An equipment trust certificate allows a company to obtain possession and use of an asset by paying for it over time through debt financing. If payments are made, title is transferred to the borrower, but if payments are defaulted on, the lender can repossess the asset. Originally used to finance railway equipment, equipment trust certificates now mainly finance aircraft and shipping containers. They provide tax benefits to borrowers by avoiding property taxes on used assets, and protect lenders by allowing repossession of the asset if payments are defaulted on.

1. Equipment Trust
Certificate (ETC)
SUBMITTED TO- SUBMITTED BY -
PROF. ANKUR KULSHRESTHA KASHISHGARG
PGDM- FINANCE
19DM092

2. Meaning of ETC
An equipment trust certificate refers to a debt instrument that allows a company to take
possession of and enjoy the use of an asset while paying for it over time.
If the borrower maintains payments and pays off the debt, the asset's title is transferred from
the holder to the borrower. But, on the other hand, if the borrower defaults, the lender or seller
has the right to repossess or foreclose on the asset.
Investor supply capital
• Receives certificate
and payments from
the trust that are
provided by the
lessee
Trust purchase asset
and leases to the
company
• Trust issues
certificate to the
investor and receives
payments from the
lessee
Company/Lessee lease
asset from the trust
• Principal and interest
payment

3. History and Benefits
 History- Originally used to finance railway
box-cars and rolling stock.
 At present- Mainly used to finance aircraft
purchases and containers used for
shipping and offshore businesses
Benefits-
 Tax benefits for the borrower as they are not
required to pay any property tax even if they
are using the asset
Protection to the trust & investor as they can
reclaim the asset from the borrower upon
default in payment