• At times when a company requires to raise capital, they may be need to offload assets from their balance sheet so that the chargeable depreciation is not considered.
• When depreciation is taken off the P/L statement, it affects the EBIDTA positively and the company can present better profitability.
• MSMEs with small balance sheets needs to keep high depreciation assets off their balance sheet which helps them to achieve better numbers.
• In such cases, a lease can be taken up for items like IT Equipments, Windpower Equipments, Machinery, Company Vehicles and others, which are items with higher depreciation.
• Since the debt is not shown on the balance sheet the leverage ratio also is better.

BENEFITS

• Balanced Cash Outflow: The biggest advantage of leasing is that cash outflow or payments related to leasing are spread out over several years, hence saving the burden of one-time significant cash payment.  This helps a business to maintain a steady cash-flow profile.
• Quality Assets: While leasing an asset, the ownership of the asset still lies with the lessor whereas the lessee just pays the rental expense. Given this agreement, it becomes plausible for a business to invest in good quality assets, which might look unaffordable or expensive otherwise.
• Better usage of capital: Given that a company chooses to lease over investing in an asset by purchasing, it releases capital for the business to fund its other capital needs or to save money for a better capital investment decision.
• Tax Benefits: Leasing expense or lease payments are considered as operating expenses, and hence, are tax deductible. A company saves tax on the lease rental paid as with an operating lease, all rentals (Principal + Interest) are expensed off whereas in loan only interest portion is expensed off.

INTEREST RATE

• Interest rates for Leasing Solutions are usually in the range of 12.5%