What is Leasing?
Financial leasing is a source of medium to long term funds that fulfill company’s financial requirements. Leasing can finance growth and expansions in general as well as serve to restructure the customer’s financial position. What could be financed through financial leasing ?
As a non banking type of finance that is strongly available at the Egyptian market today, on of ECRA’s missions is to increase the public awarness of the leasing as an alternative method of finance.
The following categories can be financed through leasing:
- Commercial Vehicles.
- IT Equipment (Hardware & Software).
- Production lines.
- Real state (commercial, administrative properties).
- Grain Products – includes flour, noodles, and dough.
- Other tangible as well as intangible long term assets.
Based on the Egyptian leasing Law no. 95 for the year 1995 that was amended by law no.16 for the year 2001, financial leasing offers several benefits that include, but not limited to the following:
- Tax Advantage
Lease payments are fully tax deductible from a lessee’s profit before taxes figures. It allows lessees to accelerate their depreciation, thereby contributing to the decrease of the tax liabilities.
- Accounting Advantage
Leasing improves the financial ratios of the lessees financial statements, through the elimination of both leased assets and their lease obligations from the lessees financial statements.
- Cash Flow Advantage.
- Lease payments can be tailored to match the lessee’s cash flow pattern.
- Leasing improves cash flow by allowing clients to pay for the asset while accommodating grace periods.
- Simplicity of Procedures.
- Leasing offers faster, more flexible procedures, and most often less costly than other financing alternatives due to the simplicity of lease transactions.
- Leasing eliminates mortgage expenses, stamp duties and other hidden costs implemented by banks.