A Finance Lease also referred to as a lease or business lease, it may suit those businesses who wish to have an Off Balance Sheet style of funding. Lessee (user) are not the owner of the goods so the value of the goods will not be entered on his/her balance sheet so neither the contingent liability.
The Finance Lease
Provider will buy the goods on lessee behalf, and lessee will lease (rent) the goods back from them for a predetermined
term, monthly repayment and residual.
Finance Lease Key
Features:
The Key Features of a Finance Lease
are:
1) Flexible Terms lessee can choose from
terms of 1-5 years.
2) Fixed Residual A residual may be
compulsory, this residual is set by the lease provider.
3) Repayment Options lessee can choose to structure a repayment schedule that suits. This could be monthly, Quarterly, Bi-Annually, or Yearly.
4) The entire or just a portion of the lease repayment as a business expense, depending on the percentage of business use.