Leasing scheme: types, classification and benefits

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Today we will talk about one of the most effective ways to develop a business - leasing transactions. This is a very relevant topic, because sometimes it is not easy to get a loan from a bank. The process takes a long time and requires a lot of documents. Then the leasing scheme comes to the rescue. It is a form of service or lending associated with the acquisition of fixed assets or expensive goods (companies or individuals), as well as long-term leases with a subsequent right to buy.

You can rent an object of any nature: movable and immovable property, various equipment, vehicles, production facilities.

What is the benefit of this type of loan

A leasing company buys any of the above properties and leases it to a business or individual who pays the price of the leasing goods and services in installments.

The payout is distributed over a long period. As a result, monthly payments are low. After the end of the installment plan, the consumer of the leasing service receives the right to buy out the equipment (orother goods) to your property at the residual value.

Other benefits:

• Ease of making a deal. It is easier to take the desired product than when applying for a bank loan for it. In addition, leasing companies transfer property rights before payments are completed.
• Reduction of tax payments for the purchase of equipment (since they are already included in the amount of the debt of the leasing company).
• Reducing the amount of property and profit tax by several times.
• No bail. This allows you to spend the saved money on business development.
• Flexible payment schedule (an individual approach to the frequency of payments is possible, which also makes them more comfortable).
• Easy termination of the transaction (as opposed to an agreement with a bank).

It is also worth noting that, by decision of both parties, payment can be made not in cash, but in goods obtained as a result of the operation of the property (compensatory leasing). This is also a big advantage.

And now we will tell you in detail about what can be purchased on lease. Most often these are goods that are used in small and medium-sized businesses:

1. Buildings (offices and retail space).
2. Specialized equipment (industrial and commercial).
3. Vehicles:

• Commercial vehicles (for freight transport).
• Specialized equipment for tillage (tractors, excavators, cranes).
• Railway equipment (rolling and traction stock).
• Aircraft(airplanes and helicopters).
• Trucks and tractors.
• Cars and buses.

There are a huge number of varieties of leasing, which are classified according to various properties. Let's talk about the main types of transactions.

There are several types of transactions according to the payout category:

1. Net (recipient bears full expenses).
2. Wet (the leasing company takes care of all maintenance and repair costs).
3. Partial (only certain types of expenses are charged to the company).

Deal participants

Analysis of the transaction scheme involves four parties:

• Company.
• Consumer.
• Supplier.
• Insurance company.

The scheme of interaction between leasing participants varies if an enterprise needs additional financial resources to provide a service. Then the bank (which provides the loan) is included in the transaction. There are options when third parties are involved in the form of another supplier, lessor or lessee. It depends on the type of transactions, which we will discuss next.

When it comes to security, there are several levels of risk:

• Unsecured. The consumer does not provide the lessor with any additional guarantees, except for the required documents.
• Partly endowed. The recipient of the service pays the insurance deposit (pledge), which is frozen in the account of the leasing campaign until the endcontracts. Subject to its conditions, the deposit is returned to the consumer.
• Guaranteed. Secured leasing implies that the entire risk is shared between insurance companies or other guarantors that specialize in chargeback and property insurance.

Certainly, the most profitable option for a leasing campaign is a guaranteed deal. But this may reduce the demand for financial leasing services, because the main advantage of leasing over bank lending is affordability.

Stages of implementation

To complete this deal, you need to do the following:

1. The consumer finds a supplier, determines the criteria (cost, quality, delivery time).
2. The lessee provides a complete list of documents to the company.
3. Documentation review.
4. Conclusion of the contract.
5. The leasing campaign purchases the product chosen by the consumer and insures it against all property risks.
6. The consumer receives the subject of financial lease and operates it for the period stipulated by the contract, not forgetting to make lease payments.
7. After the payment is completed, the goods become the property of the lessee.

Disadvantages of leasing

We have already discussed the benefits of leasing, but it also has its downsides:

• Longer application processing time than at the bank.
• The cost of leasing services is much higher than a bank loan.
• Lack of ownership (this situation is especially relevant if you use the lease for personal needs).
• The presence of a down payment, as with taking a bank loan.
• Double clearance of property (it passes from the seller to the leasing campaign and then to the consumer), which involves a lot of spending.
• Property cannot be sold or mortgaged before the end of its useful life.

Classification scheme for types of leasing and leasing operations

A lot depends on the type of leasing transaction: the price of the service, the timing of payments, the subtleties of taxation. Leasing happens:

1. With partial payment (that is, there is an incomplete payment of the cost of the item).
2. Full (by the end of the contract, all or almost all payment for the cost of the property is made).

In addition, there are several types of leasing transactions according to the main parameters.

Fast Deal

The operational leasing scheme is similar to a regular lease. The company transfers the item into operation to the consumer for a period less than the full depreciation period. After the end of the payment of the debt, the goods must be returned to the lessor.

Let's be clear that depreciation is a payment mechanism associated with paying off financial debt through periodic payments.

Depreciable property is an item that is the property of the taxpayer and is used by him to generate income. Taken into account in the taxation process by depreciation.

For property to be considered depreciable,the period of its operation should be at least 12 months, and the cost - about 100 thousand rubles.

Characteristics of the operational leasing scheme:

• Short transaction time (no more than 12 months).
• One-time service (most often used for the implementation of one project, for example, in construction).
• High rate of payments.

After the expiration of the period stipulated by the agreement, the lessee has the right to:

• Renew the lease (with all the nuances of the transaction being reviewed).
• Return the item to the lessor.
• Purchase the property at the residual price.

Thus, we can conclude that operational leasing is not a purchase, but a temporary operation of a financial service item.

Conclusion of the contract

Be careful when making a deal, because some factors can make it unprofitable. For example:

1. Additional services. Of course, among them there are mandatory ones, such as technical inspection of vehicles, but the leasing campaign may include other paid features.
2. Vague description of the timing and details of the return. Make sure that all actions in the contract are detailed and clear.
3. Right to terminate the contract if the leased asset is found to be unusable.

Financial leasing

The financial leasing scheme is essentially very similar to a long-term loan for the purchase of fixed assets. That is, the leasing campaign acquires exactly the propertyrequired by the consumer of the financial service.

The period of operation is most often equal to the period of full depreciation of the property. After its completion, the consumer redeems it at the residual value.

Analysis of the financial leasing scheme:

• This is a long-term deal (more than one year).
• After the end of the transaction, the property becomes the property of the lessee.
• Main use: development of projects to upgrade or increase industrial resources.

Conclusion of the contract

The following nuances should be taken into account:

• Expenses for the maintenance of the property are at the expense of the lessee.
• The inflation index and the associated risk are borne by the consumer of the financial service.
• Similar to an operational transaction, the lessor can significantly increase the final cost with the help of additional services.

There are several types of financial leasing.

International Leasing

This is a type of transaction involving two or more foreign countries. According to this scheme, the lessor, the recipient, and the supplier can be a representative of another country. Most often, all participants are in different countries.

International leasing scheme includes:

1. Direct leasing. Occurs between legal entities of different states. Shapes:

• Imported (the campaign buys foreign goods for exploitation).
• Export (domestic goods are transferred to foreign consumers).

2. indirect leasing. Deal schemeis between citizens of the same country, but the capital of the lessor is partly owned by foreign companies.

International leasing is governed by the 1998 Interstate Leasing Convention and the 1988 UNIDROIT Convention on International Financial Leasing (Leasing)

3. Separated. This is a type of transaction involving more than 4-5 parties. It is used for the implementation of large-scale objects (drilling platforms, aircraft). Then there may be several leasing campaigns, recipients, suppliers.

Leaseback

Another kind of deal. It consists in the fact that the company buys an item from the supplier, and then gives it to the same operation.

The leaseback scheme involves the introduction of the initial cost by the consumer (aka the seller) in the amount of 30% of the cost of the subject of operation. It is designed for a long period (from a year to 5 years), which increases depending on the value of the product and allows the consumer to receive many benefits.

Analysis of the leasing scheme:

• Reduction of income tax (subject to making payments to the cost item).
• Using the proceeds from the sale for business development.
• Removal of property from the balance. At the same time, the lessee, who also acts as a supplier, continues to use it.

Distinctive features of financial and operational leasing

For a deeper understanding of the topic, let's look at the difference between these varietiesleasing.

There are several criteria:

• Analog of operation. For financial leasing, the analogue is a long-term loan, and for operational leasing - a long-term lease.
• Taxation and accounting. From the point of view of tax payments, under financial leasing, the property is registered with the company, and with operational leasing - with the consumer of the service.
• Deal duration. As mentioned earlier, operational (also called operational) leasing is a short-term transaction, and a financial transaction in its period is close to the service life of the subject of operation.

The name of these types of transactions speaks for itself. Financial leasing, which is also called capital leasing, is designed to invest in the campaign's production funds.

Operational (operational) leasing is so called because it is used mainly for short-term transactions.

Details of paperwork

The rental period is negotiated by the consumer and the campaign at the stage of concluding the contract.

The leasing scheme is regulated by Article 655 of the Civil Code of the Russian Federation, as well as the federal law "On Financial Lease (Leasing)".

The contract should clearly state:

1. Who gives the rent and who gets it. Otherwise, the agreement may be reclassified as a regular rental agreement.
2. Where, in what amount, how often payments should be received. Separately, the amount of rent of the property and its cost are prescribed.

Land plots cannot be used for the lease agreement scheme. At the same time, it is interesting to note that if the consumer takesleasing a building, after the completion of payments, the land automatically also becomes his property. This circumstance is justified by the Land Code of the Russian Federation.

If the contract is concluded for a period of more than 12 months, it must be registered with the Regchamber.

All current and major repairs of the subject of financial lease are carried out at the expense of the lessor. But if the consumer decides to make some kind of inherent change in the product, you will have to obtain written permission from the leasing campaign. If this is not done, the lessee will pay out of his own pocket.

Property leased may be transferred to a third party. Of course, this also requires the consent of the leasing company.

In this case, a new contract is concluded with the participation of the sublessee.

Subleasing is a type of scheme of leasing participants (sublease) in which the lessee transfers the subject of financial lease to another person for operation for a fee in accordance with the terms of the new contract.

This type is used if the consumer is temporarily unable to make payments or decides to exit the transaction altogether. Federal law governs this part of the finance lease.

In this case, the sub-lessor, who used to be a consumer of the service, transfers the right to operate to the sub-lessee (that is, a third party).

At the same time, the period of use of the item by the sublessee cannot be longer than the period that was originally providedcontract.

There are no additional rules in the Civil Code of the Russian Federation regarding subleasing. Therefore, the general rules relating to finance leases apply.

It is interesting to note that there is no financial relationship between the lessor and the sub-lessee, since all payments are still made by the original consumer of the service (i.e. the current sub-lessor).

Leasing is an effective way to grow your business

There are many forms of leasing transactions that are aimed at beneficial relations of all participants in the process.

The financial leasing scheme is useful for business development. It allows you to get the desired product (subject of the transaction) quickly. Compared to a bank loan, leasing is more affordable.

In addition, low tax rates also help to actively promote the business and are an important point before choosing leasing or lending.

Financial leasing is a good solution for people who, for whatever reason, do not want to own property. But for personal needs, it is better to use a bank loan, because it is much cheaper.

Leasing is a great solution for business people. The main thing is to carefully approach the conclusion of the contract and get the most out of the deal.