Lease - A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. Leasing is a general contract between the owner and user of the asset over a specified period of time. The asset is purchased initially by the lessor (leasing company) and thereafter leased to the user (lessee company) which pays a specified rent at periodical intervals. Thus, leasing is an alternative to the purchase of an asset out of own or borrowed funds. Moreover, lease finance can be arranged much faster as compared to term loans from financial institutions.If you like this article then please like us on Facebook so that you can get our updates in future ……….and subscribe to our mailing list ” freely “
Lease financing :
Terms to be known :
(1) Lessor :A lessor is a person or an organization that owns an asset and leases the asset in consideration of some periodical payments.
Lessor may be individual partnership, joint stock companies, corporation or financial institution.
(2) Lessee :Lessee is person to whom to asset has been leased for a periodical payments. Lessee may be an individual , HUF , company etc.
(3) Lease broker :Lease broker is an agent in between the lessor (owner) and lessee. He acts as an intermediary between the two parties in arranging the lease deals. Merchant banking divisions of foreign banks, subsidiaries indian banking and private foreign banks are acting as lease brokers.
(4) Lease assets :
(5) Tenure / Term :It's the period for which the lease deed has been executed. Generally it is mentioned in lease agreement/ deeds.
(6) Rental payments :
Types of Lease :(A) Lease based on the term
Finance LeaseFinance Lease: In contrast to an operating lease, a financial lease is longer term in nature and non-cancelable. In general term, a finance lease can be regarded as any leasing arrangement that is to finance the use of equipment for the major parts of its useful life. The lessee has the right to use the equipment while the lessor retains legal title. It is also called capital lease, at it is nothing but a loan in disguise.
- Sale and lease back
- Direct lease
- Single investor lease
- Leveraged lease
- Domestic lease
- International lease