The ABC Of A Financial Lease
Financial leases are an excellent way to acquire the required assets to start your business; many small and medium scale businesses rely on these financial leases to start up their companies and prevent the business from going too far into the red early on. If you are also planning to start a new business, it is important to realize that there are many different options to get together all your required assets and capital, and financial leases are just one way to do this.
First of all, let us look into what exactly a financial lease. A financial lease is also known as a ‘capital lease’ and is an agreement where one party can acquire a specified property for a specified period from another party, at a value less than its original price. The first part – the one which buys the property – is known as the lessee, whereas the party which lends (or technically, ‘leases’) its property is known as the lessor. Usually, finance companies which provide a number of services such as hire purchase, finance brokers Chatswood, and consultancy services, also provide these leasing facilities and acts as lessors; you can however also find specialized leasing services which solely provide these facilities.
The property is acquired at a fraction of the price, with the rest being paid to the lessor in instalments predefined in the commercial agreement (of course, with a profitable interest for the lessor). The advantage of this type of asset finance therefore, is the ability to acquire an asset, which would otherwise require you to spend a good part of your capital, at a lesser value. Usually, most financial leases are directed towards moveable assets, which are assets like vehicles and machinery. The ability to be able to use these assets as soon as the down payment has been made on the asset is therefore quite useful in these cases.
The legal aspect of a financial lease varies from country to country; in general, however, all financial leases are non-cancellable, meaning that they cannot be cancelled during the lease period. This means you will have to pay each month’s due without failure. At the end of the lease term, you, as the lessee, can decide on whether you wish to purchase the asset or not. Also remember that since the lease value for an asset will always be lower than its original market price, financial leases also become a useful option when you are in need of an asset which is expensive, but which you will not be using in the long term period.