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Short funding turnaround — the credit assessment turnaround time for leasing is usually shorter than that for bank loan. The lessee does not need to provide real estate collateral. Therefore it helps to shorten the turnaround time for installation of equipment and improves in efficiency and flexibility of trading new equipment. |
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Fewer restrictions — long-term finance has many restrictions, whereas the relevant restrictions are less applicable to leasing. |
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Low finance risk — the repayment is paid by installments over the whole financing period instead of paying a lump sum payment on one due date to avoid any financial burden arisen to the company. |
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Avoidance of inflation — it takes a long time for a company to accumulate cash to purchase new manufacture equipment when inflation arises. The price is comparatively lower if it is purchased before inflation. Acquiring leasing finance, the company could use the profit generated from the production to repay the installment. |
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Elimination of risks in exchange rate and interest rate — foreign exchange is required when a company purchases the leasing equipment from overseas. Leasing contract can be repaid by RMB after converting the foreign currency into RMB. Therefore, the lessee can eliminate the exchange rate risks caused by the fluctuation in RMB. Moreover, leasing finance adopts the fixed interest rate when lease commences so that the lessee also avoids the interest rate risks caused by the fluctuation in interest rate. |
