Reference
Equipment Finance Glossary
Definitions of key terms used across equipment finance.
Owner: RJ Grimshaw·Version: v1.0·Last Updated: April 14, 2026·Working Copy
Parties & Roles
| Term | Meaning |
|---|---|
| Lessor | The party that owns the equipment and leases it to the lessee. |
| Lessee | The party that uses the equipment and makes lease payments to the lessor. |
| Obligor | The party legally responsible for repayment on a loan or lease. |
| Guarantor | A party (personal or corporate) that guarantees the obligor's performance. |
| Vendor | The equipment seller or manufacturer; often the originating partner in vendor finance programs. |
| Broker | A third-party originator who sources deals and places them with a funding source. |
| Captive | A finance company owned by a manufacturer to finance its own equipment (e.g., Caterpillar Financial). |
| Independent | A non-bank, non-captive finance company funding its own portfolio. |
| Bank-owned EF | An equipment finance subsidiary of a regulated bank (OCC/FDIC supervised). |
Origination & Underwriting
| Term | Meaning |
|---|---|
| Application-Only (App-Only) | Credit decision made from a one-page app without full financial spreads; typically up to $250K – $500K. |
| Full Financial Package | Credit decision supported by tax returns, financials, bank statements, and personal financial statements. |
| PayNet | Commercial credit bureau specific to small business lending and equipment finance. |
| Credit Memo | Underwriter's written recommendation summarizing obligor, collateral, structure, risk, and approval rationale. |
| Risk Rating | Internal credit grade (commonly A–G or 1–9) assigned to each obligor. |
| Approval Authority / Schedule A | Document defining dollar limits and rating thresholds for each approval level. |
| Stip (Stipulation) | Required document or condition that must be satisfied before funding. |
| Stip Package | The complete set of stipulations collected prior to funding. |
| Funding | Disbursement of proceeds to the vendor or lessee after all stips clear. |
| Boarding / Booking | The post-funding step of loading the contract into the servicing system of record. |
Systems
| Term | Meaning |
|---|---|
| LOS | Loan Origination System (e.g., LeasePath, Salesforce-based systems). |
| Servicing Platform | System of record for portfolio servicing (e.g., LeasePath, Solifi, Odessa). |
| Servicing | Ongoing management of the contract: billing, payments, customer service, insurance, title, reporting. |
Contract Structures
| Term | Meaning |
|---|---|
| Finance Lease / Capital Lease | Lease that transfers substantially all risks/rewards of ownership; treated as debt on lessee's books. |
| Operating Lease | Lease where lessor retains residual risk; lessee does not own the asset. |
| TRAC Lease | Terminal Rental Adjustment Clause lease, used for titled over-the-road vehicles. |
| Split-TRAC | TRAC lease with shared residual risk between lessor and lessee. |
| $1 Buyout | Finance lease structure where the lessee purchases the equipment for $1 at end of term. |
| FMV (Fair Market Value) Purchase Option | End-of-term option to buy the equipment at its then-current fair market value. |
| PUT (Purchase Upon Termination) | Mandatory end-of-term purchase at a pre-set price. |
| Residual | The projected or contracted value of equipment at lease end. |
| Advance Rate | Portion of equipment cost financed (e.g., 100%, 90%). |
| Soft Costs | Non-hardware costs financed alongside equipment (installation, training, software, delivery). |
| Hell-or-High-Water Clause | Lessee's unconditional obligation to pay regardless of equipment performance or defects. |
Collateral, Title & Lien
| Term | Meaning |
|---|---|
| UCC-1 | Financing statement filed to perfect a secured interest in collateral. |
| UCC-3 | Amendment, continuation, assignment, or termination of a UCC-1. |
| Continuation | UCC refiling required every 5 years to maintain lien perfection. |
| Lien Perfection | Legal steps (UCC filing, title notation) that make a security interest enforceable against third parties. |
| Titled Asset | Equipment with a government-issued title (trucks, trailers, some medical/aircraft). |
| ELT (Electronic Lien and Title) | State system for electronic title and lien recording. |
| CPI (Collateral Protection Insurance) | Force-placed insurance obtained by lessor when lessee fails to maintain required coverage. |
| Additional Insured / Loss Payee | Required endorsements naming lessor on lessee's insurance certificate. |
Portfolio & Credit Performance
| Term | Meaning |
|---|---|
| DPD | Days Past Due – standard delinquency aging measure. |
| Aging Buckets | Delinquency cohorts – typically Current, 1–30, 31–60, 61–90, 90+ DPD. |
| Non-Accrual | Status assigned when interest recognition is suspended, typically at 90+ DPD. |
| Impaired | Classification indicating probable loss of some principal or interest. |
| Workout | Restructured payment arrangement for a distressed obligor. |
| NSF | Non-Sufficient Funds – returned ACH or check. |
| Redraft | Re-attempted ACH pull after a failed payment. |
| Notice to Cure | Formal written notice giving obligor an opportunity to correct default. |
| Notice of Default | Formal declaration that the contract is in default. |
| Acceleration | Demand for full remaining balance due immediately after default. |
| Repossession | Recovery of collateral after default. |
| Remarketing | Sale of recovered equipment to recover losses. |
| Deficiency Balance | Remaining amount owed after repossession sale proceeds are applied. |
| Charge-Off | Accounting recognition that a receivable is uncollectible; removed from active portfolio. |
| Recovery | Post-charge-off collections applied against previously written-off balances. |
Portfolio Management
| Term | Meaning |
|---|---|
| Concentration Limit | Maximum portfolio exposure to a single obligor, vendor, industry, or geography. |
| Vintage | Cohort of deals grouped by origination period for performance tracking. |
| Static Pool Analysis | Loss curve analysis tracking a fixed origination vintage over time. |
| Portfolio Yield | Effective interest earned across the portfolio. |
| Syndication | Sale or participation of a deal or pool to another funder. |
| Assignment | Transfer of contract rights from one party to another. |
| Discounting | Selling future lease payments to a funder at a discount for immediate cash. |
| Warehouse Line | Revolving credit facility used to fund originations prior to permanent placement. |
| Securitization | Packaging of contracts into asset-backed securities for sale to investors. |
End of Term & Servicing Events
| Term | Meaning |
|---|---|
| End-of-Term (EOT) | The period 90–120 days before contract maturity when renewal, return, or buyout is negotiated. |
| Evergreen | Automatic month-to-month extension clause after stated term. |
| Buyout Quote | Payoff amount including remaining rents, residual, taxes, and fees. |
| Payoff Quote | Total dollars required to satisfy the contract in full on a given date. |
| Assumption | Transfer of an existing contract to a new obligor with lessor approval. |
| Modification | Formal amendment to contract terms (rate, payment, maturity, collateral). |
Compliance & Regulatory
| Term | Meaning |
|---|---|
| Reg B | Equal Credit Opportunity Act requirements, including adverse action notices and record retention. |
| Adverse Action Notice | Required notice to applicant when credit is declined, with specified reasons. |
| FDCPA | Fair Debt Collection Practices Act – primarily consumer; commercial exclusions apply. |
| TCPA | Telephone Consumer Protection Act – governs call/text/auto-dialer practices. |
| OFAC | Office of Foreign Assets Control – sanctions screening required on all parties. |
| KYC / KYB | Know Your Customer / Know Your Business – identity and entity verification. |
| BSA/AML | Bank Secrecy Act / Anti-Money Laundering program requirements. |
| ALLL / CECL | Allowance for Loan and Lease Losses / Current Expected Credit Loss – loss reserve methodology. |
Why Definitions Matter for Automation
For automation to function reliably, definitions must be identical across every system that touches a workflow. When a term means one thing in your LOS, another in your CRM, and something else in your agent instructions, you get translation errors -- process failures, missed triggers, and security gaps that are hard to trace back to their source. Shared vocabulary is not a documentation exercise. It is an operational requirement.
Related: U.S. Treasury AIEOG AI Lexicon (February 2026)
The U.S. Department of the Treasury, alongside NIST, ISO/IEC, the SEC, and the FDIC, published 50 official AI definitions that financial services institutions are expected to align with. If your AI systems touch credit decisions, customer communications, or compliance workflows, these are the definitions that regulators will use.
Read the full AIEOG AI Lexicon breakdownSource: Notion — Equipment Finance Glossary (Working Copy). Last synced: April 14, 2026.