The advantage of leasing over a loan: is it

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

Leasing is a type of financial activity. He has his strengths and weaknesses. From an economic point of view, it combines elements of credit, lease, investment and is based on the delimitation of property rights and ownership (use) of an object. What is the advantage of leasing? To understand this, you should study its advantages and disadvantages. Some of the advantages of this type of activity are obvious, while others are rather controversial. For example, for one of the participants (lessor) it may be more profitable than for the second subject (lessee).

What is good about leasing?

Let's look at the main advantages:

• It allows you to expand your business.
• Gives you the opportunity to receive additional income without diverting existing working capital.
• Useful for growing businesses.

It can be said that the main advantage of leasing is the savings in amounts compared to a loan and buying with your own funds.

Opportunities offered by this investment tool:

• Modernization of the entire production without diverting large finances from turnover. Lessee financing canreach 90% of the total purchase price.
• All payments on it are included in the cost, which allows you to reduce deductions for paying income tax. This is also an advantage of leasing compared to bank loans.



• The book value of the acquired property decreases very quickly. This is helped by the use of a special coefficient for depreciation. When the contract ends, the object is registered in the ownership of the lessee. Then there is no need to further accrue depreciation, the acquisition is put on the balance sheet of the new owner at the redemption (residual) value. In other words, you can write off old equipment several times faster and purchase new equipment.
• Another advantage of leasing is that VAT is reimbursed from payments in the amount that is calculated from the total amount, which is more than with a regular purchase.
• Flexible schedule. You can use a more individual approach to repayment schedules. They take into account seasonality, timing of adjustment, start-up of equipment, and so on.
• Favorable price. Using long-term economic ties, leasing companies can acquire property at affordable prices. This helps to reduce the cost of the transaction, reduces costs.
• A wide range of services during the transaction (state registration, coordination of delivery, insurance, transportation, installation and commissioning of equipment).
• Protection from scammers. Everyone is tested, contractual relationships are well thought out.

Conclusion

It should be noted that the credit system- a good tool to attract the necessary financial resources. But to support a small business, leasing is the best option. Some may not agree with this. However, many see such advantages of leasing over a loan in terms of registration:

• 

  It also requires a package of documents, but it is much faster to assemble it, you can handle it quite quickly.

• Partnership with leasing companies is usually easier and more efficient than cooperation with banks. Any nuances are entered into the contract almost immediately, as there is a flexible system for making the necessary decisions.

We have not considered all the advantages of financial leasing, but only the main ones. Each case should be considered individually. Remember: the skillful use of such tools helps many businesses grow and increase their profits.