Purpose:-

Leasing is suitable for financing most investments in productive equipment and is available to a broad range of business and other organizations, such as hospitals, educational institutions, associations and government agencies.

Benefits:-
Leasing may be beneficial for the following reasons:

• Leasing frees working capital for more productive use.
• Leasing could provide 100% funding as opposed to other sources of capital that usually provide only 60-70 percent.
• Accelerated depreciation write off is the USP of lease.
• A leasing arrangement is simple to negotiate and administer.
• Leasing provides off balance sheet funding.
• A leasing arrangement does not limit the firm's ability to raise credit.
• The lessor can pass on part of the tax benefits to the lessee through reduced rentals.
• The lease rental can be structured to accommodate the operational cash flow pattern of the lessee.
• Most expenses associated with the leased equipment can be incorporated into the lease and amortized over the lease period.

Types of Lease:-

1. Short Term Leases:- Short Term Leases are typically for assets that have high depreciation eligibility like computers, low value cars etc. They are for a period of 2-3 years. These type of leases may be useful to corporates who have capital requirements for products that have high obsolescence, high taxable income in the near future.

2. Long Term Leases:- Long Term Leases are for assets that have low depreciation eligibility like plant and machinery, cars, furniture and fixtures etc and have a long economic life. Corporates who are interested in leveraging the balance sheet and have a higher operational profit prefer this product.

3. Operating Leases:- Operating lease is a contract between the lessor and lessee such that the cost of the asset is not fully recovered from a single lessee. This means that the period of the lease wil be shorter since the lessor will recover the cost of the asset from multiple lessees. Repair and maintenance of the asset is the lessor's responsibility.

4. Sale and Leaseback:- Sale and Leaseback is a transaction where the lessee already owns the asset he wants to leverage. The lessee sells the asset to the lessor who pays for the asset and immediately leases it back to the lessee. This transaction will provide immediate non-fund based finance to the selling company and brings down the D/E ratio.

Call 323 2399 and speak to our Business Development Manager Don Asbury for more information on Leasing products offered by FinCorp.