Devising a strategy that could help you invest your assets to make some money can be tricky sometimes, right? The solution to your problem lies in the concept of asset leasing. It is common for business owners to spend a considerable amount of money on owning assets. In this way, leasing can result in lower upfront costs and more cash available for an expanding company to use for other purposes. There are many types of assets that are commonly leased, including buildings, equipment, vehicles, and technology. You can gain an advantage from leasing assets if you want to grow your business.
To better understand the concept of asset leasing, let’s take a look at the types of asset leasing.
Asset Leasing as an Investment
Electronics, furniture, and cars have all been popular in the market. For example, people are willing to invest in white goods like refrigerators, microwaves, and even washers. Startups are renting furniture to customers and also leasing items from people who already have a sofa set they’re not using.
The lease agreements for the physical assets are paid out at constant intervals by different businesses. It is possible to pool such assets together to form a portfolio.
Leasing assets isn’t the only option! Just like fractional ownership of the real estate, a consortium can also buy these assets. This consortium has higher buying power and can negotiate with companies for lease agreements. Individuals or groups can invest in such arrangements to earn income on a regular basis; whether it’s monthly or quarterly depends on the agreement.
What are the Types of Asset Leasing?
There are various types of lease arrangements. It is advisable to consider all the different types and choose the one that best suits your business, your particular circumstances, and the asset that you are acquiring.
With an operating lease, a business (the lessee) can use an asset without taking ownership of it. This means avoiding the expensive costs associated with buying the asset. The lessor is the business that loans out the asset, and both parties’ responsibilities are usually laid out in the lease contract.
The lessee typically has to take care of the asset, making sure it doesn’t sustain any damage or wear and tear. In essence, an operating lease is a type of contract for a company to use something and then return it in a similar condition. This type of agreement is useful for businesses needing to replace expensive equipment or other assets frequently.
Operating leases don’t appear on a company’s balance sheet – they’re similar to renting, with regular lease payments being an operating expense under the income statement. This is because the lessee does not have any ownership rights, and the asset won’t be registered on the balance sheet, so no depreciation is charged either. If you wish to move further with this type of asset leasing, then you can take the assistance of the BHive platform.
A finance lease or capital lease is a type of financial product where a leasing company allows a business to make use of an asset for an agreed-upon period. Usually, once the contract comes to an end, the entity leasing the asset will become the owner of that asset. Both parties involved in the agreement share some of the risks and rewards throughout the duration of it.
Finance leases are ideal for businesses that prefer to avoid large initial outlays to obtain new items, especially in times when economic security is unreliable. Fixed payments over a set amount of time make budgeting far more straightforward and also helps to prevent any unwanted expenditures from arising. The BHive platform deals with finance leasing; you can head over to their website and get more insight about the same.
Hire Purchase Leasing
Under hire purchase leasing, individuals and businesses can use and possess an asset for a certain duration while paying rent or instalments, including the depreciation of the asset and interest to cover the capital cost.
The buyer receives the goods when the hire purchase agreement is made but only owns them when the final payment is complete. Either party has the right to end the contract at any given point before ownership is established.
Every agreement must be in writing and signed by all parties involved. In case of default from the buyer’s side, the seller reserves the right to repossess goods until all payments are made, as ownership lies with them until then. Until said payments are made, buyers may not pledge, sell or mortgage these assets as they are not legally considered their own yet.
If you are planning to invest or earn through this form of asset leasing, then you can visit the BHive official website for more information.
Lease financing is a type of contract that grants one party (the “lessee”) the right to use an asset possessed by another party (the “lessor”) in exchange for timely payments. The payments are referred to as lease rentals.
The characteristics of lease financing include the following-
- Ownership: The lessee becomes the owner at the end of the lease agreement.
- Bargain purchase options: An asset can be obtained at a lower price than its fair market value through a bargain purchase option.
- Terms: Useful life of the asset is equal to or exceeds 75%.
- Present value: The present value of lease payments is equal to or greater than 90% of the asset’s original cost.
- Risks/benefits: Lessees become responsible for all risks.
Sale and Lease-back Transactions
This is part of a finance lease. With a sale and leaseback arrangement, a company will sell an asset to someone else, who then leases it back to them. The asset is generally sold at the current market value. As such, the firm gets the sale price in cash and the benefit of using the asset on the other.
In sale-leaseback agreements, the seller gives up ownership of an asset to another party as a way to get cash yet continues to use it for a long duration. It’s almost like a corporate pawnshop transaction: the company exchanges an asset for money with no expectation of buying it back.
Nowadays, investing opportunities are seeing a spike, and asset leasing can be a beneficial and efficient financial arrangement for organisations. However, before making an investment decision, it is imperative that you are thorough about how asset leasing works and what its types are. The various aspects of asset leasing, like cost efficiency and flexibility, make it a great investment option. If you wish to know more and understand how you can invest and earn through asset leasing, then head over to the Bhive website.