BUSINESS

Knowing the Advantages of Leasing in Your Business

Leasing is a financing method carried out by people through the procurement of capital goods or assets given to a company or individual within a certain period of time. You will also get various kinds of leasing benefits.

The recipient of the lease is usually an entrepreneur who is running a business activity. The entrepreneur needs capital to succeed in his business.

Meanwhile, according to the Decree of the Ministry of Finance Number 1169/KMK.01/1991, leasing can be referred to as leasing for payment activities in the form of providing capital or goods.

Definition of Leasing

Leasing is a financing activity in the form of providing goods or capital that can be carried out by anyone who needs it. Whether it’s a company or an individual who uses the item.

Leasing activities generally have a certain period of time and the method of payment is also in installments or in installments.

Payment in installments makes it easier for customers because they no longer need to prepare large amounts of money at one time. The amount of payment also depends on the amount of the cost of goods or capital and the selected installment period.

In addition, there is another definition of the term leasing, which is an agreement that has been agreed upon by the owner of the capital with another party, usually referred to as the customer who cooperates with them. After the agreement, then the customer will receive the capital or goods and start paying installments until the agreed time.

Leasing is one way that is often relied on by the people of Indonesia. Because, the presence of leasing really helps the community to be able to more easily buy goods and get the capital needed.

For example, when buying electronic goods, vehicles, capital to build a business , and others.

Leasing Benefits

Because there are providers of tools or capital through leasing activities, making it easier for the community or business people to get the goods they need.

Not only that, there are various other leasing benefits that you can feel, including:

  1. No need for guarantee

The first advantage of leasing is that it does not require collateral. If you use a leasing provider, you do not need to provide a guarantee or collateral to that party.

Because the right of legal ownership of the leased goods and the appropriate payment of income can be used as collateral. This advantage of leasing can help get many people to do leasing.

  1. Flexible

The second advantage of leasing is that it is flexible. Leasing uses a contract system that can be said to be flexible. This is intended so that the amount of the term and the nominal payment can be adjusted to the financial condition or needs of the customer.

This advantage is also one of the reasons many people do leasing to get capital used in their business.

  1. Fast service

The advantage of leasing that many people praise is that it has fast service. The service can also be fairly simple and very fast, so you can more easily and efficiently obtain an item.

  1. Capital Saving

Capital saving is one of the advantages of leasing. This means that customers do not need to spend any initial capital. This is because the financing has been provided by the leasing party at 100%. And the fees given can be used for other needs.

  1. Protected by law

Another advantage of leasing is getting legal protection. The leasing party or the customer will get legal protection because in it there is a regulation that cannot be canceled and changed. Even though the customer’s financial condition is changing.

  1. Avoid inflation

Leasing is one way that you can choose to avoid inflationary losses. You can take cover on leasing from the risk of currency depreciation.

This is because leasing payments will only be made in accordance with the finances in the agreement that has been made previously. This advantage of leasing is the reason for many people to carry out leasing activities.

  1. How to get assets

Leasing is one way that you can choose to acquire assets or capital goods when you think about it but are constrained by costs. This leasing advantage can be an option for your business.

  1. Payment as operational cost

The last advantage of leasing is that installment payments can be included in the company’s operating costs. Payments on leasing will be calculated in determining the company’s profit and loss. So the calculation is not from taxable profit, but from pre-tax income.

Purpose of Leasing

In addition to the benefits of leasing, you also need to know about the purpose of leasing. Basically, leasing has the aim of making it easier for people to obtain capital goods.

Although it has a fairly high price value.

In addition, the leasing company will get a number of benefits from credit interest. So the possibility if you want to buy a motorbike for Rp. 25 million, then it is likely that you will have to incur larger costs to the leasing party due to the credit interest that must be given.

Leasing History

In addition to the purpose and advantages of leasing, make sure you know the history too. Leasing is an activity that has been around for a long time. This activity began in 2000 BC and was first practiced in Sumer.

This has been proven by the findings of documents made of clay containing leasing with various needs. The needs at that time, for example, such as livestock, daily equipment, water and so on.

Leasing then continued with the discovery of evidence of the establishment of leasing institutions in Babylon in 400 BC. At that time, it was like now, namely the modern era. The inhabitants of Babylon have used leasing for necessities such as plant seeds, tools for farming and even land.

Some time passed, finally leasing activities were followed by other regions such as ancient Greece, Rome, Egypt and many more.

Whereas in modern times, leasing only appeared in the United States in 1850. At that time Tom M. Clark was one of the people who used leasing to rent trains in America. And then leasing spread throughout the world and still continues today.

Related Parties in Leasing

In leasing, the financing scheme involves at least four parties involved, including:

  1. Lessee

The lessee in leasing activity is a company or individual that will receive financing in the form of capital goods, which can also be referred to as a customer. When the lessees manage to pay it off, the lessee can choose to return it or buy it from the lessor.

  1. Lessor

Lessor is a party that provides or finances financing facilities to the lessee in the form of capital goods. After providing capital, the lessor will benefit through installments paid by the lessee.

  1. Supplier

In leasing, the supplier has a position as a provider of ordered goods which will be paid in full by the lessor.

  1. Bank

The bank  has a role as a provider of funds to the lessor. Usually the bank itself is not visible directly. So the leasing party will use the bank loan as capital to meet the lessee’s request.

Definition of Leasing

Leasing is a financing activity in the form of providing goods or capital that can be carried out by anyone who needs it. Whether it’s a company or an individual who uses the item.

Leasing activities generally have a certain period of time and the method of payment is also in installments or in installments.

Payment in installments makes it easier for customers because they no longer need to prepare large amounts of money at one time. The amount of payment also depends on the amount of the cost of goods or capital and the selected installment period.

In addition, there is another definition of the term leasing, which is an agreement that has been agreed upon by the owner of the capital with another party, usually referred to as the customer who cooperates with them. After the agreement, then the customer will receive the capital or goods and start paying installments until the agreed time.

Leasing is one way that is often relied on by the people of Indonesia. Because, the presence of leasing really helps the community to be able to more easily buy goods and get the capital needed.

For example, when buying electronic goods, vehicles, capital to build a business , and others.

Leasing Benefits

Because there are providers of tools or capital through leasing activities, making it easier for the community or business people to get the goods they need.

Not only that, there are various other leasing benefits that you can feel, including:

  1. No need for guarantee

The first advantage of leasing is that it does not require collateral. If you use a leasing provider, you do not need to provide a guarantee or collateral to that party.

Because the right of legal ownership of the leased goods and the appropriate payment of income can be used as collateral. This advantage of leasing can help get many people to do leasing.

  1. Flexible

The second advantage of leasing is that it is flexible. Leasing uses a contract system that can be said to be flexible. This is intended so that the amount of the term and the nominal payment can be adjusted to the financial condition or needs of the customer.

This advantage is also one of the reasons many people do leasing to get capital used in their business.

  1. Fast service

The advantage of leasing that many people praise is that it has fast service. The service can also be fairly simple and very fast, so you can more easily and efficiently obtain an item.

  1. Capital Saving

Capital saving is one of the advantages of leasing. This means that customers do not need to spend any initial capital. This is because the financing has been provided by the leasing party at 100%. And the fees given can be used for other needs.

  1. Protected by law

Another advantage of leasing is getting legal protection. The leasing party or the customer will get legal protection because in it there is a regulation that cannot be canceled and changed. Even though the customer’s financial condition is changing.

  1. Avoid inflation

Leasing is one way that you can choose to avoid inflationary losses. You can take cover on leasing from the risk of currency depreciation.

This is because leasing payments will only be made in accordance with the finances in the agreement that has been made previously. This advantage of leasing is the reason for many people to carry out leasing activities.

  1. How to get assets

Leasing is one way that you can choose to acquire assets or capital goods when you think about it but are constrained by costs. This leasing advantage can be an option for your business.

  1. Payment as operational cost

The last advantage of leasing is that installment payments can be included in the company’s operating costs. Payments on leasing will be calculated in determining the company’s profit and loss. So the calculation is not from taxable profit, but from pre-tax income.

Purpose of Leasing

In addition to the benefits of leasing, you also need to know about the purpose of leasing. Basically, leasing has the aim of making it easier for people to obtain capital goods.

Although it has a fairly high price value.

In addition, the leasing company will get a number of benefits from credit interest. So the possibility if you want to buy a motorbike for Rp. 25 million, then it is likely that you will have to incur larger costs to the leasing party due to the credit interest that must be given.

Leasing History

In addition to the purpose and advantages of leasing, make sure you know the history too. Leasing is an activity that has been around for a long time. This activity began in 2000 BC and was first practiced in Sumer.

This has been proven by the findings of documents made of clay containing leasing with various needs. The needs at that time, for example, such as livestock, daily equipment, water and so on.

Leasing then continued with the discovery of evidence of the establishment of leasing institutions in Babylon in 400 BC. At that time, it was like now, namely the modern era. The inhabitants of Babylon have used leasing for necessities such as plant seeds, tools for farming and even land.

Some time passed, finally leasing activities were followed by other regions such as ancient Greece, Rome, Egypt and many more.

Whereas in modern times, leasing only appeared in the United States in 1850. At that time Tom M. Clark was one of the people who used leasing to rent trains in America. And then leasing spread throughout the world and still continues today.

Related Parties in Leasing

In leasing, the financing scheme involves at least four parties involved, including:

  1. Lessee

The lessee in leasing activity is a company or individual that will receive financing in the form of capital goods, which can also be referred to as a customer. When the lessees manage to pay it off, the lessee can choose to return it or buy it from the lessor.

  1. Lessor

Lessor is a party that provides or finances financing facilities to the lessee in the form of capital goods. After providing capital, the lessor will benefit through installments paid by the lessee.

  1. Supplier

In leasing, the supplier has a position as a provider of ordered goods which will be paid in full by the lessor.

  1. Bank

The bank  has a role as a provider of funds to the lessor. Usually the bank itself is not visible directly. So the leasing party will use the bank loan as capital to meet the lessee’s request.

 

Types of Leasing

In addition to the purpose, history and advantages of leasing, below are some types of leasing, including:

  1. Finance Leasing or Capital Leasing (financing lease)

In finance leasing, the lessor will finance the provision of capital goods. Usually the lessee or the customer will choose the capital goods needed and on behalf of the leasing company.

The company will be the owner of the capital goods required by the lessee. Usually the lessor will place an order for goods, maintenance of capital goods and inspections that will become the object of the leasing transaction.

As a profit or reward for the use of the goods, the lessee will pay periodically to the lessor with a certain amount of rent and a period of time that has been mutually agreed upon in advance.

The total amount of rent to be paid to the lessor will include the price of the goods to be paid plus interest. Capital or finance leasing is still divided into two, namely:

  1. Direct Finance Lease

This type can occur if the lessee has never previously owned the goods to be leased. Then the lessor buys an item that will be used and according to the request of the lessee.

  1. Sale and Lease Back

In this transaction, the lessee will sell an item that has been owned to the lessor. Because of these goods then a contract is made between the lessee and the lessor.

With this mechanism, this agreement has a different purpose than the Direct Finance Lease. Because the lesse needs cash that can be used for additional working capital or other interests.

It can be said that using a sale and lease back system allows the lessor to provide funds for any purpose to the client.

  1. Operating Lease (Ordinary tenant lease)

In this operating lease, the leasing company will buy capital goods and then lease it to the lessee. In addition, they also reap profits through several other lease contracts.

The leasing company in the operating lease will be responsible for the costs of implementing the lease, for example, such as taxes, insurance and maintenance of the capital goods concerned.

  1. Sales-Typed Lease

In this type, the producer or manufacturer also acts as one of the leasing companies so that the number of transactions including profits has been calculated by the producer.

  1. Leveraged Lease

Leverage lease is capital by involving a third party. So that the lessor does not pay for the capital goods in full, but will joint venture with a third party. So for the payment, the lessee will deal with more than one party.

Leasing activities in addition to involving the lessee and the lessor will also involve the bank, which will finance the largest part of the transaction to be carried out.

  1. Cross Border Lease

Cross-border lease is a leasing practice where the lessee and the lessor are in different countries. Usually leasing activities in this case are carried out for capital in the form of military equipment or aircraft.

Terms Related to Leasing

In leasing activities, there are several terms that are commonly used. These terms include:

  1. Lease is a lease contract for the use of property with a certain amount of rent within a certain period.
  2. Lessees, are customers or users, both individuals and companies who want to use capital from the financing of the leasing company.
  3. Lessor is the party providing capital or the owner of the asset who will provide it for use by the customer or the lessee.
  4. Residual Value is the value of the leased asset that is predicted to be realized at the end of the lease period.
  5. Lease Term is a period of time that has been determined and is absolute so it cannot be canceled or changed.

Leasing Features

In addition to the purpose, history, types and advantages of leasing, leasing also has the following characteristics.

  1. The property rights of the list object are with the leasing provider.
  2. Objects that become the object of leasing are objects that will be used in a company.
  3. Usually, there is a relationship between the lease term and the useful life of the leased object.

Leasing Elements

In addition to the history, types, characteristics, history and advantages of leasing. Leasing has six elements, including:

  1. A corporate financing

Leasing is intended as an effort to provide financing facilities to certain companies or individuals who need it. However, in its development, it can also be given to individuals with goods that are not necessarily intended for business activities.

  1. Provision of capital goods

The next element is the provision of capital goods. The provision of capital goods is usually provided by the supplier at a cost obtained from the lessor. The capital goods will be used by the lessee for their business interests.

The capital goods provided also vary, such as office equipment consisting of photocopiers, computers or also in the form of machines, airplanes, motorized vehicles and others.

  1. Time limit

One of the important elements in leasing activities is the existence of a limited period of time. Usually in leasing activities will be determined in a period of about one year or more.

Then if the period has expired, it is also determined how the ownership status of the goods is. For example, at that time the lessee is given the right to choose whether the lessee will buy the goods at a mutually agreed price or can return the goods to the lessor.

  1. Periodic payback

After the lessor has paid in full the price of capital goods to the supplier, it makes the lessee to pay in installments the price of capital goods to the lessor. The length and amount of this installment payment has similarities with a bank credit. This item will be the guarantee.

  1. The right to choose to buy capital goods

The right owned by a party to buy a capital item at a certain time with certain conditions. This means that at the end of the lease period, the lessee is given a right to choose whether the capital goods are to be purchased at a specified price.

Usually not all leasing providers provide this voting right. Sometimes there are also leasing providers who recommend that the lessee immediately return the capital goods to the lessor at the end of the leasing period.

  1. Residual value

The remainder or it can be said residue is the amount of money that must be paid by the lessee to the lessor at the end of the lease term. The residual value to be determined has also been discussed in the mutually agreed contract.

Leasing procedure

To get the benefits of leasing, there are several procedures that must be considered, namely:

  1. The selection of suppliers, prices and types of goods will be determined by the lessee.
  2. After completing the application form, then the form is sent to the lessor along with other application requirements documents.
  3. The lessor will evaluate the creditworthiness. If the evaluation is complete, the next process is to make a contract and sign the document.
  4. In addition, the lessee can also sign an insurance contract for the equipment to be leased. And the equipment purchase contract will be signed by the lessor with the supplier of the equipment needed.
  5. In order to also be able to deliver the leased equipment to the lessee’s location. The supplier will sign an after-sales agreement to maintain and maintain the condition of the equipment.
  6. the lessee signs the equipment receipt and receipt of the goods to the supplier.
  7. The Supplier will submit a receipt which will be used as proof of ownership to the lessee.
  8. The lessor will finance the price of the equipment that will be leased to the supplier.
  9. And the lessee pays the rent in stages according to the payment schedule agreed in the previous contract.

That’s some information related to leasing such as leasing benefits, characteristics, procedures and so on.

You will get the advantage of leasing that is easy to manage and can help businesses that are being run with simple financial report applications and business application.

May be useful.

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