Glossary

Key words and phrases to help you navigate the world of finance and smartfundit.com even better.

A

Activation
The process when a lessor makes your agreement live and the initial rental will be taken on the lease. smartfundit.com will have received all the correct paperwork from the customer (lessee) and the supplier (reseller/dealer) and the supplier's invoice will be paid.

Add-on
The addition of new equipment to the equipment already on a lease agreement (with the same lessor). This is achieved by way of a new agreement for the additional equipment and only one DDM is taken.

Arrears
An agreement is considered to be in arrears when the rental due date has passed without the rental due having been paid by the customer. Arrears are normally classified by the number of days that have passed from the due date without the rental being paid (that is, days in arrears).

Asset finance (Asset financing / asset leasing)
The use of leasing facilities provided by a finance provider to fund the acquisition of business assets, such as plant and machinery. The finance provider usually requires security to be taken on the asset, and the cost of leasing is typically spread over the normal life of the asset.

B

Board resolution
This is a document conveying the Board of Director's approval of a specification, such as empowering an individual to sign an agreement.

C

Capital allowances
These are tax allowances which the owner of equipment is entitled to claim against their taxable income. When the agreement is a lease agreement, the lessor claims the capital allowances. When the agreement is a Purchase Plan or Lease Purchase the customer is deemed to be the owner and is thus able to claim the capital allowances.

Certificate of Acceptance
A document whereby the lessee acknowledges to smartfundit.com that the solution to be leased has been delivered and allows the lease agreement to be started.

Consumer credit act (UK) - 1974
This act lays down certain requirements for the protection of sole traders and partnerships where the total of the minimum payments due under a hire or lease agreement is £25,000 or more (including VAT). Further information can be obtained from any Trading Standards office.

Consumer credit act licence
This must be held by any company who wishes to offer credit facilities.

Credit line
A credit line may be established for a customer when smartfundit.com anticipates that they will sign several agreements within the next year. The amount of equipment cost the customer will rent is estimated. Subject to the financial status of the customer, smartfundit.com can approve a credit line equal to that amount. Then, as individual contracts are signed and sent in, the credit review process is minimised until the approved credit line is used up.

D

Default
A customer who is in violation of any term or condition of the agreement, including, but not limited to, arrears.

Deferral / deferred payment
An active smartfundit.com agreement where the first payment is deferred (usually by 3 months). This is particularly of use to lessees who have come to the end of their budget period, but want to have access to new technology before a new financial year or the equivalent commences. In the case of a three year agreement, the lessee is thus contracted for 39 months as opposed to 36 months.

Depreciation write-offs
For accounting purposes, to represent the consumption of an asset over its useful life. Under a finance lease, the customer must account for the asset as a capital item, following the accounting rules for fixed assets. The systematic writing off of an asset's value (by reducing a company's taxable income) reflects its wearing out through use and the passage of time.

Direct lease
You select and negotiate the price of the asset. The Lessor will then buy it from the manufacturer (if new) or the previous owner (if used) to and then lease it to you. (see also sale-and-leaseback)

Due date
The date of the month on which a customer's rentals will be collected by direct debit, or will be expected by cheque.

E

Economic life (of leased equipment)
The estimated period during which the equipment 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. Also known as useful life. The period of time during which an asset has economic value and is usable.

End of lease options
Lease contracts usually stipulate that you return the asset to the Lessor; dispose of the asset to an independent third party; or enter into a secondary lease period at a pre-agreed rental at a much lower cost and continue using the equipment. 

F

Fair market value
Price at which an asset is sold and bought in the open market.

Finance on demand^TM
smartfundit.com's unique online platform allows subscribers in just a matter of minutes, to choose from thousands of competitive leasing products from the world’s leading finance providers in order secure funding for IT hardware, software or services.

Finance leasing
You effectively acquire all financial benefits and risks without actually acquiring legal title. The leasing rate is computed to collect the full value of the asset (plus finance charges) during the contract period. At the end of the lease, the asset is sold to a third party and you can receive a share of the sale proceeds (if the lease is not being extended). Generally, you will not be able to become the owner of the asset at any time - unless a private arrangement is made with the third party. However, you usually have the option to extend your lease and as you will have paid for almost the full value during your initial lease period, the rental payments for subsequent periods will be minimal (sometimes referred to as "peppercorn rental").

Fixed assets
Tangible or 'real' assets used in a business for a number of years for profit generation and not held for resale.

Fixed term rental agreement
There can be no secondary period on this sort of contract and the equipment has to be returned at the end of the agreement.

G

Gearing
A key ratio for assessing a company's stability and credit worthiness. Gearing is the amount of the company's finance that has been borrowed as a percentage of net worth. Lending to a highly geared company involves a higher degree of risk.

Guarantee
A written guarantee that confirms that a third party (either individual or company) will guarantee the customer's obligations under the smartfundit.com agreement if the customer becomes, for any reason, in default under the terms and conditions of the agreement.

H

Hardware leasing (Hardware finance / hardware financing)
Leasing agreements used to fund the acquisition of all types of hardware, including desktop PCs, notebooks, telecommunications systems, servers and storage systems. Financing hardware is a flexible and cost-efficient alternative to paying for it all up front and it avoids the potentially high cost of fast-depreciating assets.

Hire purchase
This is an agreement for the hiring of an asset with an option to purchase. The legal title will pass to you when all payments have been made. The term of a hire purchase must be significantly shorter than the working life of the asset. You are able to claim capital allowances as if you had purchased the asset outright, gaining immediate use of it.

I

Initial period / minimum period / primary period
The smartfundit.com agreement initial period begins on payout to the reseller by smartfundit.com and continues until the customer has made all the payments and fulfilled all its obligations in the term of the agreement specified in the document.

L

Landlord's waiver
A document that protects a lessor's equipment from being considered part of a property and thus irremovable. This document primarily protects the lessor's rights to the leased equipment, when permanently installed in a lessee or landlord's building.

Lease
A contract through which an owner of equipment (the lessor) conveys the right to use its equipment to another party (the lessee) for a specified period of time (the lease term) for specified periodic payments. A lease is a contract in which the Lessor purchases the asset selected by you and conveys the use of an asset to you for a specific period of time at a predetermined rate.

Lease rate
The periodic rental payment to the Lessor for the use of the asset. The lease rate is primarily determined by the total cost of the asset, the duration of the lease and the interest rate level.

Lease term
The contracted minimum period of the agreement including any secondary period.

Lessee
The user of the asset or equipment being leased.

Lessor
The party to a lease agreement, who has legal title to the equipment, grants the lessee the right to use the equipment for the lease term and is entitled to receive the rental payments. The Lessor is the party who has legal or tax title to the equipment, grants the lessee the right to use the equipment for the lease term, and is entitled to the rentals, i.e. the leasing company.

Life cycle management
The effective and agreed management of the asset during the lease term and its appropriate disposal at the end of that period.

M

Master lease
A contractual arrangement, which allows you to lease other assets under the same basic terms and conditions without negotiating a new contract. You simply have addendums to the original contract.

Minimum period
See Initial Period.

P

Payment in advance
Periodic payments are due at the beginning of each period.

Payment in arrears
Periodic payments are due at the end of each period.

Present value (PV)
Value today of a future payment, or stream of payments, discounted at the appropriate rate.

Primary period
See Initial Period.

Purchase leaseback (also known as sale and leaseback)
A transaction in which used equipment is purchased from the lessee by the lessor. Title to the goods passes from the lessee to the lessor and the equipment is then leased back to the same lessee on normal commercial leasing terms. Care is exercised to ensure that the lessor has good title to the equipment before leasing begins. Not valid in Scotland.

Purchase option
A provision by which you have the right to purchase the asset at the end of the lease term, either at a predetermined amount or its fair market value.

Purchase order
A document from smartfundit.com addressed to the reseller giving them the authority to supply the equipment to the customer.

Purchase plan
An agreement where the customer wishes to own the equipment at the end of the Lease Term.

R

Renewal rentals
The rentals that are due in the secondary period of the agreement.