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What is leasing?

At the moment many Russian enterprises suffer searching and attracting long-term investments for output expansion, up-to-date equipment purchase and introduction of new technologies.

Leasing is an investment tool making it possible for an enterprise to update its main funds and obtain advanced high-technology equipment without diverting its own means or resources.

Leasing is a means of financial backing where obtaining of development means goes together with enterprise tax structuring.

Leasing is a sort of investment activity where a lessor (a leasing company) buys equipment and gives it in rent to a lessee (a client) at a definite charge, for a specified period of time and on certain terms with further passing of property to a lessee.

Leasing transaction is trilateral: the participating parties are the client, equipment contactor and leasing company. As a rule, the client comes around quite aware of what kind of equipment he needs and who produces this equipment. The leasing company checks the seller, estimates the equipment and checks the client on financial solvency. After calling in the property (hereon the sellers area of responsibility is over) its set in lessors balance.

  • You can get any piece of equipment which is on sale or can be called in under financing provisions in force. You can choose the equipment and the seller by yourself; we just acquire it to give it in rent.
  • You take up a 20-30 % advance payment for the equipment acquired.
  • Leasing saves up financial means of lessees enterprise. Besides, obtaining equipment in rent makes it possible for paying enterprises to significantly decrease the tax base of active business by structuring tax allocations.
  • You save up your current capital by meeting lease payments at the expense of earning which is generated by the acquired equipment itself.

The using of accelerated depreciation mechanism will make it possible for you to obtain the equipment at net book value at the end of 2-4 years. At the same time its real value will be much more expensive.

Leasing gives ample opportunity to start a big project without insetting much.

Leasing main types are:

  • classical financial leasing;
  • leaseback;
  • service leasing

Lets take a look at each type:

Three parties take part in financial leasing transaction: the property user (the lessee), the leasing company (the lessor), and the seller (the property seller). The lessor in the name of the lessee acquires the property from the seller. After the lessee had taken up the advance payment, the lessor makes the property over to him on terms of durable paid use with further transfer of property. Firstly, the advantage of financial leasing lies in tax payment savings, secondly, in credit operations making it possible to combine capital growth with property or equipment use. Leaseback is a sort of leasing where the seller (the seller) of the leasing matter acts on behalf of the lessee. That is to say, if the enterprise (businessman)-lessee already has necessary manufacturing assets and needs current capital for business expansion, the leasing company can call in the equipment on hand at the price agreed by both parties and give it back in rent to the enterprise (businessman). This agreement results in the lessees getting necessary current capital and using legal means for tax mitigation at his enterprise. After paying leaseback transaction price, the lessee regains his property rights on the equipment.

Service leasing is a mid-term agreement on using the leasing matter with its further return to the lessor. In this case, the lessee can use the property in line with the service need and make up for the depreciated book value of the property in lease payments, meanwhile, reserving all leasing advantages.

115280, Russia, Moscow, Leninskaya Sloboda 19
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