Leasing is a type of financial activity. He has his own strengths and weaknesses. From the point of view of the economy, it combines the elements of credit, rent, investment and is based on the distinction between 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 other points are quite controversial. For example, for one of the participants (lessor) it may be more profitable than for the second entity (lessee).
What is good about leasing?
Let's look at the main advantages:
- It allows you to expand your business.
- It makes it possible to obtain additional income without distraction of existing working capital.
- Useful for developing enterprises.
We can say that the main advantage of leasing is the savings in amounts compared to a loan and purchase on your own funds.
Opportunities offered by this investment instrument:
- Modernization of the entire production without distraction of large finances from the turnover. Lessee financing can reach 90% of the total acquisition cost.
- All payments on it are charged to cost, which allows 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. Helps this use in the depreciation of a special ratio. When the contract ends, the object is made into the property of the lessee. Then there is no need to further depreciate, the acquisition is put on the balance of the new owner at the redemption (residual) value. In other words, you can write off several times faster old equipment and purchase new equipment.
- Another advantage of leasing is that VAT is refunded from payments in the amount that is considered of the entire amount, which is more than with a regular purchase.
- Flexible schedule. You can use a more individual approach to repayment schedules. Take into account seasonality, the timing of commissioning, commissioning of equipment and so on.
- Profitable price. Using long-term business relationships, 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, delivery coordination, insurance, transportation, installation and commissioning of equipment).
- Protection from scammers. All are tested, the contractual relationship is well thought out.
Conclusion
It should be noted that the credit system is a good tool to attract the necessary financial resources. But leasing is the best option to support a small business. Someone may not agree with this. However, many see such advantages of leasing over credit in terms of registration:
- It also requires a package of documents, but you can assemble it much faster, you can handle it quite quickly.
- Partnership with leasing companies, as a rule, is simpler and more effective than cooperation with banks. Any nuances are entered into the contract almost immediately, since there is a flexible system for making the necessary decisions.
We have considered far from 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 enterprises to grow and increase their profits.