Let's Define the Chosen Term

We hope this clarifies this term, but if we can be of further assistance, please let us know.

Capital Goods Leasing

In addition to raising expensive equity and debt capital, companies can also use capital goods leasing. This is particularly a good solution for companies that have little equity.

Lease contracts have a similar character to rental contracts (also known as hire purchase). Either the leasing company finances the purchase or the seller takes over the financing, e.g., in the sense of sales financing.
With investment leasing, a leasing company provides equipment for a monthly fee. The ownership of the good remains with the leasing company. Usually, however, there is a purchase option included, which enables ownership to be taken over by a purchase at the end of the term. This is also in the interest of the leasing company, as in this case it does not have to take over the system after the term.

Leasing is primarily suitable for young, dynamic companies with high earnings potential but little equity. It relieves the liquid funds in the short term and does not require any outside capital. In addition, leasing installments can be deducted from tax. With higher amounts, e.g. for entire production lines, it is of course also a viable alternative for larger companies.
However, leasing is relatively expensive because the leasing company calculates its installments based on the refinancing costs, the rather short amortization period and the administrative costs and then charges a variable risk and profit surcharge. Finally, leasing increases the running costs and thus reduces the company's earnings value.

Advantages and disadvantages of leasing

Leasing is a great way to preserve a company's liquidity. However, this results in higher running costs.

Advantages:
•    Preservation of the company's liquidity
•    Easier budgeting and calculation
•    Relief of the balance sheet and improvement of the return on equity
•    Liquidity reserves for financing / expanding the core business are spared
Disadvantage:
•    Leasing is usually more expensive than outside financing (leasing installments are burdened by refinancing costs, short amortization periods, administrative costs and variable risk and profit surcharges)
•    In the event of early withdrawal, high withdrawal costs must be paid
•    Running costs are increased, which reduces the company's earnings value

Are you interested in leasing capital goods? Please contact us. We have partnerships with which we can make your financing request happen.