Know how leasing works It is essential because, sometimes, it can be good financing for your company. We explain the advantages, disadvantages and its different modalities.
Leasing as a financing option: benefits and disadvantages
Leasing is, in essence, a Rent with option to buy. Since the 1980s it has been commonly used for company cars, but it can also be used for real estate. Today you can access furniture and real estate leasing and, although with different conditions, it may interest you.
The main advantages of leasing are related to the fact that we do not assume accounting expenses or depreciation. Not surprisingly, we must remember that we have no obligation to purchase the asset when the contract expires. Another aspect is that we can finance the 100 % of the acquisition of the good Finally, it is necessary to mention the tax advantages that are applied because the value of the good will be recorded as an expense. All this information is important so that you can choose this option with criteria.
Of course, it is convenient to point out that this system also has disadvantages. The first of these is that the interest payable is higher to the middle In second place, No we can access the property until completion the contract and also insurance is not covered nor the repairs. There are, then, some additional expenses that in no case should you disdain. As a general principle, leasing is only recommended if we are going to make use of what we contract.
How leasing works: financial, operational and lease-back
There are several types of leasing and it is good to know what we can expect from each of them. There is financial leasing, operational and lease-back. Depending on the circumstances of your business, you will be interested in one format or another. Let's take a look and indicate the pros and cons of each case:
when there is a financial leasing, a company has bought previously the goodno for later lease it. When this happens, it is important that it is recorded in the contract he amount and the additional interest.
This type of leasing has advantages and disadvantages. The main advantage is that the companies financial leasing usually have one wide portfolio of goods. The main drawback is that the interests required to cover are usually greater. It is true that the sum can change a lot depending on the company, but this aspect cannot be neglected.
This formula will interest you, either if the manufacturer does not arrive, or if you have several goods. At this point, you should consider the possibility of contracting through this option.
When we talk about operating lease, we refer to when companies manufacturers either distributors They directly offer the option. This option is usually useful when manufacturers have a network established in a geographical framework.
The main advantage of operating leasing is that this type of formula usually has lower interest. As you are the manufacturer or importer, you can offer a more interesting fee to the customer. Not surprisingly, you do not have to apply a surcharge to guarantee your continuity. Although this possibility is not so common because there is a tendency to delegate to finance companies, we can find companies that offer it.
The truth is that this was the first option that arose and has a rudimentary touch. However, we cannot deny that it is a practical option. If you are dealing with large companies, it will be easy to negotiate a good fee.
He lease-back is a less common option, but can be interesting when needed additional funding. This system consists, in summary, in which a company that has an asset sells it to a company and, subsequently, signs a lease. In practice, the company never ceases to dispose of the asset.
The advantages that this formula offers are two; First, the ability to have liquidity in a difficult moment and the second, dispose of the good for a certain time with the possibility of retrieve it. The disadvantage is obvious, since ownership of the asset is lost in the short term.
This possibility is important to take into account. If the traditional forms of financing fail you and you have assets, this is an opportunity.
The truth is that the leasing has become a good possibility for the companies that want to save. Having assets, sometimes, is nothing more than an expense. Consequently, the formulas that are linked to the lease are extremely interesting. It should not be forgotten, furthermore, that the Spanish Administration favors leasing contracts.
when we know how leasing works, the truth is that we can find several financing possibilities. Although Spain is traditionally a country with a culture of ownership, this option is spreading. If you are looking for financing to undertake projects in your company or tax or accounting advantages, be sure to consider this option. This is a way to improve in your day to day.