18632726 leasing-and-hire-purchase contract in banking sector

LEASING AND HIRE PURCHASE

TYBBI

DEFINITION

Leasing is a process by which a firm can obtain the use of a
certain fixed assets for which it must pay a series of
contractual, periodic, tax deductible payments. The lessee is
the receiver of the services or the assets under the lease
contract and the lessor is the owner of the assets. The
relationship between the tenant and the landlord is called
a tenancy, and can be for a fixed or an indefinite period of
time (called the term of the lease). The consideration for the
lease is called rent.
Under normal circumstances, an owner of property is at
liberty to do what they want with their property, including
destroy it or hand over possession of the property to a tenant.
However, if the owner has surrendered possession to another
(ie the tenant) then any interference with the quiet enjoyment
of the property by the tenant in lawful possession is unlawful.
Similar principles apply to real property as well as to personal
property, though the terminology would be different. Similar
principles apply to sub-leasing, that is the leasing by a tenant
in possession to a sub-tenant. The right to sub-lease can be
expressly prohibited by the main lease.
FINANCIAL SERVICES MANAGEMENT

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FEATURES
Formality of a lease
A tenancy for years greater than 1 year must be in writing in order to satisfy
the Statute of Frauds.

Term of a lease
The term of the lease may be fixed, periodic or of indefinite duration.
If it is for a specified period of time, the term ends automatically when the period
expires, and no notice needs to be given, in the absence of legal requirements.
The term's duration may be conditional, in which case it lasts until some specified event
occurs, such as the death of a specified individual.
A periodic tenancy is one which is renewed automatically, usually on a monthly or
weekly basis.
A tenancy at will lasts only as long as the parties wish it to, and be terminated without
penalty by either party.
It is common for a lease to be extended on a "holding over" basis, which normally
converts the tenancy to a periodic tenancy on a month by month basis.

Rent
Rent is a requirement of leases in common law jurisdiction, but not in civil law
jurisdiction. There is no requirement for the rent to be a commercial amount. "Pepper
corn" rent or rent of some nominal amount is adequate for this requirement.

Leasing of real property
There are different types of ownership for land but, in common law states, the most
common form is the fee simple absolute, where the legal term fee has the old meaning of
real property, i.e. real estate. An owner of the fee simple holds all the rights and
privileges to that property and, subject to the laws, codes, rules and regulations of the
local law, can sell or by contract or grant, permit another to have possession and


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control of the property through a lease or tenancy agreement. For this purpose, the
owner is called the lessor or landlord, and the other person is called the lessee or tenant,
and the rights to possess and control the land are exchanged for some payment
(called consideration in legal English), usually a monthly rent. The acceptance of rent
by the landowner from a tenant creates (or extends) most of the rights of tenancy even
without a written lease (or beyond the time limit of an expiring lease). Although leases
can be oral agreements that are periodic, i.e. extended indefinitely and automatically,
written leases should always define the period of time covered by the lease. In the 1930s,
the British government introduced infinite leases, only to remove the power to create
these in the early 1990s. A lease may be:


a fixed-term agreement, in other words one of these two:


for a specified period of time (the "term"), and end when the term expires;



conditional, i.e. last until some specified event occurs, such as the death of a
specified individual; or



a periodic agreement, in other words renewed automatically


usually on a monthly or weekly basis



at will, i.e. last only as long as the parties wish it to, and be terminated without
penalty by either party.

Because ownership is retained by the lessor, he or she always has the better right to
enforce all the contractual terms and conditions affecting the use of the land.
Normally, the contract will be express (i.e. set out in full and, hopefully, plain
language), but where a contract is silent or ambiguous, terms can be implied by a court
where this would make commercial sense of the transaction between the parties. One
important right that may or may not be allowed the lessee, is the ability to create
a sublease or to assign the lease, i.e. to transfer control to a third party. Hence, the
builder of an office block may create a lease of the whole in favour of a management
company that then finds tenants for the individual units and gives them control.
Under common law, a lease should have three essential characteristics:
1. A definite term (whether fixed or periodic)
2. At a rent
3. confer exclusive possession


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Leasing of tangible personal property
An owner can allow another the use of a vehicle (such as vehicle leasing of a car,
a truck or an airliner) or a computer either for a fixed period of time or at will. This
can be a simple leasing transaction, or it can be a transaction intended to allow the
user the right to buy the item at some future time.


In a simple lease (rental) of a car, P pays O a rental for the use of the car during the
agreed period which may be a few days (e.g. for a holiday trip) or longer where it is
more economic to pay for use rather than pay for the ownership of an asset of
depreciating value. Normally, only P will be allowed to use the vehicle and, in such
a case, P has possession and control. But, P could be an employer who allows C the
use of the car to visit clients, and thereby gives C control.



In a lease with the possibility of purchase, O could allow P to lease the car for a
specified period of time. If all the rental payments are made in full, P will then be
allowed to buy the car at the contractual purchase option price. In a consumer lease
subject to the federal Consumer Leasing Act and the Truth in Lending Act, the
purchase option price can not be a "bargain" purchase, that is, it cannot be less than
the originally estimated fair market value. A "bargain" purchase creates an
installment sale, to which the Truth in Lending Act (TILA) applies including the
standardized disclosures, most importantly the Annual Percentage Rate (APR).
Typically, the vehicle dealer or other personal property seller offers the leasing
terms and contract of a third party finance company. Hence, O leases the vehicle to
P, and upon execution of the contract simultaneously sells ownership of the car to F
and assigns the lease contract to F. It is standard for the contractual terms to
prohibit P from parting with possession or control of the car to another (if P does
part with possession, this can be a theft of the car from F).

Real leases
Whether it is better to lease or buy land will be determined by each state's legal and
economic systems. In those countries where acquiring title is complicated, the state
imposes high taxes on owners, transaction costs are high, and finance is difficult to
obtain, leasing will be the norm. But, freely available credit at low interest rates with


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minimal tax disadvantages and low transaction costs will encourage land ownership.
Whatever the system, most adult consumers have, at some point in their lives, been
party to a real estate lease which can be as short as a week, as long as 999 years, or
perpetual (only a few states permit ownership to be alienated indefinitely). For
commercial property, whether there is a depreciation allowance depends on the local
state taxation system. If a lease is created for a term of, say, ten years, the monthly or
quarterly rent is a fixed cost during the term. The term of years may have an asset
value for balance sheet purposes and, as the term expires, that value depreciates.
However, the apportionment of relief as between business expense and depreciating
asset is for each state to make (all that is certain is that the lessee cannot have a double
allowance).

Private property rental
Rental, tenancy, and lease agreements are formal and informal contracts between an
identified landlord and tenant giving rights to both parties, e.g. the tenant's right to
occupy the accommodation for an agreed term and the landlord’s right to receive an
agreed rent. If one of these elements is missing, only a tenancy at will or bare licence
comes into being. In some legal systems, this has unfortunate consequences. When a
formal tenancy is created, the law usually implies obligations for the lessor, e.g. that the
property meets certain minimum standards of habitability. With a bare licence, some
states do not imply any significant lessee protections
A tenancy agreement can be made up of:


express terms. These include what is in the written agreement (if there is one), in the
rent book, and/or what was agreed orally (if there is clear evidence of what was
said).



implied terms. These are the standard terms established by custom and practice or
the minimum rights and duties formally implied by law.


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Commercial leasehold
Generally speaking in the modern legal framework, commercial real property leases
fall into one of just a few categories: Office, Retail, Warehouse, Ground, and a catch-all
hybrid often referred to as "Mixed Use". Each has certain typical characteristics,
although Ground leases may differ somewhat, taking on some characteristics of Retail
leasing when associated with a retail project, like a shopping center; and although
Mixed Use projects can vary greatly depending upon the various inclusions and the
size of the overall project, among other things. It is widely appreciated by those who
specialize in commercial leasing, including the business side and the legal side, that,
other than hybrids such as Mixed Use project leasing, Retail leasing can have the most
complexity.
Mixed Use projects often have elements of most or all of the other categories, not
infrequently including a hotel, office building, ground floor retail with residential
condominium above and a parking garage. The interplay of all these different
components with each other and the underlying property documents which describe,
define, and control their interactions, operation and management,

as well as the

division of costs for the operation of the site, are typically very complex.
Retail leasing often requires the parties to address issues typically not addressed at all
in other types of commercial leasing which have no retail component. These additional
challenges include such topics as exclusives and restrictive covenants, radius
restrictions on near-by self-competition, co-tenancy, no-build areas and visibility
corridors, parking ratio assurances, signage concerns (including pylons, monuments,
and criteria), CAM and CAM caps and controls (including the "cumulative" and "noncumulative" concepts), continuous operating covenants, and much more.

Advantages of commercial leasing
For businesses, leasing property may have significant financial benefits:


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Leasing is less capital-intensive than purchasing, so if a business has constraints on
its capital, it can grow more rapidly by leasing property than it could by
purchasing the property outright.



Capital assets may fluctuate in value. Leasing shifts risks to the lessor, but if the
property market has shown steady growth over time, a business that depends on
leased property is sacrificing capital gains.



Because of investments which are done with leasing, new businesses are formed.
Furthermore, unemployment in that country is decreased.



Leasing may provide more flexibility to a business which expects to grow or move
in the relatively short term, because a lessee is not usually obliged to renew a lease
at the end of its term.



In some cases a lease may be the only practical option; such as for a small business
that wishes to locate in a large office building within tight locational parameters.



Depreciation of capital assets has different tax and financial reporting treatment
from ordinary business expenses. Lease payments are considered expenses, which
can be set off against revenue when calculating taxable profit at the end of the
relevant tax accounting period.

Disadvantages of commercial leasing
For businesses, leasing property may have significant drawbacks:


A net lease may shift some or all of the maintenance costs onto the tenant.



If circumstances dictate that a business must change its operations significantly, it
may be expensive or otherwise difficult to terminate a lease before the end of the
term. If the business is successful, lessors may demand higher rental payments when
leases come up for renewal. If the value of the business is tied to the use of that
particular property, the lessor has a significant advantage over the lessee in
negotiations.

Leasing Internationally

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The practice of leasing is well established in most countries of the world .
However the benefits (in particular the tax benefits) to the lessee and
lessor will vary widely depending on national accounting standards and
tax regulations. These largely divide into countries observing:


Legal Form: the lessors legal ownership of the property. or



Substance: the lessee legal right to use the property.

National accounting standards vary in the tests that decide if the lease
is a:


Capital or Finance Lease, which is considered a financing transaction
- as the lessor has less of the risks of ownership, such as the value of
the equipment in future years.



Operating Lease, whose term is short compared to the useful life of the
asset, where the lessee does not have to show the lease on their balance
sheet.


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Pros and cons of leasing by the
way of example
Buying a vehicle is a fairly straightforward process. You borrow money from a lending
institution, pay the dealership for the car, and then make monthly payments on the
loan until it's paid off. As you pay off the loan, you gain equity in the vehicle until it's
eventually all yours. You can keep the vehicle as long as you like and you can do
whatever you want to it, from giving it a custom paint job to entering it in a
demolition derby. The only penalty for modification or abuse, perhaps, is a lower resale
value when you're done with it.
On the surface, leasing appears even simpler. You pay the leasing company a monthly
payment that's lower than when buying. Then, after enjoying the most trouble-free two
or three years of the vehicle's life, you simply bring it back to the dealership and lease
another new one, or walk away. No muss, no fuss, right? Gone are your worries about
haggling over the trade-in value or how to sell your old car. With a lease, that new-car
smell need never leave your nostrils. Moreover:
There's often no down payment required when leasing, or only a low one.
You can drive a higher-priced, better-equipped vehicle than you might otherwise be
able to afford to buy.
You're always driving a late-model vehicle that's usually covered by the
manufacturer's warranty.
These benefits are very inviting for many people. Still, there are a number of
compromises and disadvantages to leasing, which means that it's not right for
everyone.
Once you're in the leasing habit, monthly payments go on forever.
You have a limited number of miles in your contract and will have to pay extra if
you go over.
You must maintain the vehicle in good condition. If you don't, you'll have to pay
penalties for excess wear and tear when you turn it in.
If you need to get out of a lease before it expires, you may be stuck with thousands
of dollars in early-termination fees and penalties--all due at once.


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Leasing is rarely a better financial arrangement than buying. The financial
advantage of buying increases the longer you keep the vehicle after the loan is paid
off.
At the end of the lease, you have no equity in the vehicle to put toward a new car.
You can't customize your vehicle in any permanent way.
In addition, arranging a lease can be a confusing, complicated process that can easily leave you paying more than you
should.
This is not to say that leasing can't be a satisfying and cost-effective way to acquire a new vehicle. But it's a mistake to think
that leasing is always easier or less expensive than buying.


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TYPES OF LEASE
While many leasing companies may use the same name to describe a lease, the actual
terms and conditions written in their contracts often vary. At Access Equipment
Leasing, we always recommend you carefully review any leasing documents and ask
your leasing company or Access Equipment Leasing to explain anything that is
unclear.
True Lease or Operating Lease
Best For: Equipment that will rapidly depreciate or become obsolete in a short period of
time - i.e. some forms of computer equipment.
How It Works: In a true or operating lease, the leasing company retains ownership of
the equipment during the lease. True or operating leases typically have no
predetermined buyouts - customers usually classify these payments as an operating
expense.
Benefits:
Lower payments and typically the most tax-friendly form of leasing, Additionally, true
or operating leases offer three choices at the end of your lease:
· return the equipment to the leasing company,
· purchase the equipment at its fair market value or option amount
· extend your lease term.
Finance Lease or Capital Lease
Best For: If you would prefer to own the equipment when the lease agreement ends.
How It Works: The full purchase price, plus interest, is spread over the length of the
lease agreement.
Benefits: At the end of the lease, you own the equipment for a minimal payment,
usually $1.00 or a small percentage of the original purchase price.
Skip Lease
Best For: Seasonal businesses, agricultural companies, recreational services firms, and
other organizations which might require a more flexible payment schedule due to
seasonal business conditions.
How It Works: You specify the months when you would prefer not to make payments.
Benefits: Flexible, in that it can be adjusted to irregular cash flow.


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Sale-Leaseback
Best For: Customers who have purchased their equipment, but now have decided that
leasing would be more beneficial. Sale-leaseback also allows companies to raise cash for
other investments or cash flow purposes.
How It Works: The business that has already purchased equipment sells it to a leasing
company, which then takes ownership of the equipment and leases it back to the
business. Access Equipment Leasing requires that the equipment be purchased within
90 days.
Benefits: The sale-leaseback allows you to put money back into your business or into
investments that appreciate rather than depreciate.
60 or 90-Day Deferred Lease/ leveraged
Best For: Businesses that need equipment for operation and development that will not
immediately generate revenue.
How It Works: A 60 or 90-day deferred lease can be structured as a finance lease or a
true lease. With this form of lease, there is usually no advance payment required, and
the first payment is not due for 60 or 90 days after the lease begins.
Benefits: The equipment you need can be acquired with little to no money up front and
no payments for 2-3 months.
Master Lease
Best For: If your leasing requirements will likely be expanding over time.
How It Works: Separate lease schedules are created to accommodate the addition of
equipment over a period of time of your specification. The master lease governs the
basic terms and conditions. Benefits: Acquiring additional equipment is made more
convenient.
Municipal Lease
Best For: Local and state government organizations that wish to acquire equipment.
How It Works: The tax structures and details of municipal leases will vary
considerably from standard business leases. Seek the advice of your financial advisor to
better understand your municipal lease options.
Benefits: Municipal leases are designed specifically for local and state government
organizations.
Step Up Lease
Best For: Businesses whose financed equipment will allow more profitability over a
period of time.
How It Works:Payments increase according to a regular schedule over the life of the


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lease.
Benefits: Payments can be structured to match current cash flow

LEASING IN INDIA
 Leasing has grown by leaps and bounds in the eighties but it is
estimated that hardly 1% of the industrial investment in India is
covered by the lease finance, as against 40% in USA and 30% in
UK and 10% in Japan.
 The prospects of leasing in India are good due to growing
investment needs and scarcity of funds with public financial
institutions.
 This type of lease finances is particularly suitable in India where a
large number of small companies have emerged more recently.

 Leasing in the sphere of land and building has been in existence in
India for a long time, while equipment leasing has become very
common in the recent times.


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Lessors
1. Specialized leasing companies:
There are about 400-odd large companies which have an organizational focus on
leasing, and hence, are known as leasing companies.
Till recently, most of them were diversified financial houses, offering several fund-based
and non-fund based financial services. However, recent SEBI rules on bifurcation of
fund-based and non-fund based activities has resulted into hiving-off of merchant
banking divisions of these entities. Most of these companies also offer hire-purchase
activities, and some of them might have a consumer finance division as well.
2. Banks and bank-subsidiaries:
Till 1991, there were some ten bank subsidiaries active in leasing, and over-active in
stock-investing. The latter variety was ravaged in the aftermath of the 1992 securities
scam.
In Feb., 1994, the RBI allowed banks to directly enter leasing. So long, only bank
subsidiaries were allowed to engage in leasing operations, which was regarded by the
RBI as a non-banking activity. However, the 1994 Notification saw an essential thread
of similarity between financial leasing and traditional lending.
Though State Bank of India, Canara Bank etc have set up leasing activity, it is not
currently at a scale to make any difference on the leasing scenario. This is different
from the rest of the World, where banks are front-runners in leasing markets.
3. Specialized Financial institutions:
There is a wide variety of financial institutions at the Central as well as the State level
in India. Apart from the apex financial institutions, viz., the Industrial Development
Bank of India, the Industrial Finance Corporation of India, and the ICICI, there are
several financing agencies devoted to specific causes, such as sick-industries, tourism,
agriculture, small industries, housing, shipping, railways, roads, power, etc. In most
States too, there are multiple financing agencies for generic or focussed cause.
4. One-off lessors :


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Some of the companies engaged in some other business which gives them huge taxable
profits, have resorted to one-off leasing on a casual basis to defer their taxes. These
people are interested only in leasing of high-depreciation items, preferably those
entitled to 100% depreciation.
.
5. Manufacturer-lessors :
This part of the lessor-industry is in highly under-grown form in India, for simple
reasons. Vendor leasing is a product of competition in the product market. As
competition forces the manufacturer to add value to his sales, he finds the best way to
sell the product is to sell it without the buyer having to pay for it instantly. Product
markets so far for most durables were oligopolistic, and good products used to sell even
otherwise at a premium. With the economy decisively moving towards market
orientation, competition has become inevitable, and competition brings in its wake
sales-aid tools. Hence, the potential for vendor leasing is truly great.Presently, vendors
of automobiles, consumer durables, etc. have alliances or joint ventures with leasing
companies to offer lease finance against their products. However, there is no devoted
vendor leasing of the type popular in most of the advanced markets, where a specific
leasing company or leasing program takes exclusive charge of a vendor's products.

The lessees
a.

Corporate customers with very high credit ratings: These essentially look at

leasing to leverage against assets which are otherwise not bankable, or for pure junk
financing.
b.

Public sector undertakings: This market has witnessed a very rate of growth in

the past. With budgetary grants to the PSUs coming to a virtual halt, there is an
increasing number of both centrally as well as State-owned entities which have resorted
to lease financing. Their requirements are usually massive.
c.

Mid-market companies: The mid-market companies, that is, companies with

reasonably good creditworthiness but with lower public profile have resorted to lease


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financing basically as an alternative to bank/institutional financing, which to them is
time-consuming and tedious.
d.

Consumers: Retail funding for consumer durables was frowned-upon at one point

of time, but recent bad experience with corporate financing has focussed attention
towards consumer durables which incidentally, is all the all-time favorite of financiers
World-over. Most of the larger companies have expressed interest in consumer funding,
with ticket size going as low as Rs. 5000.
e.

Car customers: Car leasing World-over is a very big market, and the same is true

for India. So long, most car leases were plain-vanilla financial leases but one now finds
few instances of value-added car lease services also being offered.
f.

Commercial vehicles: Commercial vehicles customers have always relied upon

funding by hire-purchase companies. The customer profile ranges from large fleet
owners to individual truckers.
g.

Earth-moving machinery customers: These customers have also traditionally

relied upon lease financing. Their requirements are generally large - each excavators
costs more than Rs. 25 lacs. The income-stream is based on contracts they have - at
times, the income generation may be sporadic, or the need might itself be temporary. In
fact, operating leases would have been ideal in this market, but they are yet to be
launched to any serious degree.
i.

Govt. depts. and authorities: One of the latest entrants in leasing markets is the

Govt. itself. The Depts. of Telecommunications of the Central Govt. took the lead by
floating tenders for lease finance worth about Rs. 1000 crores. In its reforms
programme, India has limits to the extent to which it can resort to deficit financing,
and leasing is easily going to appeal to the Govt. , if not for cost reasons, at least for the
fact that it will not feature in national accounts as a commercial financing. As a spinoff, it might even help reducing the reported deficit, as the Govt. resorts to what is
loved World-over as a tool of off-balance-sheet financing.


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EQUIPMENT
LEASING

Is Equipment Leasing The Right Choice For You?
Not all businesses have sufficient start-up capital. In addition, not all established
businesses have enough money to support all expenses necessary for expansion. So the
question is, is equipment leasing the right choice for you? To answer this question, let
us consider the benefits of leasing equipment over purchasing. But first, what is
equipment leasing? Equipment leasing simply means renting business equipment.
Instead of obtaining a loan to purchase equipment, equipment leasing lets you use the


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equipment and start operating the business without the need for down payment or cash
payment. Payment may be done in monthly installments or yearly payments
depending on the type of lease you’ve obtained.
So what makes equipment leasing advantageous over purchasing? First of all, it
doesn’t repress cash flow. With purchasing, a business is forced to give up a huge
portion of its finances to buy expensive equipment. It can take some time before a
business can regain the amount of money used for buying equipment. On the contrary,
equipment leasing allows a business to start manufacturing and managing the business
without the need to dispel big cash. Thus, there would sufficient cash available to
support other areas of the business.
Leasing equipment presents different types of leases for every business. Those
businesses that are operates on a seasonal basis can avail of a “skip lease” where
skipping payments during slow seasons are allowed without any penalties. There is
also a type of lease called “step-up” lease where businesses who are just starting up can
defer lease payments until the business gains footing. These are just two examples of
leasing terms which are available for a business. Every equipment leasing company
offers different types of lease that each business can consider before taking their pick.
Equipment leases are tax deductible. Lease payments can be considered as a business’s
monthly expense which makes it a hundred percent tax deductible. Every business
owner who leases equipment should remember this important fact and inquire from
their lawyers or accountant on how they can avail the tax deduction.
Another great advantage about leasing business equipment is that it lets you keep up
with technology. Machines and equipment are constantly and continuously enhanced.
A particular device can be outdated or get obsolete in just a few years. If you
purchased the equipment, it wouldn’t be practical to buy the latest model and throw
out the money you spent on that equipment. If you leased the equipment, you can
easily trade your current equipment and replace it with the latest model in the market.
It is also worth mentioning that applying for an equipment lease is so much easier than
trying to obtain a loan. Commercial banks and lending institutions generally have
strict policies and procedures before granting a loan approval. In most cases, an
excellent credit history is required to qualify. A business plan must also be presented
in order to get approved. Equipment leasing companies do not impose such
requirements from their clients. Usually, leasing companies only consider the last six
months of an individual’s credit history.
Equipment Leasing and Expanding Your Business


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The challenge of business financing isn’t just for new businesses. A growing business
can also encounter the same challenges as a new business does. When it’s time to
expand the business, an entrepreneur may choose to apply for a traditional business
loan or seek out more conventional methods of business financing. In this article, we
will discuss how equipment leasing can help with your plans of expanding the business.
What is Business Equipment Leasing?
We all know that a growing business needs additional machineries, equipment, and
vehicles to carry on its expansion. Without sufficient funds, expanding the business
can prove to be very difficult. Consequently, buying new business equipment can eat
up a very large percentage of the company’s budget and there may not be much left to
cover other expenses. By leasing business equipment, the cost is significantly cut off so
that the money can be used for other areas of financing.
Almost any type of device, machinery, equipment can be leased. Leasing companies
also offer vehicles for lease such as delivery vans, trucks, trailers, etc. Any type of
business-regardless of which industry it belongs can enjoy the benefits that equipment
leasing offers.
Another term for equipment leasing is “renting equipment”. In other words, the
necessary equipment does not need to be purchased. Machinery or equipment would
instead be “leased” or “rented”. Rather than submitting a huge, one-time payment for
the purchase of equipment, the business owner has the option to obtain the devices
needed and pay lower, monthly installments. There is also no need to give a down
payment and since the equipment was not purchased, there’s no need to pay additional
tax fees.

More Reasons to Lease Your Business Equipment
What are other benefits of leasing?

For one, a business does not need to spend a

fortune just to get access to the latest and state-of-the-art equipment in the market.
Whether you have limited funds or not, leasing enables you use only the best equipment
for your business. This can certainly make a big difference in your business
performance. Using the most advanced equipment should help your business keep up
with your toughest competitors.
Leasing also eliminates the risk of obsolescence. Any time you want to exchange the
equipment you leased for new and better devices, you can do so without worrying
about your budget. When your lease term ends, you have the option to keep the


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equipment you leased for a low payment or simply return them to your lessor with no
further obligations.
Another thing that makes equipment leasing a practical business financing option is its
fast and convenient processing. Leasing companies allow businesses to submit their
applications online and get an approval within the same day or within just minutes.
At the most, a business can expect to receive the equipment it leased within a week or
two.
For a business owner who plans to expand his company, equipment leasing is definitely
worth considering. Take advantage of the opportunity to see your business grow at the
most minimal cost possible through this wonderful financing option.

Where to Find a Business Equipment Lease Company

You can do a survey or ask for suggestions from other business owners in your locality.
If you have friends or relatives who are also running their own companies, why not ask
them for possible recommendations. You can also explore your choices through the
internet as many business leasing companies advertise their services online.
Comparing online will give you a better idea as to the average pricing rate that most
leasing companies offer. When doing your search, do not overlook smaller leasing firms
and independent business equipment lessors as they may provide good service for a
smaller cost. As long as you check their background and reputation, you may be able
to work out a good partnership with a smaller lease firm.

The important thing to remember is to carefully study your lease contract before
signing up your application. Take note that the specific lease terms and rules will vary
from one leasing company to another. Therefore, take time to read and understand the
Agreement before making your final decision.
How to Get Approved For an Equipment Lease
Many companies provide leasing services on equipment, vehicles and special machines
for large businesses and small businesses alike. Leasing equipment is generally quicker
and uncomplicated compared to other business financing options. Below are practical
advices on how you can get an easy approval for business equipment lease:
Tips On How To Get A Fast Equipment Leasing


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Starting your own small business can be a challenge especially when you think about
the machines and equipment you would need. Even setting up a home office needs
quite a big amount of budget to acquire basic equipment such as computers, fax
machines, copiers, printers, and others.
However, the absence of a large start up business funding should not be a problem.
Today, aspiring small business owners have the option to lease business equipment
especially when they don’t have a big budget to spend.
Where can you avail of business equipment leasing services?
There are three main providers of business equipment leasing in the industry. They are
captive leasing companies, brokers and independent lessors. Larger corporations
usually turn to captive leasing companies for equipment while smaller businesses may
turn to brokers and independent lessors.
Banks and equipment leasing companies are examples of independent lessors. On the
other hand, brokers are usually individuals who provide assistance for those who want
to lease business equipment. Brokers simply coordinate with banks and equipment
leasing companies to help a certain business process a leasing arrangement. If you
don’t know much about leasing procedures, a broker can help you find a good leasing
deal for your business.
If you wish to acquire business equipment leasing, it would be better to do some
research yourself. Check out the internet for possible equipment leasing companies you
can apply to and study the leasing terms they offer. Choosing a leasing term will
depend on the nature of your business and on your financial situation so it’s best to get
an accurate idea about your options. Even if you’re coordinating with a broker, make
sure that you check the information yourself to be able to come up with an informed
decision.
If you own a small company and is planning to lease business equipment, this is a
timely article for you. Below is a practical guide on how you can get a fast approval
from your equipment leasing application:
Prepare all necessary documentations. Do research as to what specific documents you
need to submit to the leasing company. Knowing this important information can save
you precious time and will ensure that your lease application won’t get denied.
Many business equipment leasing providers require the submission of a business plan.
This plan should contain information about your company, a description of your
business, a list of the equipment you wish to lease, your credit report, references,
projected expenses, earnings, etc.


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Hiring a Certified Public Accountant is an advantage when preparing your financial
statement especially if you had been in operations for more than a year. Contact your
prospective leasing company and ask for the exact lease requirements.
Request and review possible quotes. The best way to compare different business
equipment lease providers is to ask for quotes. Compare the prices as well as the choices
of repayment terms offered by the company.
Provide a number of credible references. An equipment lease provider will be more
confident to give you an approval if you include trusted references in your lease
proposal. Reviewing your record of transactions with suppliers or business-to-business
companies will prove your capacity as a lessee. Make sure that the references you’ll
provide are in good terms with your company.
Have an attorney review the contract. Before signing up your lease contract, it is
advisable to have a lawyer review the terms and conditions in your behalf. Bear in
mind that once you’ve signed the contract, you will be bound by the conditions of your
lessor.
Check your business’s credit history. It’s also a wise step to check your business credit
history before submitting your lease application. This way, you can avoid the risk of
rejection in case your credit rating needs improvement.
Consider paying through ACH Debiting. ACH Debiting is an arrangement that
involves three parties -you, your bank and your leasing company. Under this
arrangement, payments will be automatically sent to your leasing company according
to the payment schedule in your contract.

This minimizes the risk of delays or missed

payments.
As much as possible, make way for actions that will enhance your credit.


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CONCEPT AND MEANING
OF HIRE PURCHASE
Hire purchase is a type of instalment credit under which the hire purchaser, called the
hirer, agrees to take the goods on hire at a stated rental, which is inclusive of the
repayment of principal as well as interest, with an option to purchase. Under this
transaction, the hire purchaser acquires the property (goods) immediately on signing
the hire purchase agreement but the ownership or title of the same is transferred only
when the last installment is paid. The hire purchase system is regulated by the Hire
Purchase Act 1972. This Act defines a hire purchase as “an agreement under which
Goods are let on hire and under which the hirer has an option to purchase them in
Accordance with the terms of the agreement and includes an agreement under which:
1) The owner delivers possession of goods thereof to a person on condition that
such person pays the agreed amount in periodic installments.
2) The property in the goods is to pass to such person on the payment of the last
of such instalments, and


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3) Such person has a right to terminate the agreement at any time before the
property so passes”.
Hire purchase should be distinguished from instalment sale wherein property passes to
the purchaser with the payment of the first instalment. But in case of HP (ownership
remains with the seller until the last instalment is paid) buyer gets ownership after
paying the last instalment. HP also differs form leasing.

DIFFERENCE BETWEEN
LEASE FINANCING AND
HIRE PURCHASE
BASIS LEASE FINANCING HIRE PURCHASE
Meaning a lease transaction is a commercial arrangement, whereby an equipment
owner or manufacturer conveys to the equipment user the right to use the equipment
in return for a rental. Hire purchase is a type of installment credit under which the
hire purchaser agrees to take the goods on hire at a stated rental, which is inclusive of
the repayment of principal as well as interest, with anoption to purchase. Option to
user No option is provided to the lessee (user) to purchase the goods. Option is provided
to the hirer (user). Natures of expenditure Lease rentals paid by the lessee are entirely
revenue expenditure of the lessee. Only interest element included in the HP
installments is revenue expenditure by nature. Components Lease rentals comprise of 2
elements (1) finance charge and (2) capital recovery. HP installments comprise of 3
elements (1) normal trading profit (2) finance charge and (3) recovery of cost of
goods/assets.

NSIC AND HIRE PURCHASE
Small scale firms can acquire industrial machinery, office equipment, vehicles, etc.,
without making full payment through hire purchase. With the help of assets acquired


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through hire purchase they can produce and sell. From the earning payments can
easily be made in installments. Ultimately the ownership of assets can be acquired.
Now several agencies like National Small Industries Corporation (NSIC) provide
machinery and equipment to small scale units on hire purchase basis and on lease basis.
NSIC follows the following Hire Purchase procedure and Hire Purchase Scheme for
financing plant and machinery to small scale units.


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18632726 leasing-and-hire-purchase contract in banking sector

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