Page 147 - F3 Integrated Workbook STUDENT 2019

Financing – Debt finance

3.2 Leasing

Lease

A lease is a commercial arrangement where an equipment owner
(the lessor) conveys the right to use the equipment in return for
payment by the equipment user (the lessee) of a specified rental

over a pre agreed period of time.

Reasons for leasing

 Convenient, readily available form of finance, especially for plant and
equipment or motor vehicles.

 Avoids the need to find the capital at the start of a project.

 Cheaper than conventional debt financing?

This is because a lease is asset-backed finance and so is less risky for the

lender. Lenders may therefore be prepared to offer a lower rate of interest
than on a standard borrowing.

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