Financial leasing is an innovative financial tool that is realized through three key steps: the lessor buys the equipment, leases it out and collects the rent. In simple terms, it means that the user chooses the equipment needed, the lessor finances the purchase, and then leases the equipment to the user, who pays the rent on a regular basis, during which the ownership of the equipment belongs to the lessor.
Based on its characteristics, financial leasing is divided into a variety of types:
Direct (simple) financial leasing, the lessee directly selects the equipment, the lessor is responsible for risk assessment and financing, and equipment depreciation is mainly borne by the lessee. Operating lease, at the end of the lease term, the lessee has a variety of options, the lessor may provide repair and maintenance services, accounting equipment depreciation is handled by the lessor. Project finance leases, where the project revenue is guaranteed, the lessor has no recourse to assets outside the project, and the rent is determined based on the project cash flow. Leaseback leasing, where the equipment owner sells and then leases back, flexible use of funds, applicable to second-hand equipment. Leveraged leasing, a large-scale project financing method, similar to syndicated loans, mainly applied to large equipment. Entrusted leasing, involving multiple parties, the lessor may be the principal or trustee, entrusted with the purchase of equipment.In addition to financial leasing, there are other ways of financing for enterprises, such as bank loans (working capital, fixed assets and special loans), stock financing (to promote the conversion of corporate mechanisms), bond financing (corporate bonds), overseas financing (commercial bank loans, financial market issuance of securities), and pawn financing (physical mortgage loans). Each of these methods has its own application scenarios and advantages and disadvantages, and enterprises choose the most suitable financing channel according to their own needs.