Leasing

Leasing is an amazing method of long term financing. If an organization needs
expensive machine, equipments, transport etc., then it has to purchase those things
directly or instead of purchasing directly the organization can use those things through a
lease contract from a company. But at that case, company does not get the
ownership of the machine. The company is the owner of the machine. To enter into such
a  contract, the organization has to pay rent (like interest) to the company
at a fixed rate and thus it can get the opportunity of using the leased properties. Let us
assume, a business firm takes a photocopy machine as lease from a  company for
3 years by pledging to pay a fixed amount of rent and returns it to the company
after the expiry of the period. That means, on a leasing contract, ownership of the
property is retained with the concerned company. As an advantage , the
organization needs not to take long term loan or to use savings fund. For this reason,
leasing is a source of long term financing. Newly established companies or the small
companies whose capital for investment is not sufficient also can use expensive
machines, etc. through leasing. The leasing company provides repair and maintenance
services for the lease properties.

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