final decision to purchase the leased equipment is deferred until the
end of the lease contract (at its then "fair market value"),
monthly rental payments are usually expensed for tax purposes.
Term Loan
A loan which is repaid over a predetermined period of time longer
than one year. Rates may be floating or fixed.
Time Value of Money
All money commands interest, either imputed or explicit.
Interest costs are a function of the interest rate and the time for
which the money is being "rented" (used). Thus, time
costs money.
TRAC Lease
This is a tax-oriented lease of titled motor vehicles or trailers
that contains a terminal rental adjustment clause (fixed purchase
amount) and otherwise complies with the requirements of a true lease.
Undercapitalization
Starting a new enterprise with too little money to carry it
through the beginning stages of development.
Trustee
A bank designated as the custodian of funds and official
representative of bondholders or lessor. Trustees are appointed to
insure compliance with the trust indenture and represents bondholders
or lessors to enforce their contract with the issuer.
Unsecured Bonds
Debt bonds issued on the general credit of a company.
Unsecured Loan
Loan granted solely on the strength of the maker's signature.
Venture Capitalist
An investor who provides early financing to new ventures--often
technology-based--with an innovative product and the prospect of rapid
and profitable growth.
Warrant
An option to buy a certain amount of stock for a stipulated price that
is transferable--it can be traded.
Working Capital
The amount of funds available to pay short-term expenses. Seen as
a cushion to meet unexpected or out-of-the-ordinary expenses. It is
determined by subtracting current liabilities from current assets.
Yield
The interest rate earned by the lessor or equity party in a lease.
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