Lease Financing, Hire - Purchase and Factoring
LESSON-15 LEASE FINANCING, HIRE PURCHASE AND FACTORING
Rekha Rani
STRUCTURE
15.0 15.1 15.2 15.3 15.4 15.5 Introduction Objectives Concept of Lease Financing Meaning of Lease Financing Importance of Lease Financing Types of Lease Agreements 15.5.1 Financial lease 15.5.2 Operating lease 15.5.3 Sale and lease back 15.5.4 Leveraged leasing 15.5.5 Direct leasing Advantages of leasing Leasing in India Concept & Meaning of Hire purchase Difference between Lease Financing and Hire Purchase NSIC & Hire Purchase Factoring 15.11.1 Factoring procedure 15.11.2 Merits Summary Glossary Self Assessment Questions Further Readings
15.6 15.7 15.8 15.9 15.10 15.11
15.12 15.13 15.14 15.15
15.0 INTRODUCTION
In order to start and sustain a business one needs finance. In the unit one on feasibility study, you have already seen the process of estimating financial requirements. The process involved (a) making a list of all the assets (b) identifying the sources of supply (c) estimating the cost of acquisition when the assets are to be acquired on outright basis. Then investment requirements as well as entrepreneur’s fear will increase. To scare away the entrepreneur’s fear, the emphasis should be given to resources and not to the ownership. In this unit we intend to familiarize you with some important financial innovations i.e., leasing, hire purchase and factoring.
227
15.1 OBJECTIVES
After going through this unit you should be able to • Describe the meaning of leasing • Explain the role and importance of lease financing in economic development of a country • Distinguish between the various types of leases • Describe the meaning of hire purchase • Distinguish between leasing and hire purchase • Describe the meaning of factoring
15.2 CONCEPT 0F LEASE FINANCING
Lease financing denotes procurement of assets through lease. The subject of leasing falls in the category of finance. Leasing has grown as a big industry in the USA and UK and spread to other countries
Rekha Rani
STRUCTURE
15.0 15.1 15.2 15.3 15.4 15.5 Introduction Objectives Concept of Lease Financing Meaning of Lease Financing Importance of Lease Financing Types of Lease Agreements 15.5.1 Financial lease 15.5.2 Operating lease 15.5.3 Sale and lease back 15.5.4 Leveraged leasing 15.5.5 Direct leasing Advantages of leasing Leasing in India Concept & Meaning of Hire purchase Difference between Lease Financing and Hire Purchase NSIC & Hire Purchase Factoring 15.11.1 Factoring procedure 15.11.2 Merits Summary Glossary Self Assessment Questions Further Readings
15.6 15.7 15.8 15.9 15.10 15.11
15.12 15.13 15.14 15.15
15.0 INTRODUCTION
In order to start and sustain a business one needs finance. In the unit one on feasibility study, you have already seen the process of estimating financial requirements. The process involved (a) making a list of all the assets (b) identifying the sources of supply (c) estimating the cost of acquisition when the assets are to be acquired on outright basis. Then investment requirements as well as entrepreneur’s fear will increase. To scare away the entrepreneur’s fear, the emphasis should be given to resources and not to the ownership. In this unit we intend to familiarize you with some important financial innovations i.e., leasing, hire purchase and factoring.
227
15.1 OBJECTIVES
After going through this unit you should be able to • Describe the meaning of leasing • Explain the role and importance of lease financing in economic development of a country • Distinguish between the various types of leases • Describe the meaning of hire purchase • Distinguish between leasing and hire purchase • Describe the meaning of factoring
15.2 CONCEPT 0F LEASE FINANCING
Lease financing denotes procurement of assets through lease. The subject of leasing falls in the category of finance. Leasing has grown as a big industry in the USA and UK and spread to other countries