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- 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.
- 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 rates for Leasing Solutions are usually in the range of 12.5%
CHECKLIST OF DOCUMENTS
Proof of Identity
- Pan Card
Proof of Address
- Electricity bill
- Telephone bill
- Latest property tax receipt
- Voter id card
- Company Pan card
- Proof Of Address – Registered
- Proof Of Address – Corporate
- Proof Of Address – Factory/Unit/Plant/Shop
Proof of Registration
In case of Company
- Articles of Association
- Memorandum of Association
- Certificate of Incorporation
In case of Partnership
- Certification of registration of firm with the registrar of firms and societies
In case of MSME unit
- Certificate of registration with District Industry centre (Compulsory for medium MSME)
In case of SSI unit
- SSI registration number/SIA SEK No.
- Brief profile of the Group / Parent company and Associate / subsidiary companies together with brief financials, if applicable.
- Current major orders/projects in hand (Share a few contract copies).
- Details on the equipment required i.e. supplier, model, utility, etc.
- Last 3 years audit report & audited financials
- Business Continuity proof – 3 years ITR
- Debtors ageing list
- Last 6 months bank statement
- Loan statement with sanction letter
- Financial projections, if applicable