Leasing is a simple contractual arrangement calling for the lessee (user) to pay the lessor (owner) regular payments in exchange for use of an asset over an agreed period of time. Buildings, vehicles and equipment are among the most common assets that are leased.
For instance, imagine that you and 5 of your friends (owners/lessors) were to co-invest in bikes that were then leased to a restaurant (users/lessee) to use for delivery and pay all of you a monthly rental. It is as simple as that.
Leasing is a simple contractual arrangement calling for the lessee (user) to pay the lessor (owner) regular payments in the agreed time.
Pre-agreed monthly payments for the full lease tenure with no day to day volatility like stock markets
Upfront security deposit as well as the ability to recover, re-lease or sell assets to mitigate risk
Ability to claim depreciation and expenses to reduce the effective tax rate for lessor (you)
In addition to traditional loans, leasing should be considered as a strategic tool to finance micro, small and medium-sized enterprises (MSMEs). Although it is a well-known instrument for financing the acquisition of all types of equipment in countries around the world, in emerging markets, it is generally more accessible to larger companies than to MSMEs.