Analysis of advantages of financial leasing

Analysis of the advantages of financial leasing

The general operation process of financial leasing is: the lessee first selects the supplier of the required equipment, and then finds a suitable lessor to negotiate for the purchase; the lessor Purchase the equipment according to the lessee's requirements and then hand it over to the lessee for use.

Financial leasing belongs to service trade and is a knowledge-intensive edge industry integrating finance, trade and services. Lessors use leasing as a vehicle to develop transaction models that can both reduce risks and increase returns. As a kind of financial innovation and trade innovation, financial leasing is the second largest financing method after bank credit internationally. The financial leasing industry is an industry alongside banking, securities, insurance, and trusts. It plays a very important role in promoting the development of the national economy, accelerating corporate technological innovation, and promoting international trade. It is known as a "sunrise industry" in the financial field. Financial leasing has received great attention from governments, regulatory agencies and research departments in Western countries, and is known as the "promoter of the new economy". Financial leasing has been introduced into my country as a financial innovation for more than 20 years and has made significant contributions in the introduction of capital, technology and advanced equipment. Therefore, it has also received great attention from the Chinese government, regulatory agencies and research departments. Compared with banks, trusts, and securities, the advantages of the financial leasing industry are mainly reflected in the following aspects:

(1) Advantages of two-way development against the market Financial leasing has the advantage of two-way development against the market. During economic prosperity, Bank credit policies are loose, and financial leasing can give full play to its financing function, create financing opportunities for enterprises, and promote vigorous economic development; during economic depression, the financial leasing industry not only plays the role of a "booster" but also gives full play to its promotional function and promotes economic development. Investment and consumption stimulate economic development, inject fresh blood into economic development, and promote healthy economic development. Financial leasing is an effective means to stimulate investment and overcome shrinking investment. It can avoid the impact of national monetary policy fluctuations to a certain extent, and plays a positive role in the stable development of enterprises and the sustained and stable growth of the national macro economy.

(2) Personalized advantages The form of financial leasing is flexible and can be tailored to meet different conditions and needs according to project conditions, background, and the requirements and goals of all parties involved in the project. As a new industry, financial leasing itself is a financial innovation. In the fierce market competition with other financial industries, financial leasing has continuously introduced new forms of financial leasing, such as direct leasing, leaseback leasing, sub-lease, leveraged leasing, entrusted leasing, etc.

(3) The advantage of strong autonomy in equipment selection. During the financial leasing process, the lessee has the right to independently select equipment and suppliers without relying on the lessor’s judgment and decision. The lessor shall not interfere with the lessee’s decision-making. Selection of equipment and suppliers. Except for equipment with special regulations by the state, the lessor can recommend manufacturers and equipment to the lessee, but has no decision-making power.

(4) Advantages of flexible rent payment methods Financial leasing has a relatively flexible method of rent collection. The lessor can combine the repayment time and amount with the actual operating conditions of the enterprise based on the lessee's production nature, financial status, and seasonal sales characteristics, and is not limited to regular and fixed rent payment forms. The lessee can pay rent in many forms. For example, according to the payment interval, it can be divided into annual payment, semi-annual payment, quarterly payment and monthly payment; according to whether each rent is equal, it can be divided into equal payment and unequal payment. In practice, the rent payment method agreed upon by the lessee and the lessor is generally post-payment annuity.

(5) Advantages of matching with various financing methods. Financial leasing can be matched with a variety of financing methods, stemming from the needs of the mutual development of both parties. During the establishment period of an enterprise, financial leasing is used in conjunction with bank loans. Bank loan financing is used to mainly solve the enterprise's demand for short-term working capital, and financial leasing is used to solve long-term financing mainly focused on technological transformation. Enterprises should clarify the purpose of financing, avoid financial risks caused by using working capital for technological transformation and infrastructure project construction, and give full play to the positive role of leasing in accelerating depreciation and adjusting capital structure. In the process of equity financing, enterprises can use financial leasing to provide favorable support. As corporate financial advisors, financial leasing companies can use diversified financial leasing methods to design appropriate capital structures for companies, help companies make full use of financial leverage to raise funds, optimize capital structures, and adjust asset return rates, so that companies can better meet listing conditions. . In terms of mergers and acquisitions, financial leasing can make full use of diversified financial leasing methods to help companies gain unique advantages in expansion and contraction, help companies optimize their asset-liability structure, and solve some sources of funds. Financial leasing can also join forces with venture capital to jointly incubate and support small and medium-sized enterprises, or jointly invest with small and medium-sized enterprise funds to support the development of small and medium-sized enterprises.

(6) Advantages of off-balance sheet financing For companies with large financing needs, credit status is very important. Because loans are generally reflected as corporate liabilities, they will affect the company's refinancing ability. Financial leasing is off-balance sheet financing, and companies can not only finance up to 100% of the value of the leased property, saving working capital, but also maintain existing credit lines. Through this kind of off-balance sheet financing, enterprises can expand their sources of funds and break through the limitations of current budget size. For enterprises that have a large amount of capital solidified and precipitated after a period of operation, they can also use the method of sale and leaseback for off-balance sheet financing.

Through sale and leaseback, working capital can be released to meet the needs of enterprises to improve their financial status and revitalize existing assets, thereby converting physical capital into monetary capital and maintaining the liquidity of corporate funds without affecting the company's continued use of assets.

(7) Advantages of simple and fast procedures Small and medium-sized enterprises are flexible in operation and highly adaptable. Their capital needs are characterized by "urgent, small and frequent" and are extremely timely. However, bank loan procedures are cumbersome, involve many steps, and take a long time. Business opportunities are often missed by waiting for the loan to be finalized, and the financial needs of small and medium-sized enterprises cannot be met. In financial leasing transactions, small and medium-sized enterprises only need to directly lease equipment as needed. Under the same conditions, financial leasing has fewer links, shorter time, and simpler and faster procedures than bank loans, so it is more suitable for the operating rules and financing needs of small and medium-sized enterprises.

(8) Advantages of complete financing Bank credit is a kind of incomplete financing. In order to ensure the safety of credit assets, banks not only need small and medium-sized enterprises to provide mortgages to banks, but also impose lower rates on the collateral. Discount rate, the general loan amount is 30% of the assessed value of the collateral. Compared with bank credit, financial leasing has the advantage of complete financing. Financial leasing is actually 100% complete financing from the lessor to the lessee, and the lessor provides the lessee with What is offered is an equivalent to the price of the equipment.

(9) Low-cost advantage: Small and medium-sized enterprises can use less rent to obtain the right to use equipment, create profits, and achieve business objectives. The payment of funds lags behind the use of assets, which is conducive to giving full play to the time value of funds, allowing small and medium-sized enterprises to create greater value with limited funds. Small and medium-sized enterprises use equipment to produce, generate profits and pay rent while increasing their production capacity at a lower cost and avoiding the constraints of insufficient funds on production capacity.

(10) Tax-saving advantages Generally speaking, in order to encourage investment and promote technological progress of small and medium-sized enterprises, the state has formulated a series of preferential policies for financial leasing. In April 1996, the State Administration of Taxation issued the "Notice on Fiscal and Taxation Issues Concerning Promoting Enterprise Technological Progress", which stipulates that for enterprises that use financial leasing for technological transformation of machinery and equipment, the depreciation period can be based on the lease period or the national regulations. Yes, but the minimum period is not less than 3 years. For the lessee, the cost of financial leasing is ostensibly higher than the cost of credit funds, but compared with the market opportunities gained by deferring income tax, reducing the debt ratio, and saving financing time, the lessee's benefits are very significant.

(11) Service advantages Financial leasing is not a simple financing, but a knowledge-intensive edge industry integrating finance, trade and services. Financial leasing can not only alleviate the financing difficulties of small and medium-sized enterprises, but also provide comprehensive services in asset management, investment consulting, management consulting, capital operation and other aspects to make up for the "innate deficiencies" of small and medium-sized enterprises in this regard.

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