CLFP Equipment Finance Fundamentals 2

Question 1

What is a 'TRAC lease' primarily used for?

Accepted Answer

Financing over-the-road vehicles and transportation equipment with a Terminal Rental Adjustment Clause

Answer

Financing agricultural equipment

Answer

Financing government-owned properties

Answer

Financing real estate under IRS rules

Question 2

In equipment finance, what does 'LTV' stand for and why is it important?

Accepted Answer

Loan-to-Value; it measures how much financing is extended relative to the equipment's value

Answer

Lease Term Variable; it tracks payment frequency changes

Answer

Long-Term Volume; it measures total lease portfolio size

Answer

Lessee Total Value; it assesses overall creditworthiness

Question 3

What is 'soft cost' financing in equipment leasing?

Accepted Answer

Financing of non-tangible costs like installation, training, software, or freight bundled with equipment

Answer

Financing for used or refurbished equipment

Answer

Financing with no credit check required

Answer

Financing exclusively for small businesses

Question 4

What is the 'money factor' in equipment leasing?

Accepted Answer

A decimal number used to calculate the finance charge portion of a lease payment

Answer

The percentage of equipment cost paid upfront

Answer

The lessor's profit margin on a deal

Answer

The ratio of hard to soft costs in a lease

Question 5

What does 'advance payment' mean in the context of a lease structure?

Accepted Answer

Lease payments made at the beginning of each period rather than at the end

Answer

A security deposit paid before equipment delivery

Answer

The first payment covering installation costs

Answer

An extra payment to reduce the residual

Question 6

What is the role of a 'broker' in the equipment finance industry?

Accepted Answer

An intermediary who originates transactions and places them with funding sources (lessors/lenders) for a fee

Answer

An independent equipment appraiser

Answer

A government licensing authority for lessors

Answer

A collections specialist for defaulted leases