The advantage of leasing before a loan: is it

Leasing is a type of financial activity. He has his strengths and weaknesses. From the economic point of view, it combines the elements of credit, rent, investment and is built on the delineation of property rights and possession (use) of the object. What is the advantage of leasing? To understand this, it is necessary to study its advantages and disadvantages. Some of the advantages of this activity are obvious, and other points are rather controversial. For example, for one of the participants (the lessor), it can be more profitable than for the second entity (the lessee).

What is good leasing?

Let's look at the main advantages:

• It allows you to expand your business.
• It gives an opportunity to receive additional income without diverting the available working capital.
• Useful for developing enterprises.

We can say that the main advantage of leasing is the saving of amounts in comparison with the loan and purchase at own expense.

Opportunities that this investment tool opens:

• Modernization of the whole production without diverting large finances from turnover. Financing of the lessee can reach 90% of the total purchase price.
• All payments on it are carried at cost, which allows you to reduce deductions for income tax. This is also an advantage of leasing in comparison with bank loans.
• The book value of the acquired property decreases very quickly. This is facilitated 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 longer any need to calculate depreciation, the purchase is put on the balance of the new owner at the redemption (residual) value. In other words, it is possible to write off old equipment several times faster and buy new equipment.
• Another advantage of leasing is that with payments, VAT is refunded in the amount that is considered from the whole amount, which is more than with a normal purchase.
• Flexible schedule. You can use a more individual approach to repayment schedules. Take into account seasonality, timing of commissioning, equipment start-up and so on.
• Profitable price. Using long-term economic ties, leasing companies can acquire property at reasonable prices. This contributes to a cheaper transaction, reduces costs.
• A wide range of services for the transaction (state registration, supply agreement, insurance, transportation, installation and adjustment of equipment).
• Protection against fraud. All are tested, contractual relations are well thought through.

Conclusion

It should be noted that the lending system is a good tool for attracting the necessary financial resources. But to support a small business, leasing is the best option. Someone might not agree with this. However many see such advantages of leasing before the credit from the point of view of registration:

• It also requires a package of documents, but it is much faster to collect it, you can manage it fairly quickly.
• Partnership with leasing companies, as a rule, is simpler and more effective than cooperation with banks. Any nuances are brought into the contract almost immediately, since 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: skillful use of such tools helps many companies develop and increase their profits.