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Glossary
AACFB
American Association of Commercial Finance Brokers. An industry association for commercial finance brokers.
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Glossary
Accelerated Depreciation
Any depreciation method that front-loads deductions in early years vs straight-line.
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Glossary
ADS
Alternative Depreciation System. A slower depreciation method required in certain situations.
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Glossary
Advance Rate
The percentage of an asset's value that a lender will finance.
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Glossary
Alternate Data Underwriting
Underwriting that uses non-traditional data sources (bank statements, business cash flow, etc.) rather than relying solely on credit-bureau data.
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Glossary
Amortization
The process of paying down a loan via regular payments that cover both principal and interest.
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Glossary
APR
Annual Percentage Rate. The yearly cost of borrowing expressed as a percentage, including interest plus most fees.
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Glossary
ASC 842
The current US GAAP standard requiring all leases over 12 months to appear on the lessee's balance sheet.
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B
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Glossary
Balloon Payment
A large lump-sum payment at the end of a loan term, with smaller payments throughout the term.
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Glossary
Beneficial Owner
A natural person who owns 25% or more of a business entity (or has significant control). Required to be identified under Patriot Act KYC…
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Glossary
BHPH
Buy-Here-Pay-Here. A used-vehicle dealer that finances customers directly, typically for sub-prime credit.
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Glossary
Bonus Depreciation
A first-year depreciation deduction in addition to Section 179, applied to qualifying new and used equipment.
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Glossary
Bookout
A lender's confirmation document showing the actual equipment values from a recognized valuation source.
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C
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Glossary
Capital Lease
The older accounting term for what is now called a finance lease under ASC 842.
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Glossary
Captive Lender
An OEM's in-house finance arm. Finances the parent manufacturer's equipment exclusively or primarily.
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Glossary
CDC
Certified Development Company. A non-profit that originates the SBA-guaranteed portion of SBA 504 loans.
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Glossary
CDFI
Community Development Financial Institution. A mission-driven lender certified by the Treasury Department to serve underserved markets.
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Glossary
Co-Borrower
A second person whose name appears on the loan as a borrower, sharing liability with the primary borrower.
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Glossary
Co-Signer
A person who signs a loan agreeing to pay if the primary borrower fails. Does not have ownership of the equipment.
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Glossary
Conditional Sales Agreement
A financing structure where title transfers only when the buyer completes payment. Functionally a loan with a built-in lien.
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Glossary
Cosmetic Damage
Equipment damage that doesn't affect function but reduces resale value. Common consideration in used-equipment valuation.
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Glossary
Cost Basis
The amount you paid for equipment, plus capitalized costs like delivery and installation, used to calculate depreciation.
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Glossary
Credit Tier
A category lenders use to bucket borrowers by credit profile, typically based on FICO score.
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Glossary
Cross-Collateral
A lending arrangement where collateral for one loan also secures another loan with the same lender.
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D
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Glossary
Deferred Payment
A loan structure where the first payment is delayed (typically 30-90 days) after equipment delivery.
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Glossary
Doc Fee
A documentation fee charged at closing to cover paperwork and processing.
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Glossary
DocuSign
The most widely-used electronic signature platform for commercial transactions, including equipment finance closings.
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Glossary
Dun & Bradstreet
Dun & Bradstreet (D&B). A business credit-bureau and analytics company. Issues DUNS numbers and Paydex scores.
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Glossary
DUNS Number
A unique 9-digit identifier issued by Dun & Bradstreet, used to track business credit history.
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Glossary
E-Sign Act
Federal law (Electronic Signatures in Global and National Commerce Act) recognizing electronic signatures as legally valid.
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Glossary
Effective APR
The true annual cost of borrowing including compounding effects; for monthly equipment loans, very close to nominal APR.
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ELFA
Equipment Leasing and Finance Association. The largest industry association for equipment leasing and finance companies.
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Glossary
Equipment Appraisal
A formal valuation of equipment by a qualified appraiser, used for financing, insurance, or sale purposes.
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Equipment Financing Agreement (EFA)
A loan-like instrument secured by the equipment, structured as a finance lease for accounting but functionally identical to a loan.
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Glossary
Equipment Loan
A standard installment loan to purchase equipment, secured by the equipment itself.
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Glossary
FICO Score
A three-digit credit score (300-850) from Fair Isaac Corporation, used by most lenders to assess credit risk.
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Glossary
Finance Lease
A lease that economically transfers ownership to the lessee (e.g., $1 buyout), treated as a purchase for tax and accounting.
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Glossary
First Payment Default
When a borrower fails to make their first scheduled payment after equipment funding. A serious default category in lender risk models.
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First-Position Lien
A senior secured claim on collateral. First-position lender gets paid before all junior lien holders in a default.
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Glossary
FMV
The price equipment would sell for in an arms-length transaction; in leasing, the residual price to buy out an FMV lease.
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Glossary
FMV Lease
A true lease where the lessee can purchase at fair market value or return at term-end. Lowest monthly payment.
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Glossary
FTC Endorsement Guides
FTC rules requiring honest disclosure of paid endorsements, partnerships, and material connections.
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Glossary
Independent Broker
A finance company or broker that originates equipment loans across multiple lenders, not owned by an OEM.
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Glossary
Iron Solutions
A market-data and valuation service for construction, agricultural, and industrial equipment. Now owned by Ritchie Bros.
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L
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Glossary
Lien Release
Documentation that a lender's security interest in collateral has been satisfied and removed.
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Lien Search
A check of public records to identify any existing liens on a piece of equipment or against a borrower.
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Glossary
Loan to Value
The ratio of loan amount to equipment value. Inverse of advance rate.
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M
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Glossary
MACRS
Modified Accelerated Cost Recovery System. The IRS depreciation system for most business equipment.
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Glossary
Marketplace Lender
A platform that connects borrowers with multiple lenders via an online marketplace.
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Glossary
Mascus
A global online marketplace and data provider for commercial equipment sales, valuations, and auction listings.
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Glossary
Master Lease Agreement
A framework agreement that allows a lessee to lease multiple pieces of equipment under the same terms over time.
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Glossary
Mechanic's Lien
A lien filed by a service provider (mechanic, repair shop) on equipment they worked on, for unpaid bills.
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Glossary
NADA Equipment Value
NADA Guides equipment valuation books. Industry-standard reference for vehicles, trucks, RVs, marine, and powersports equipment values.
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NAICS Code
North American Industry Classification System code. A 6-digit code identifying a business's primary industry.
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NEFA
National Equipment Finance Association. An industry association for equipment finance brokers and lenders.
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Glossary
No-PG Financing
Equipment financing without a personal guarantee from the business owner.
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Non-Recourse Financing
Financing where the lender cannot pursue the borrower personally for any deficiency after collateral sale.
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O
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Glossary
OEM
Original Equipment Manufacturer. The company that manufactures the equipment, often with its own captive finance arm.
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Glossary
Operating Lease
A lease that does not transfer ownership risks/rewards. Off-balance-sheet under pre-ASC 842 accounting.
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Origination Fee
A one-time fee charged at loan closing, typically 1-3% of the loan amount.
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Glossary
Originator
The lender that originally creates a loan. May or may not be the company that services the loan over its life.
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P
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Glossary
Patriot Act Verification
Federal law requiring financial institutions to verify customer identity (KYC) to prevent money laundering and terrorism financing.
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Glossary
PAYDEX Score
A business credit score from Dun & Bradstreet (1-100) measuring payment history with vendors.
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Personal Guarantee
A signed promise by a business owner to personally repay a business loan if the business defaults.
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Glossary
Pre-Funding Inspection
A pre-closing inspection of equipment ordered by the lender to verify condition, value, and matches to the financing application.
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Glossary
Recourse Financing
Financing where the lender can pursue the borrower for any deficiency after collateral is repossessed and sold.
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Glossary
Recovery Period
The number of years over which MACRS depreciates an equipment class.
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Remarketing
The process of selling repossessed or off-lease equipment to recover lender losses.
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Residual Value
The projected value of equipment at the end of a lease term, used to calculate lease payments.
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Glossary
Ritchie Bros. Auction
The largest commercial equipment auctioneer in North America. Auction results are a primary data source for equipment valuation.
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Glossary
Salvage Value
The estimated value of equipment at the end of its useful life, used in some depreciation methods.
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SBA 504
An SBA loan program designed for fixed assets (real estate, large equipment), structured through a CDC.
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Glossary
SBA 7(a)
The SBA's flagship loan program, partially guaranteed by the SBA, used for many business purposes including equipment.
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SBA Express
A streamlined SBA 7(a) loan program with smaller maximum amount but faster turnaround.
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SBA Guarantee
A federal guarantee on a portion of an SBA-eligible loan, reducing lender risk and making the loan available to small businesses that might not…
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Glossary
Seasonal Payment
A loan structure with reduced or skipped payments during defined off-season months.
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Glossary
Section 179
IRS code section allowing immediate expensing of qualifying equipment purchases up to an annual limit.
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Glossary
Servicer
The company that handles ongoing administration of a loan: payments, statements, customer service.
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SIC Code
Standard Industrial Classification code. A 4-digit predecessor to NAICS, still used in some lending systems.
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Skip Payment
A loan feature allowing one or more skipped payments per year, with the term extending to accommodate.
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Soft Costs
Non-equipment costs of acquisition: delivery, installation, training, sales tax. Often financed alongside the equipment.
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Soft Pull
A credit check that does not affect your credit score and does not show as a hard inquiry on your report.
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Glossary
Spindle Hours
Total runtime of a CNC machine's cutting spindle. A primary wear indicator for CNC equipment valuation.
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Step Payment
A loan structure with payments that increase (or decrease) on a defined schedule over the term.
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Stip
A lender requirement that must be satisfied before funding. Common stipulations include bank statements, photos of equipment, or vendor verification.
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Subordination
A lender voluntarily takes junior position to another lien, usually to allow new financing.
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TCPA
Telephone Consumer Protection Act. Federal law restricting unsolicited phone calls, SMS, and faxes. Requires explicit consent for marketing contact.
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Glossary
Thin File
A credit applicant with limited credit history or few tradelines. Different from bad credit; harder for traditional underwriting models.
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Glossary
Time in Business
How long a business has been operating; a key underwriting factor for equipment financing.
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TRAC Lease
Terminal Rental Adjustment Clause lease. A lease for titled equipment (typically trucks/trailers) where the lessee guarantees the residual value.
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Tradelines
Individual credit accounts (loans, credit cards, etc.) that appear on a credit report.
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Glossary
True Lease
A lease where the lessor retains ownership and tax benefits; the lessee can deduct lease payments as operating expense.
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Glossary
UCC-1
A financing statement filed with the state to perfect a lender's lien on collateral.
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UCC-3
A UCC amendment form used to continue, amend, or terminate a UCC-1 financing statement.
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Glossary
Useful Life
The expected period over which equipment will be used productively in business. Often differs from MACRS recovery period.
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V
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Glossary
Vendor Financing
Financing arranged through the equipment seller (dealer or manufacturer rep), often with promotional terms.
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Vendor Pricing
Special pricing or financing terms negotiated between the equipment dealer/vendor and a finance company.
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Glossary
VIN
Vehicle Identification Number for titled equipment (trucks, trailers, certain heavy equipment). A unique 17-character identifier.
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