LEASE FINANCING

Submitted by
N.S.Abhay Kumar
DEFINITION
 A process of obtaining FA, product or
service.
 In exchange of contractual, periodical,
tax deductable payments.
 Time period.
 Participants – Lessor, Lessee.
 Agreement.
 Terms and Conditions.
LEASE AGREEMENT
Common elements in a Lease agreement
 Details of parties involved and address.
 Details of property-location, identification
 Declaration by the lessor that he is either
the owner of the property or is duly
authorized by the owner to deal with it.
 Effective date of the commencement
and duration of the time period.
 Terms and conditions.
 Lease rent and mode of payment.
 Security deposits associated ,whether
interest free or not and circumstances of
its refund.
 Advance rent payable.
 Rent escalation.
 Facilities included with rent.
 Fittings and fixtures.
 Grounds on which contract’s terminated.
 Renewable clauses etc.
ESSENTIALS ELEMENTS
 Parties to the Contract
 Assets
 Ownership separated from User.
 Terms of the Lease
 Lease rentals
MODES AFTER
TERMINATION
 The lease is renewed either on a
perpetual basis.
 The assets reverts to the lessor
 The asset reverts to the lessor and he
sells to the third party
 The lessor vends the assets to the lessee.
 The parties may mutually agree to and
choose any of the previously mentioned
alternatives at the beginning of the lease
contract
PARTICIPANTS
 Lessor
Specialized Leasing Companies
One-off lessors
Manufacturer-lessors
Bank-sponsored leasing companies
Financial Institution
 Lessees
 Lease Brokers
 Lease Financiers
CLASSIFICATION OF
LEASE
Lease

Finance Lease
&
Operating Lease

Domestic Lease Sale and

and International Leaseback &
Lease Direct Lease

Single Investor
Lease and
Leveraged Lease
FINANCIAL LEASE
OPERATING LEASE
SALE AND LEASEBACK
DIRECT LEASE
SINGLE INVESTOR
LEASE
LEVERAGED LEASE
DOMESTIC LEASE
INTERNATIONAL LEASE
THE LEASING PROCESS
 Application through Approval
 Documentation and ordering asset
 Acceptance and lease beginning
ADVANTAGES
 Reduced initial cash outlay
 Easier credit terms
 Avoidance of financial restriction
 Flexibility in addressing obsolescence
 Maintenance support
 Current deductibility
 Balance sheet appearance
DISADVANTAGES
 Overall cost
 No ownership interest
 Lost tax benefits
 Commitment to property