Importance of Lease Finance

Importance of Lease Finance:

Lease finance means contract among owner of asset and user of asset. In this contract just rent is paid at periodical intervals for utilizing of asset by user. When user of asset has no money to reimburse initial amount of leasing contract, he can as well do contract with third part to pay the initial amount or particular period rent of lease. This will be as well lease finance. In following words, we can clarify its significance:

A. Lease finance is simple to get than acquiring loan for buying all the fixed assets.

B. Monthly rent recompense for lease finance will be operating expenditures. This will be permitted to deduct net income. Therefore, company can obtain tax advantages in lease financing.

C. This can illustrate as invisible debt of company out of its balance sheet. You can illustrate lease finance in the footnote of the balance sheet, when you did contract directly with the owner of the asset.

D. One of main significant point is that it is more flexible manner of finance. You can fix your requirement of asset and obtain it one lease via lease financing.

E. The study from IFC [PDF] has revealed that 30 percent of net share of lease financing as investment of fixed asset is of emerging and builds up economies and now 15 percent of developing countries.

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