Leasing is a contractual agreement where a lessor provides an asset to a lessee. There are two main types of leasing: operating leases and financial leases. Operating leases involve short term agreements where costs are paid by the owner, while financial leases cover the asset's cost over the lease period through rentals paid by the lessee. Financial leases can take various forms like sale-leaseback, direct leasing, or leverage leasing. Leasing provides advantages to both lessees through financing flexibility and to lessors through higher profits.
This ppt is covering lease finance in detail, covering advantages & disadvantages. Types of lease. Instead of doing hard work rely on smart work. Time you devote on copy pasting. Channelize that time in understanding topic via reading it.
Lease Financing
Terminology
The advantages of leasing
Limitation of leasing
Types of Leasing
Financial lease
Operating lease
Sale and lease back
Leveraged leasing
Direct leasing
Other types
Problems of leasing in India
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing.
There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.
There are various types of factoring:
Recourse, Non - recourse, maturity and cross - border factoring.
Leasing and hire purchase are both financial arrangements.Sonam704174
Leasing and hire purchase are both financial arrangements for acquiring assets. Leasing involves renting an asset for a specified period, while hire purchase allows the buyer to use the asset during the payment period with ownership transferring after the final installment.
This ppt is covering lease finance in detail, covering advantages & disadvantages. Types of lease. Instead of doing hard work rely on smart work. Time you devote on copy pasting. Channelize that time in understanding topic via reading it.
Lease Financing
Terminology
The advantages of leasing
Limitation of leasing
Types of Leasing
Financial lease
Operating lease
Sale and lease back
Leveraged leasing
Direct leasing
Other types
Problems of leasing in India
Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing.
There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.
There are various types of factoring:
Recourse, Non - recourse, maturity and cross - border factoring.
Leasing and hire purchase are both financial arrangements.Sonam704174
Leasing and hire purchase are both financial arrangements for acquiring assets. Leasing involves renting an asset for a specified period, while hire purchase allows the buyer to use the asset during the payment period with ownership transferring after the final installment.
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3. Difference between Buying & Leasing
• Buy :-
XYZ ltd. buys machinery and uses it, financed by
debt and equity.
Manufacturer XYZ ltd. Who buys and uses the
machinery financed through equity shareholders
and creditors.
4. • Lease :-
Bajaj Finserv (lessor) buys machinery, and XYZ
ltd. (lessee) leases it.
Manufacturer Bajaj Finserv (owns the
machinery but does not use it) XYZ ltd. (uses
the machinery but does not own it)
5. Elements of leasing
No of parties
to contract – 2
Asset Consideration
Lease period
Use vs
ownership
termination
6. Clauses in lease agreement
• Nature
• Description
• Delivery and redelivery
• Period
• Lease rentals
• Use
• Repairs and maintenance
• Alteration in contract
7. Legal aspects of leasing
The lessor (Bajaj Finserv) has the duty to:
• Deliver the asset to the lessee
• Authorize the lessee to use the asset
•Leave the asset in peaceful possession
The lessee (XYZ) has the obligation to :
• Pay the lease rentals periodically
• Take reasonable care of the asset
• Return the leased asset
8. Types of leasing
OPERATING LEASE –
• An operating lease is a contract in which the
lessor does not transfer all the risks and rewards to
the lessee and the cost of the asset is not fully
amortized during the primary lease period.
9. FEATURES -
• Short term agreement for the use of asset
between the lessee (XYZ) and owner of the asset
(Bajaj Finserv).
• Cost related to the asset are paid by the owner of
the asset.
• The primary lease period does not cover the cost
of the asset.
• The term of operating lease is always shorter
than the economic life cycle of the asset.
• It is mainly useful in case of computers, office
equipments, trucks, automobiles, etc.
10. FINANCIAL LEASING
A finance lease is a contract in which
the cost of the asset is covered in the
lease period by the lessor with an
acceptance rate of return.
11. FEATURES
•It is a long term agreement between the lessor
(Bajaj Finserv) and the lessee (XYZ).
•Cost related to asset are paid by the lessee.
•The lessee usually cannot cancel the lease.
•The lessee pays a series of rentals for using that
asset.
•The lessor recovers a large part of the asset in
addition to earning interest from the rentals paid by
lessee.
•The lessee has the option of acquiring ownership
of the asset.
12. Forms of financial lease
Sale and
lease back
Direct leasing
Leverage
leasing
Straight and
modified
lease
Primary and
secondary
lease
Domestic
lease
International
lease
13. SALE AND LEASE BACK
The owner of an asset sales it to a leasing
company(lessor)which lease it back to
owner(lessee).
Leaseback arrangement involves the sale of an
asset already owned by a firm (vendor) and
leasing of the same asset back to vendor from
the buyer.
Suppose, XYZ buys machinery and is now out of
funds, so it sells the machinery to the Bajaj
Finserv and gets funds. Now it will take the
machinery back on lease from Bajaj Finserv.
14. DIRECT LEASING
• Direct lease is defined as contractual arrangement in
which the lessor purchases the property directly from
manufacturer and leases that property to the lessee .
• It is two types:-
Bipartite- there are two parties involved namely equipment
supplier cum lessor who manufactures the asset and leases it
also and lessee.
Tripartite- the are three parties involved namely equipment
supplier (manufacturer), lessor (who buys the asset from
manufacturer and leases it), and lessee.
15. LEVERAGE LEASE
• A leverage lease is an arrangement under
which the lessee borrow funds , for leasing the asset
,from third party called lender which is usually a
bank or a finance company.
• Three parties are involved namely lessor, lender and
lessee.
• This lease is usually of high cost and for a long period
of time.
16. STRAIGHT LEASE AND MODIFIED LEASE
• Straight Lease requires the lessee firm to pay
lease rentals over the expected service life of
the asset and does not provide for any
modifications to the terms and conditions of
the basic lease.
• Modified Lease provides several options to
the lessee during the lease period.
17. PRIMARY AND SECONDARY LEASE
• Primary Lease are those lease in which the
rental payments are high so the cost of the
asset can be covered.
• Secondary Lease are those in which there are
nominal rentals.
18. DOMESTICLEASE and international lease
• Domestic Lease is if all the parties to an
agreement namely equipment supplier, lessor
and lessee are domiciled in the same country.
• International Lease is if all the parties to an
agreement in the different countries , it is
called international lease. It is of two types,
import lease and cross border lease.
19. INTERNATIONAL LEASE ARE OF TWO TYPES :
• IMPORT LEASE : when lessor and lessee reside
in same country and equipment supplier in
different country . The lease arrangement is
called import lease.
• CROSS BORDER LEASE : when lessor and
lessee residing in two different countries and
no matters where the equipment supplier
stays , the lease is called cross border lease.
20. Advantages of leasing
To the lessee :-
• Doesn’t have to pay cash immediately.
• Easy source of finance.
• Enhanced liquidity.
• No disposal problem
• Convenience & flexibilty