How expensive is Luckin Coffee? Even the equipment is rented

Recently, Qixinbao data shows that on April 1, Luckin Coffee (China) Co., Ltd. added a piece of chattel mortgage information.

The mortgagee is Zhongguancun Technology Leasing Co., Ltd., and the amount of guaranteed debt is 45 million yuan. Luckin’s movable collateral is coffee machines, milk boxes, powder warehouses, and the items belong to stores in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and other places.

In response, Luckin Coffee said that this is a conventional equipment financing lease, which is in line with Luckin’s general idea of ??asset-light operations.

Ruixing is a financial lease, which means Ruixing sells the equipment it buys to a leasing company, gets cash, and then rents it back for use. This is a financing method that allows the lessee to quickly recover the funds used to purchase the item and accelerate capital turnover.

According to reports, Luckin Coffee’s mortgage behavior, namely financial lease, is currently the most common and basic form of non-bank finance in the world. It is mostly seen in aviation, heavy machinery and other important industries. The operating method of the asset industry is to use fixed assets that do not generate profits as collateral to lend working capital to financial leasing companies, so that the company can maximize the value of its own funds and achieve faster development.

At the beginning of this year, Luckin Coffee announced three major indicators. By the end of the year, the total number of stores will exceed 4,500, surpassing Starbucks in terms of stores and cup volume, becoming the largest chain coffee brand in China. However, Luckin Coffee suffered a net loss of 857 million yuan in the first nine months of 2018. Yang Fei, co-founder and CMO of Luckin Coffee, said that the loss of 800 million was completely in line with expectations and that subsidies would continue in the next 3 to 5 years, regardless of profitability issues.