Leasing scheme: types, classification and advantages

Today we will talk about one of the most effective ways of developing a business - leasing transactions. This is a very urgent topic, because getting a loan from a bank is sometimes difficult. The process takes a long time and requires many documents. Then a leasing scheme comes to the rescue. This is a form of services or lending related to the acquisition of fixed assets or expensive goods (campaigns or individuals), as well as long-term leases with a subsequent right to purchase.

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

What is the benefit of this type of loan?

The leasing campaign buys any of the above property and rents it out to an enterprise or private individual who pays the installment price for the goods and leasing services.

The payout is distributed over the long term. Due to this, the amount of monthly payments is small. After the installment plan is over, the consumer of the leasing service gets the right to buy back the equipment (or other goods) at his residual value.

Other benefits:

• Ease of closing a deal. It’s easier to take the desired product than when applying for a bank loan. In addition, leasing campaigns transfer ownership of the property until payment is completed.
• Decrease in tax payments for the purchase of equipment (as they are already included in the amount of debt of the leasing company).
• The decrease in the amount of property tax and profit by several times.
• Lack of collateral. This allows you to spend 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 the contract with the bank).

It is also worth noting that, according to the decision of both parties, payment may not be made in cash, but with goods received as a result of the operation of the property (compensation leasing). This is also a big advantage.

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

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

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

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

According to the category of payments, several types of transactions are distinguished:

1. Net (the costs are fully borne by the recipient).
2. Wet (the leasing company incurs all the costs of servicing and repairing the goods).
3. Partial (only certain types of expenses are borne by the company).

Transaction participants

Analysis of the transaction scheme involves the participation of four parties:

• Company.
• Consumer.
• The supplier.
• Insurance Company.

The interaction scheme of leasing participants varies if the company needs additional financial resources to provide the 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 deals, which we will talk about later.

With regard to security, there are several degrees of risk:

• Unsecured. The consumer does not provide the lessor with any additional guarantees, except for binding documents.
• Partially provided. The recipient of the service pays an insurance deposit (pledge), which is frozen in the account at the leasing campaign until the end of the contract. Subject to its conditions, the deposit is returned to the consumer.
• Guaranteed. Secured leasing implies that all risk is distributed between insurance campaigns or other guarantors that specialize in refund insurance and property insurance.

By far, the most advantageous option for a leasing campaign is a guaranteed transaction. But this can reduce the demand for financial rental services, because the main advantage of leasing over bank lending is accessibility.

Stages

To complete this transaction, the following steps are required:

1. The consumer finds a supplier, defines the criteria (cost, quality, delivery time).
2. The lessee provides a complete list of documents to the company.
3. Review of documentation.
4. The conclusion of the contract.
5. The leasing campaign purchases the goods selected by the consumer and insures them 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 payment is completed, the goods become the property of the lessee.

Disadvantages of leasing

We have already discussed the leasing advantages scheme, but it also has its drawbacks:

• Longer application review 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 rental for personal needs).
• The presence of a down payment, as with a bank loan.
• Double registration of property (it passes from the seller to the leasing campaign, and then to the consumer), which implies a large expenditure.
• You cannot sell or pledge property before the end of its life.

Classification scheme of types of leasing and leasing operations

Much 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 value of the item).
2. Full (by the end of the contract, all or almost all of the payment of the value of the property is made).

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

Operational transaction

An operating lease arrangement is similar to a regular lease. The company transfers the item to the consumer for a period shorter than the full depreciation period. After the payment of the debt has ended, the goods will be returned to the lessor.

Let us explain that depreciation is a repayment mechanism related to the repayment of 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. It is taken into account in the taxation process by calculating depreciation.

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

Operational leasing scheme characteristics:

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

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

• Renew the lease (while all the nuances of the transaction are reviewed).
• Return the item of operation to the lessor.
• Buy property at a residual price.

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

Conclusion of an agreement

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

1. Additional services. Of course, there are mandatory ones among them, such as technical inspection of vehicles, but the leasing campaign may include other paid functions.
2. A vague description of the timing and details of the return. Make sure that all actions in the contract are detailed and clear.
3. The right to terminate the contract if the leased asset is unsuitable for operation.

financial leasing

The financial leasing scheme is inherently very similar to a long-term loan for the purchase of fixed assets. That is, the leasing campaign acquires exactly the property that the consumer of the financial service needs.

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

Analysis of the financial leasing scheme:

• This is a long transaction (more than one year).
• After the transaction, the property becomes the property of the lessee.
• Main application: development of projects to modernize or increase industrial resources.

Conclusion of an agreement

The following nuances should be taken into account:

• Costs for servicing property are made at the expense of the lessee.
• The inflation index and associated risk are borne by the consumer of financial services.
• As in the operational transaction, the lessor can significantly increase the final cost with the help of additional services.

There are several subspecies of financial leasing.

International leasing

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

The international leasing scheme includes:

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

• Imported (for the operation of the campaign buys foreign goods).
• Export (domestic goods are transferred for use to a foreign consumer).

2. Indirect leasing. The transaction scheme is concluded between citizens of one country, but the lessor’s capital is partially owned by foreign companies.

International leasing is regulated by the Convention on Interstate Leasing of 1998 and the UNIDROIT Convention on International Financial Leases (Leasing) of 1988.

3. Separate. This is a type of transaction involving more than 4-5 parties. It is used to implement large-scale facilities (drilling platforms, aircraft). Then there may be several leasing campaigns, recipients, suppliers.

Return lease

Another kind of deal. It lies in the fact that the company buys an item from a supplier, and then gives it to him for operation.

The leaseback scheme involves the introduction of the initial cost by the consumer (aka seller) in the amount of 30% of the value 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 goods and allows the consumer to get many advantages.

Analysis of the leasing scheme:

• Profit tax reduction (subject to the payment of expenses).
• Direction for the development of business money received from the sale
• Removal of property from the balance sheet. 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, we will analyze the difference between these types of leasing.

There are several criteria:

• The analogue of the 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 for financial leasing, the property is listed in the campaign, and in the case of an operational lease - in the consumer of the service.
• The duration of the transaction. As mentioned earlier, operational (also called operational) leasing is a short-term transaction, and a financial transaction by its period is close to the 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 campaign production assets.

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

Details of paperwork

The lease term 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 by the federal law “On financial leasing (leasing)”.

The contract should clearly state:

1. Who gives the rent, and who gets it. Otherwise, the contract may be reclassified to a normal lease.
2. Where, how much, how often payments should come. Separately, the amount of rental property and its value are prescribed.

For the scheme of the lease agreement can not use land. It is interesting to note that if a consumer leases a building, after the payment is completed, the land will automatically become its 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 Regpalate.

All current and major repairs of the subject of financial lease are carried out at the expense of the lessor. But if the consumer decided to make some inherent change in the product, you will have to enlist the written permission of the leasing campaign. If this is not done, the lessee will pay out of 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 sub-lessee.

Sub-leasing is a type of leasing participants' scheme (sub-leasing) in which the lessee transfers the subject of a financial lease for use to another person for a fee in accordance with the terms of the new agreement.

This type is used if the consumer is temporarily unable to make payments or even decides to exit the transaction. Federal law governs this portion of finance leases.

In this case, the sub-leasing company, which was previously a consumer of the service, transfers the right of operation to the sub-lessee (that is, a third party).

At the same time, the period of use of the item by the sub-lessee cannot be longer than the period that was originally provided for by the contract.

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

It is interesting to note that the lessor and the sub-lessee do not have financial relations, since all payments are still made by the original consumer of the service (that is, the current sub-lessor).

Leasing is an effective way of business development

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

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

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

A financial lease 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 derive maximum benefit from the transaction.