Leasing Workflow
Step 1 – Choice of the leasing assetLease asset is the subject of... More
Leasing is a form of finance for the expenses needed for acquiring or using a particular asset – the leasing assetLease asset is the subject of... More. Therefore the first step of the leasing workflow is exactly the choice of the asset (otherwise we will not have anything to finance). The key figure in the choice of the leasing assetLease asset is the subject of... More is the lesseeThe lessee is the user of... More – it is she who needs to choose the asset which she needs.
To start off, we have to mention a restriction – not all “assets” which one may need or require can be financed through leasing. The first requirement to the future leasing assetLease asset is the subject of... More is that it needs to be a “long term material asset”, e.g. „longterm“– we can use the “material” asset for a relatively long term. Leasing for immaterial assets is not possible. A true question from the leasing practice:„Can we lease 10 tons of beer?“ The negative reply is dully anticipated, and the reason is that beer is not exactly a “long term asset”, even if bottled.
Another important requirement for the leasing assetLease asset is the subject of... More is that it should be “liquid” (not like the beer above). This means that a secondary market for used assets must exist. This requirement stems from the use of the leasing assetLease asset is the subject of... More as the main collateral by the lessors (this being a key difference between lease finance and bank credit). If this requirement seems clear, what changes from time to time or from one leasing companyA company whose main activity is... More to another is “Which asset is liquid?” We will use a practical example. Prior to the Crisis of 2008 in Bulgaria a yaght leasing was not exotic. It was claimed that yaghts are quite liquid. Although a used-yaght market does exist, leassors soon found out that the remarketing term or the low secondary price make youghts a difficult asset to lease. It is true that these days (2015) it will be impossible to find a leassor for a yaght purchase in Bulgaria.
Leasing for any luxury items is not common practice. Having said this, some leasing companiesA company whose main activity is... More specialize in exactly such assets – for example leasing of luxury cars. This, however, should be classified more as an exeption than the rule.
This second requirement has its implication on the leasing approval by the leasing companiesA company whose main activity is... More for specialized industrial equipment. Although leasing of all sorts of machines is a common practice, the leasing for the “unique and only machine in Bulgaria” will be difficult to finance by most lessors. The reason – exactly its secondary value and potential difficulties in case of needed remarketing.
The requirements for the leasing assets have a specific national element, based on the markets in various countries. If the secondary Ferrari market in Bulgaria is rather limited and so is the leasing of a Ferrari, in Germany the case will be much different and a Ferrari car may be leased without much difficulties.
In our article “Leasing Markets” in this site we will go into greater detail of the most common leasing assets in Bulgaria and around the World. “Most popular” means also most commonly accepted for lease finance by the leassors. Here we will only mention that the following assets have the leading market shares:
- All sorts of mass cars,
- All sorts of commercial vehicles,
- Mass machines and industrial equipment.
Computer and communication equipment, real estate, luxury assets have a more limited lease market. When the market or an individual leasing companyA company whose main activity is... More is more risk-aggressive some or all of these assets become readily accepted leasing assets.
One classification of leasing derives exactly from the choice of the leasing assetLease asset is the subject of... More – consumer leasing or production leasing, differentiating between the potential use of the leasing assetLease asset is the subject of... More.
It is important to mention for this step of the leasing workflow that further to the choice of the leasing assetLease asset is the subject of... More the lesseeThe lessee is the user of... More also choses his vendor.
We will not go into the detail of how the asset to be financed by leasing is chosen. We trust that the reader has substantial experience in searching, negotiating and choosing all sorts of assets. We will only mention that this step ends with the generation of an important document generated by the vendors of the leasing assets – the asset offer. The choice of lesing asset ends exactly with the receipt of the offer for the asset by issued from the vendor by the future leessee.
