Reinforce Your Business with Business Asset Finance

Assets in a business can be financed by the following methods:

• Leasing
• Hire purchase
• Mortgage
• Factoring

Leasing is a legal contract where you (lessee) approach a lender (lessor) who lends you the asset amount or a fee.

• The lessee approaches the lessor for the equipment or the plant or any asset that he requires.
• The lessor and the lessee both agree on the conditions of the leasing agreement.
• The lessor then lends the asset to the lessee for the duration agreed upon in the agreement.

The lease agreement includes all the aspects of the contract, some of them are:

• The duration for which the asset is being lend
• The condition of the asset during lending.
• The place and time at which the asset is lend
• The amount for which the asset is leased
• The installments and the mode of payment of the lease
• The rights of the lessee and the lessor
• Maintenance cost of the asset that is paid by the lessor and the lessee

The lease is classified into two types:

• Finance lease
• Operating lease

In operating lease the asset is leased for a fixed period. When the when the lease period is complete then the lessor hands over the asset top the lender. Here the lender sometimes may sell the asset to the lessor for an amount.The ownership of the leased asset remains with the lender in leasing agreement.The leasing can also be of direct lease where the lessor approaches the leasing company which then borrows or purchase the asset from the source and lends it to the lessor for fees. In sales and lease back the lessor sells the asset to the lender which then leases back the asset to the lessor for a fee.

Hire purchase is a legal agreement where the ownership of the asset passes to the person hiring the asset once all the installments are made. The term of the contact is generally kept smaller than the life of the equipment that is hired. The final installment is generally higher than the previous regular installments. The person hiring the asset also has the option of purchasing the asset in the middle of the hiring contract before the hiring term expires.

In factoring the bank buys the account receivable of the client or company and pay to its client 80% of the value. The remaining 20% is given when the customers of the company pay the debts to the company.