Finance Lease Guarantees

Transaction Below $10Mil

Competitive Financing for International Buyers

Our Lender Bank supports competitive medium-term financing structured as finance leases in addition to financing structured as installment loans. Support of lease financing is important since some foreign buyers of U.S. capital goods prefer lease financing as an alternative to traditional installment loans. Our Lender Bank will guarantee lease financing of U.S. goods and services to creditworthy international lessees, both private and public sector, when financing is otherwise not available or applicable interest rates are not economically viable.

Standardized Documentation

In order to provide accessible guarantee support for lease financing, Our Lender Bank has created standardized guarantee documentation designed to meet the special requirements of this type of export finance. The MT Master Guarantee Agreement – Finance Lease provides equivalent Our Lender Bank support for medium-term finance leases as is provided for traditional loan financing using Our Lender Bank’s MT Master Guarantee Agreement. Both Master Guarantee Agreements are compatible with the operational efficiencies of Our Lender Bank’s Medium-Term Electronic Compliance Program.

Benefits:

  • Enables international lessees to obtain finance leases from lessors
  • Covers 100% of commercial and political risks
  • Flexible financing options and repayment terms
  • Transaction size up to $10 million (financed portion, excluding exposure fee)

Eligible Leases

Only finance leases ( as defined under International Accounting Standards) are eligible for Our Lender Bank guarantee support. Under IAS 17, a lease is classified as a finance lease if it transfers substantially all the risks and benefits of ownership to the lessee. Full payout leases (i.e., those with no residual value) and transactions that are essentially “conditional sales” contracts often qualify as finance leases.

Our Lender Bank does not prescribe a particular form of lease agreement for use with the MT MGA – Finance Lease, but has instituted procedures for granting approval of the lessor’s lease agreement forms, provided that the lease agreement contains certain provisions required by Our LenderBank.1 To obtain Our Lender Bank approval of a lease agreement, the applicant (generally the lessor) must submit a copy of the lease agreement form together with a legal opinion covering specified matters under the law of the relevant jurisdiction.2 If Our Lender Bank approves a lease agreement form for use with the MGA – Finance Lease in a specific country, that lease agreement form may be used for subsequent lease guarantee transactions in that country for up to three years without further Our Lender Bank review.

Eligible Transactions

In general, Our Lender Bank guarantees leases of U.S. capital equipment and related services. Financing may also be available for refurbished equipment, software, certain banking and legal

Financing Terms

Our Lender Bank requires the lessee to make a cash payment (which may be financed by the lessor) equal to at least 15% of the Net Contract Price.3

Generally, the repayment term of a transaction is determined by numerous variables including but not limited to the borrower’s financial condition, the common repayment terms the market gives such products, specific industry practices, industry and country conditions, useful life, OECD and Berne Union agreements, and the matching of terms offered by other foreign government-sponsored financing. Repayment terms up to five years are generally available for exports of capital equipment and services.

Periodic rent payments under the lease may be calculated either on the basis of equal principal amortization or using a mortgage-style amortization (equal payments). Rent may be payable monthly, quarterly or semiannually.

Medium-Term Credit Standards

To qualify for Our Lender Bank’s medium-term financing, borrowers must meet certain credit standards, depending on the size of the transaction, the nature of the buyer, and the goods and services being financed. If a buyer does not meet these standards, the use of guarantors and other credit enhancements may be used to .

Fees

  • Letter of Interest Application Processing Fee $50 .
  • Commitment Fee – 0.125% per annum on the undisbursed balance of the guaranteed portion of the finance lease.
  • Our Lender Bank Exposure Fee – Varies, depending upon tenor, country risk, and buyer credit risk (see Exposure Fee Calculator).

Request Additional Info;

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s