Definition of Financial Leasing: (Financial Leasing), also known as equipment leasing (Equipment Leasing) or modern leasing (Modern Leasing), refers to leasing that substantially transfers all or substantially all of the risks and rewards associated with ownership of an asset. Ownership of the asset may or may not ultimately be transferred.
Financial Leasing:
Simple Financial Leasing
Simple Financial Leasing means that the lessee chooses the leased object to be purchased, and the lessor leases the leased object to the lessee through the assessment of the risk of leasing items. The lessee has no ownership but enjoys the right to use the leased object and is responsible for the repair and maintenance of the leased object during the entire leasing period. The lessor is not responsible for the good or bad condition of the leased item, and depreciation of the equipment is on the lessee's side.
Leveraged financial leasing
Leveraged leasing is similar to syndicated loans, a kind of financial leasing with tax benefits specializing in large-scale leasing projects, mainly led by a leasing company as the backbone of the company, to finance a mega leasing project. First of all, set up a leasing company from the main body of the operating institutions - specifically for the project set up a fund management company to provide the project more than 20% of the total amount of funds, the rest of the source of funds is mainly to absorb the banks and the community of idle capital, the use of 100% of the benefits of enjoying the benefits of low taxes, "to two Bo8 The remaining part of the source of funds is mainly to absorb the banks and social idle capital, using the benefit of 100% low tax "two for eight" leverage to obtain huge amount of funds for the leasing project. The rest of the practice is basically the same as financial leasing, except that the complexity of the contract increases due to the wide range of issues involved. Because of the tax benefits, standardized operation, good comprehensive benefits, safe rental recovery and low cost, it is generally used for the financial leasing of aircraft, ships, communication equipment and large sets of equipment.
Commissioned Financial Leasing
One way is that the person who owns the funds or equipment commissions a non-banking financial institution to engage in financial leasing, with the first lessor being the principal at the same time and the second lessor being the trustee at the same time. The lessor accepts the funds or the subject matter of the lease from the principal, and according to the written entrustment of the principal, handles the financial leasing business to the lessee designated by the principal. The ownership of the subject matter of the lease belongs to the principal during the lease period, and the lessor only receives the handling fee and bears no risk. A major feature of this entrusted leasing is that enterprises without the right to lease business can "borrow the right" to operate. E-commerce leasing is to rely on the entrusted lease as a business leasing platform.
The second way is that the lessor entrusts the lessee or a third person to buy the leased goods, the lessor pays the money according to the contract, also known as entrusted purchase of financial leasing.
Project financial leasing
The lessee concludes a project financial leasing contract with the lessor on the basis of the project's own property and benefits, the lessor has no recourse to the lessee's property and benefits other than the project, and the collection of rent can only be determined by the project's cash flow and benefits. The seller (i.e., the producer of the leased item) takes this approach to marketing its products and expanding its market share through a leasing company that it holds. Communications equipment, large medical equipment, transportation equipment and even highway operating rights can be used in this way. Others include return leasing, also known as sale-and-leaseback financial leasing; and finance-to-lease, also known as sub-finance leasing.
Risks of financial leasing:
Product market risk. In the market environment, whether it is financial leasing, loans or investment, as long as the funds for additional equipment or technological transformation, the first should consider the market risk of the products produced with the leased equipment, which requires an understanding of the sales of the product, the market share and the ability to occupy the market, the product market development trend, the structure of consumption, as well as the consumer's mentality and ability to consume. If these factors are not adequately understood, the investigation is not detailed, it is possible to increase the market risk.
Financial risk. Because of the financial attributes of financial leasing, the risk of financial aspects throughout the entire business activities. For the lessor, the biggest risk is the lessee's ability to pay back the lease, which directly affects the operation and survival of the leasing company, therefore, the risk of paying back the lease from the beginning of the project, it should be highly concerned.
Trade risk. Because financial leasing has trade attributes, trade risks exist from the order negotiation to the trial acceptance. Due to the commodity trade in recent times the development of a more complete, the community has correspondingly established supporting institutions and preventive measures, such as letter of credit payment, transportation insurance, commodity inspection, commercial arbitration and credit counseling have taken precautions and remedial measures against the risk, but due to the different degree of awareness and understanding of the risk of some means and the nature of business, coupled with the lack of experience in business management and other factors, these means have not been all adopted, making trade risks still exist.
Technology risk. One of the benefits of financial leasing is the introduction of advanced technology and equipment before other enterprises. In the actual operation process, factors such as whether the technology is advanced or not, whether the advanced technology is mature or not, and whether the mature technology infringes the rights and interests of others legally are all important reasons for technical risks. In serious cases, the equipment can be paralyzed by technical problems. Others include economic environment risk, force majeure and so on.