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CLFP EXAM - Equipment Lease and Financing Documentation- Qs & As
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CLFP EXAM - Equipment Lease and Financing Documentation- Qs & As
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CLFP EXAM - Equipment Lease and FinancingDocumentation- Qs & As
Where do you file to take Real Estate as Additional Collateral? Correct Ans-Documents need
to be filed in the office of the county recorder where the real property is located.
What is Anti Deficiency Laws: Correct Ans-The laws prescribe practices with respect to
situations in which the lessor or secured party has an interest in both real and personal
property. By pursuing a remedy to foreclose on real property, a lessor may lose claim to pursue
a deficiency underthe equipment lease (or vice versa)
What is a "lease commencement" pre-funding agreement? Correct Ans-Lease
Commencement which simply states that the lessee is to commence immediately and the
lessee acknowledges it must pay no matter what happens with the equipment delivery.
What is an "interim funding" pre-funding agreement? Correct Ans-Provides for some sort of
loan in the amount of the advanced required, to culminate in equipment lease once the
equipment is delivered and accepted. If lease does not commence in certain time period, all
proceeds must be repaid
What are the concerns with pre-funding? Correct Ans-1) giving up leverage with vendor
2.) at risk successful D&A may never happen or delay
3.) vendor inventory financing
,What is a Nominal Option? Correct Ans-Allows lessee to purchase equipment at the end of
the lease for $1.00 or some other minimal payment such that they are likely to exercise the
option
What is a Fair Market Value Option? Correct Ans-Gives the lessor the ability to require the
lessee to purchase the equipment at an agreed upon price following the conclusion of the lease
- at which point the lessee is given an option to acquire if for that amount. Typically a true lease.
What is a Put Option? Correct Ans-gives the lessor the ability to require the lesees to
purchase the equipment at an agreed upon price following the conclusion of the lease. Typically
not a true lease
What is a Renewal Option? Correct Ans-gives the lessee the option to automatically renew
from period to period. Renewal continues until such time lessee indicates it wishes to
terminate.
What is an Equipment Financing Agreement (EFA)? Correct Ans-A loan document that
creates debt on the part of the customer and a security agreement in favor of the lender.
Payments consist of principal and interest. EFA are used to avoid vicarious liability. Uses similar
documents as lease. D&A is recommended
What is a Lease a document? Correct Ans-A lease is a basic document by which a lessor
agrees to provide equipment or other personal property or rights to a lessees in return for
rental payments.
, What are Lease Exhibits document? Correct Ans-Also referred to a "schedules" are used if
the description of lease property is too lengthy to fit into the space allotted on the lease. Often
wise to have lessee initial all exhibits.
What is a Delivery & Acceptance (D&A) document? Correct Ans-Document signed by lessee
indicating the lessee has unconditionally accepted the equipment. Ideally the date of this
document should be subsequent to the date of the lease. Also good practice to confirm via
confirmation call
What are Guaranties? Correct Ans-Document containing all credit support provided by third
parties that are not the primary lessees.
What are Corporate Resolutions? Correct Ans-Document certifying by the corporate
secretary or other officer that the person signing is so authorized. Often easier that reviewing
articles of incorporation and bylaws. Documents in which an officer is authorizing themselves,
notary is recommended.
What are Real Estate Waivers documents? Correct Ans-Document acknowledges an owner
or mortgagee or real property that the leased equipment belongs to the Lessor and can be
removed.
What are Fixture Filings documents? Correct Ans-Similar to UCC filings, documents filed in
real property records to provide notice to third parties of the lessor's ownership interest in the
equipment.
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