Small business government loans are usually implemented through lease financing. Conceptually, a lease may be defined as a contractual arrangement in which a party owning an asset (lessor) provides the asset and the right to use the equipment to the user (lessee) over an agreed period of time for consideration in the form of periodic payment (rentals) with or without a further payment (premium).
At the end of the period of contract (lease period), the assets revert back to the lessor unless there is a provision for the renewal of the contract. Leasing essentially involves the divorce of ownership from the economic use of an asset. It is a contract in which a specific asset required by the lessee is purchased by the lessor, in this case from a manufacturer selected by the lessee.
Leasing is a device of financing. The position of a lessee is akin to that of a person who owns the same asset with borrowed money. The real function of a lessor is not the renting of assets but lending of funds. Lease financing is, in effect, a contract of lending money.
The lessor is the nominal owner of the asset as the possession and economic use of the asset vests in the lessee. The lessee is free to choose the asset according to his requirements and the lessor does not take recourse to the asset as long as the rentals are regularly paid to him. An asset lease transaction can differ on the basis of the extent to which the risks and rewards of ownership are transferred and the number of parties to the transactions. Risk with reference to leasing refers to the possibility of loss arising on account of underutilization of the asset.
Related Articles of Interest :
-
Fast Cash Leasing
10 August 2010 8:30 PM |
No Comments
Leasing is an arrangement that provides a firm with the use and control over assets without receiving title to them. A leasing is a written agreement allowing the use of the assets for a specific period of time. The lease is signed by both the...
-
Types Of Car Leases
10 August 2010 8:30 PM |
No Comments
When leasing a car, individuals need to be familiar with the different types of leases that are available. Consumer leases essentially come into two categories, namely, open end and closed end. There is a substantial difference between these two categories; this difference needs to be...
-
Leasing
10 August 2010 8:30 PM |
No Comments
A lease is basically a contract that transfers the right of possession. It could be property-related, equipment-related, or vehicle-related. Much easier than buying or financing, leasing is the most affordable way to get the equipment your business requires. Approximately eight out of 10 businesses today...
-
Small Business Loans
10 August 2010 8:30 PM |
No Comments
After determining the level of working capital, a firm has to decide how it is to be financed. The need for financing arises mainly because the investment in working capital/current assets – that is, raw materials, work/stock-in-process, finished goods and receivables – typically fluctuates during...
-
Free Small Business Accounting Software
10 August 2010 8:30 PM |
No Comments
Free small business accounting software primarily focuses on assets. Assets may be described as valuable resources owned by a business, which were acquired at a measurable money cost. As an economic resource, they satisfy three requirements. In the first place, the resource must be valuable....
-
Small Business Bad Credit Loans
10 August 2010 8:30 PM |
No Comments
When talking about Small Business Bad Credit Loans, it is important to get an insight of the term ‘receivables’. It can be defined as debt owed to the firm by customers arising from sales of goods or services in the ordinary course of business. When...
-
Equipment Leasing
10 August 2010 8:30 PM |
No Comments
A lease is basically a contract that transfers the right to possession. Equipment leasing companies provide customers with the privilege to use their equipment for a limited time frame with a monthly payment. Leasing equipment for official purposes, as opposed to purchasing equipment, offers any...
-
Small Business Start Up Loans
10 August 2010 8:30 PM |
No Comments
Small business startup loans are usually given in the form of term loans. Term loans, also referred to as term finance, represent a source of debt finance which is generally repayable in more than one year but less than 10 years. They are employed to...
-
Business Acquisition Loans
10 August 2010 8:30 PM |
No Comments
Business acquisition loans, or “change of control” financing conditions, can vary to a great extent from case to case. Meeting the criteria for small business acquisition loans may be an ordeal at times. When businesses being sold are extremely profitable, the selling price will probably...
-
Bad Credit Leases
10 August 2010 8:30 PM |
No Comments
Bad credit leases provide people the chance to acquire property like cars and houses despite a distressing financial situation. Several companies have already been offering these leases so as to give people with bad credit the opportunity to live normal lives and clean up their...