The best way to finance a project is the use of bank credit. Financial institutions and banks currently offer several types of credit tailored to all needs, but there is also what is known as leasing or leasing. It is a technique of financing of building or equipment for the professionals.
In the case of a car leasing for example, the property purchased with the loan obtained is rented instead of being purchased with a car loan. The company that rents it can buy it back at the end of the contract, and this for a rather low value. All you need to know about this type of credit, you will find it in this article.
Overview of Leasing Features
Less well known than bank loans and bankless credit, leasing is now very popular with investors. Its operating principle is a little different, but more practical. In fact, a lease is not really an installment sale, nor a simple lease or hire purchase. Three stakeholders come into play, including the business that buys the property or the lessor, the other business that will lease the property called the lessee and the provider that offers the sale to the lessor.
Once the lease agreement is completed, the lessee has the option to waive the option of repurchasing the property, renewing the agreement or returning the property. Note that the property remains the property of the lessor during the rental period. You should also know that this type of loan includes 2 contracts, including the lease agreement between the lessor and the lessee and the standard sale agreement between the lessor and the supplier.
The property may be a piece of furniture or a building. For movable property, this may be capital goods or tooling equipment. As for real estate, they must be for professional use.
The advantages and disadvantages of the credit-bail
Like other means of financing, leasing has advantages and disadvantages. For the lessor, this allows it to provide all the financing without any personal contribution. In other words, it does not require self-financing. As the equipment leased is not included in the balance sheet, the lessee or the lessee has the right to use expensive equipment without changing its level of indebtedness.
Unlike bank loans, all the elements that make up the lease contract are negotiable, be it the duration, periodicity or the amount of rent. Leasing is also prized for its great flexibility. To avoid disappointment, it is important to take into account the disadvantages of the device in which you want to get started.
The application may be refused if the leasing companies find that the property is difficult to resell at the end of the lease. This financing technique is expensive especially for those considering small investments. Despite its flexibility, it is not always possible to terminate the contract early.
The rents collected by the lessor are transferred to overhead if the lease term corresponds to the economic life of the property leased.