With the current financial crisis that the world is experiencing and the fact that Rwanda is a developing economy, it can be difficult to justify spending millions of Rwandan francs to buy a new piece of equipment, whether it is a fleet of vehicles or high-tech equipment.
With the current financial crisis that the world is experiencing and the fact that Rwanda is a developing economy, it can be difficult to justify spending millions of Rwandan francs to buy a new piece of equipment, whether it is a fleet of vehicles or high-tech equipment.
However that does not mean you have to go without them because this may affect the profits of the company.
There are many solutions to this problem that a company can use and one of them is leasing. Leasing can help companies get the equipment they need, while reserving their cash for other projects.
A company can lease everything it could, especially items that quickly depreciate. So it makes sense to lease instead of purchase.
Leasing allows companies to spread the payments out over years, which they can expense each month and write off the costs faster.
This makes sense than buying. Leasing fits a couple of different needs, the first of which is helping new companies get started.
It can be difficult when starting a new establishment but leasing can help out on this. Leasing is basically an installment payment program or a conditional sales contract. It also helps established companies keep going during hard times.
Any time there’s a downturn in the economy, traditional sources of finances start to dry up. Leasing companies are not as demanding as banks.
Leasing helps companies conserve cash capital and manage cash flow program.
The number of companies going for leasing in Rwanda is still low. The present market has generated interest from those that have exhausted other sources, such as cash reserves and credit lines.
Leases are designed for personal property, vehicles and equipment used in a trade or business. Equipment which can be leased includes production and storage equipment, furniture, computers (including software), office equipment, agricultural equipment and vehicles.
Qualifying for a lease is similar to qualifying for a loan. To secure an approval, you should have a clean credit history both as a business entity and often as personal history for the owners.
Depending on the total amount leased, the company may request financial statements or tax returns. The credit review will include confirmation of cash flow to service the new debt.
When negotiating the terms of the lease, pricing is an important consideration. Compare both the initial charges paid when you sign the lease, the monthly payment and the purchase option.
If you compare payments or rates only, you do not evaluate your total commitment to the leasing company.
Working with an established company, and having a good relationship can be crucial to a successful leasing experience. Investors are advised to ask questions, not hesitate to request for explanation of any charges, cost to begin the lease and the purchase option at the end.
By purchasing some equipment and leasing others, you can maximize benefits from both.
For instance, if a purchase at the end of the year limits the depreciation that you are allowed, you would consider leasing the final purchase instead. Another benefit is the ability to lower annual expenses, as the end user only pays for a portion of the equipment’s value due to residual assumptions.
Leasing is a means of helping businesses make use of equipment without having to own them.
It eliminates the need for a business to commit capital to purchase equipment by either borrowing, or using its own resources.
Businesses that have realized that profits are made not from owning, but from using equipment, often consider leasing rather purchasing.