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    Ms. Nidhi Gupta Manvendra Shrivastava MBA (MS) 2 Yrs

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    Arnav -knavish
    The document discusses different types of lease financing. It defines a lease as a contract between an asset owner (lessor) and user (lessee) granting the lessee use of the asset in exchange for periodic payments. The main types of leases covered are financial leases, operating leases, sale-and-leaseback, leveraged leases, and direct leases. Financial leases typically involve transferring ownership to the lessee at nominal cost after a long non-cancellable term. Operating leases grant limited use rights and are common for assets with high obsolescence risk. Sale-and-leaseback involves an owner selling an asset then leasing it back. Leveraged leases include a third

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    Ms. Nidhi Gupta Manvendra Shrivastava MBA (MS) 2 Yrs

    Uploaded by

    Arnav -knavish
    38 views11 pages
    The document discusses different types of lease financing. It defines a lease as a contract between an asset owner (lessor) and user (lessee) granting the lessee use of the asset in exchange for periodic payments. The main types of leases covered are financial leases, operating leases, sale-and-leaseback, leveraged leases, and direct leases. Financial leases typically involve transferring ownership to the lessee at nominal cost after a long non-cancellable term. Operating leases grant limited use rights and are common for assets with high obsolescence risk. Sale-and-leaseback involves an owner selling an asset then leasing it back. Leveraged leases include a third

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    Lease Financing

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    The document discusses different types of lease financing. It defines a lease as a contract between an asset owner (lessor) and user (lessee) granting the lessee use of the asset in exchange for periodic payments. The main types of leases covered are financial leases, operating leases, sale-and-leaseback, leveraged leases, and direct leases. Financial leases typically involve transferring ownership to the lessee at nominal cost after a long non-cancellable term. Operating leases grant limited use rights and are common for assets with high obsolescence risk. Sale-and-leaseback involves an owner selling an asset then leasing it back. Leveraged leases include a third

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    38 views11 pages

    Ms. Nidhi Gupta Manvendra Shrivastava MBA (MS) 2 Yrs

    Uploaded by

    Arnav -knavish
    The document discusses different types of lease financing. It defines a lease as a contract between an asset owner (lessor) and user (lessee) granting the lessee use of the asset in exchange for periodic payments. The main types of leases covered are financial leases, operating leases, sale-and-leaseback, leveraged leases, and direct leases. Financial leases typically involve transferring ownership to the lessee at nominal cost after a long non-cancellable term. Operating leases grant limited use rights and are common for assets with high obsolescence risk. Sale-and-leaseback involves an owner selling an asset then leasing it back. Leveraged leases include a third

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    LEASE FINANCING

    Presented to:
    Ms. Nidhi Gupta

    Presented by:
    Manvendra Shrivastava MBA (MS) 2 Yrs.

    What Lease is ?

     A lease transaction is a commercial arrangement whereby an equipment owner or manufacturer conveys to the equipment user the right to use the equipment in return for a rental.  In other words, lease is a contract between the owner of an asset (the lessor) and its user (the lessee) for the right to use the asset during a specified period in return for a mutually agreed periodic payment (the lease rentals).

    Page  2

    Types of Lease

     Financial lease  Operating lease  Sale and lease back  Leveraged lease  Direct lease

    Page  3

    Financial lease

     Long term non cancellable lease contracts are known as financial leases.  The essential point of financial lease agreement is that it contains a condition where the lessor agrees to transfer the title for the asset at the end of the lease period at a nominal cost.  Under this lease, the lessor recovers 90% of the fare value of the asset as lease rentals and the lease period is 75% of the economic life of the asset.

    Page  4

    Operating Lease

     This lease agreement gives to the lessee only a limited right to use the asset.  Mines, computers, hardwares, trucks and automobiles are found suitable for operating lease because the rate of obsolence is very high in these kind of assets.

    Page  5

    Sale and Lease Back

     Under this, the owner of an asset sells the asset to a party (the buyer), who in turn leases back the same asset to the owner in consideration of lease rentals.  The lessee can satify himself completely regarding the quality of the asset and after possession of the asset convert the sale into a lease agreement.

    Page  6

    Leveraged Leasing

     Under leveraged leasing arrangement, a third party is involved beside lessor and lessee. The lessor borrows a part of the purchase cost (say 80%) of the asset from the third party i.e. lender and the asset so purchased is held as security against the loan.  The lender is paid off from the lease rentals directly by the lessee and the surplus after meeting the claims of the lender goes to the lessor. The lessor, the owner of the asset is entitled to depreciaton allowance associated with the asset.

    Page  7

    Direct Leasing

     Under direct leasing, a firm acquires the right to use an asset from the manufacturer directly. The ownership of the asset leased out remains with the manufacturer itself.  The major types of direct lessor includes manufacturers,. Finance companies, independent lease companies, special purpose leasing companies, etc.

    Page  8

    Advantages of Leasing

     Saving of capital  Flexibility and convenience  Planning cash flows  Improvement in liquidity  Better equipment utilization  Equipment upgradation  Inflation friendly  Fixed rate financing

    Page  9

    Conclusion

     Leasing is an important source of funding for Medium and small scale industries, which are key drivers of economic development in developing countries. There is substantial scope for future growth in the industry, particularly in developing countries. However, the industry faces financial and regulatory challenges which must be addressed to promote its growth. Leasing is instrumental in assisting the development of the financial sector and of the economy as a whole.

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