Lease Finance is a Great Financial Instrument to Lift Your Flagging Business

A Finance Lease can be a great support for businesses running short of capital when they want to finance new projects. Private institutions, under an agreement, extend these lease loans to customers where the customer utilises the asset and in return pays an agreed sum in rent to the funder over a period agreed by both parties. As per the lease financing rules, at the end of the agreed period, the borrower can either return the asset to the lender or revise the agreement and continue to use the machine for a second term.

Lease financing is usually granted to needy parties to allow them to buy machinery, equipment, vehicles and other such assets which they can then use to generate money on a monthly or yearly basis. During this time whatever installment of payment agreed with the lender and covered by the agreement will be returned to the lender usually on a monthly basis. The agreement is usually drawn up to facilitate the return payment for the borrower, by tuning the return schedule so that it matches with the revenue cycle. This lifts the pressure off the shoulder of the borrower and eases the cash flow to a great extent.

There are several advantages to taking out lease finance, and one of these is the influx of cash into the business with which you can buy the machinery or vehicle you need to start production immediately. Your project may not be in a position to take off as you would like as you lack the finance to support its commencement. This could be because your new project demands the purchase of new or second-hand machinery which would be commissioned into production, and this is where lease financing immediately helps you to buy what you need.

Another advantage of lease finance is that the machinery or vehicle you buy through lease financing can be added to the balance sheet. For VAT registered establishments, the VAT of monthly rentals for vehicles can be reclaimed. You can also revise the contract to start a new contract when the original lease agreement comes to an end.   With fixed rentals in place for the primary period, the leasee can predict their cash flow forecasts accurately.

The private companies that offer these lease loans tend to be more liberal in their terms as they do not impose many obstacles in the path of loan processing. Unlike banks and government institutions where the operators are answerable to authorities, the private lenders do not have any restrictions controlling them hence they are able to relax the conditions binding the lease loans, making it easier for their client. Lease financing is a great financial instrument as it allows the leasee to operate freely and concentrate           on revenue building as they are required to pay only a fixed amount to the funder as return of payment every month.