Leasing is one of the most common forms when a company or private individuals need financing their assets, such as machinery, equipment, construction equipment, automobiles, etc. A lease agreement is a contract between a lessee (borrower) and the lessor (owner) for the use of them. According to the contract, the lessee will monthly pay the lessor for the use of this exact asset.
Comparing with bank credits, it is very meaningful that the leasing asset can be purchased or collateralized by simpler procedures. The basic Principle of Leasing is that the leasing company will purchase the asset and deliver it to the company in return for monthly lease payments.
There are several types of Leasing worldwide:
- The Finance Lease or Capital Lease – the lessee gets the ownership of the asset before the lease expires. Simply, the finance lease is the type of lease where lessor transfers all the risks and rewards associated with the asset to the lessee before the lease agreement expires.
By such type of leasing, the company will finance the purchase of machinery or any movable asset. At the end of the lease term, the mentioned assets will be transferred to the company’s possession as the lessee. So, financial leasing is the best way to purchase additional equipment and machinery.