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.
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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

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or by contract or grant, permit another to have possession and 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 minimal tax
disadvantages and low transaction costs will encourage land ownership. Whatever the

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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 "non-cumulative" concepts), continuous
operating covenants, and much more.

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Advantages of commercial leasing

For businesses, leasing property may have significant financial benefits:

 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.

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Leasing Internationally
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.

• 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.

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• 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.

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

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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.

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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 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.

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✔ 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.

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.

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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 :

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.

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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
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 spin-off, 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 leasingsimply means renting business equipment. Instead of obtaining a loan to
purchase equipment, equipment leasing lets you use the equipment and start operating the

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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 equipmentpresents 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 equipmentis 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 companiesdo 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

The challenge of business financingisn’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?

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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 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 optionis 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

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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. Youcan 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 equipmentis 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

Starting your own small businesscan 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 fundingshould not be a problem. Today,
aspiring small business owners have the option to lease business equipmentespecially 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 leasingin 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 companiesare 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
companiesto 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.

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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 companiesyou 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.

Hiring a Certified Public Accountantis 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:
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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

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

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