It is most common for the letter of credit to cover the entire stream of payments, not just the cost of the equipment. We like letters of credit more than a cash deposit, but ranked number two because in the leasing business, additional security deposits are more common. In this instance, the stock is most common physically held by the lessor or its bank or stock broker. There are instances when the stock is held by a third party. In all the instances we have seen, the full dollar amount of the lease is required to be covered by a publicly traded stock, municipal bond, or other such instrument.
Warrants are a form of stock.
This is very common in Venture Backed Leases. It is an incentive to extend credit to a company not turning a profit or expected to turn a profit for several years. It is also attractive to investors or smaller leasing companies who are willing to extend credit with warrants. Vehicles Contrasting warrants, smaller transactions, where the credit or situation is not present, or company is new, pink slips to vehicles are held by the lessor. A vehicle appraisal, condition report, and department of motor vehicle processing is required.