Need Financing for Your Business? Here’s a Quick Guide to Lease Financing in Nigeria
May 30, 2020
What is Lease Financing?Lease finance is a medium to long term financial solution that gives the borrowing party (Lessee) the right to use an asset provided by the lending party (Lessor) without outright purchase, but instead regular payments often monthly, known as lease rental throughout the duration of the lease agreement.
How Does Lease Financing Work?During the contract period of lease financing, the financial losses and gains associated with ownership of the asset are transferred to the lessee who also enjoys full operating control of the asset and is also responsible for maintenance of the asset. Assets that often attract lease financing include vehicles, specialised equipment, and even business software. Lease finances are also referred to as a capital lease or sales lease.
How to Obtain Lease Financing in Nigeria
- The first step to take in a lease finance agreement is to determine what asset(s) your business requires.
- Next, you will need to find a financing company that will cover the purchase cost or already has ownership of the asset: at CapitalField Financial Management Ltd, we provide financing and structuring solutions for a wide range of assets, from vessels, and motor vehicles to power generating sets, manufacturing plants and marine assets.
- A legal contract is drawn between you (the lessee) and the financing company (the lessor) which will detail the duration of the lease, payment amount and what ownership rights will be transferred to you during the lease period.
- At the end of the contract, the lessee can request to acquire ownership of the asset.
What are the advantages of Lease Financing for Your Business?
- Leasing can be a cost-effective way for your business to take advantage of important capital goods without having to spend a lot of money on acquisition.
- Lease financing is easier to obtain and cheaper than bank loans; it also often runs over a longer period of time.
- From an accounting perspective, Lease payments can be deducted as a business expense, giving you a tax-deductible advantage as opposed to increased taxes on new assets
- Your leased equipment or asset can pay for itself through the income generated by its usage.