What Is a Lease Cosigner?

Entrusted lease is a form of financial lease. Units with excess idle equipment are willing to lease equipment in order to make full use of the equipment and obtain a certain income. In this way, the unit with excess idle equipment does not seek the lessor by itself, but instead entrusts the leasing agency to find the lessee on its behalf, and then the lessor, the lessee and the leasing agency sign the lease contract together. The leasing agency does not advance the funds and does not own the ownership of the leased items. Instead, it only handles the lease on behalf of the client (a unit with excess idle equipment) and only charges the commissioned lease fee agreed by both parties. ^[1]

Entrusted lease

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(1) If the company in which the principal is a shareholder or holding company needs to obtain a fixed asset for business purposes, and if it does not want to invest more in the bank's valuable credit line due to a loan from the bank, Occupied, if it is difficult to obtain the eligibility to issue bonds in the market to obtain funds for a while, if it is unwilling to diversify its equity interests due to going to the stock market to raise funds, or excessively disclose its trade secrets, then the principal Entrusted leasing can be used to obtain the fixed assets from companies that have shares or holdings through the transaction method of financing leasing;

(2) If the company in which the client holds shares or holds shares determines whether it is possible to accelerate depreciation of the fixed assets obtained in order to reduce the previous income tax burden and delay the payment of income tax, which is of great significance to its own operating effects, then the client Entrusted leasing can be used to adopt financing leasing as a transaction method to enable the company in which it has a shareholding or holding to obtain the fixed asset. Because, for the fixed assets under corporate finance lease, the state stipulates that it can be depreciated according to the short term of the legal depreciation period and the term of the finance lease (but not shorter than three years). When obtaining fixed assets by other means, there is no such accelerated depreciation benefit;

(3) If the company in which the trustee participates or holds shares needs to increase the liquidity of its own assets, but cannot do so by derogating its own fixed assets, because it still needs to use these fixed assets, then, it You can use entrusted leasing to adopt the sale and leaseback financing lease transaction method. At this time, on the one hand, it transferred the ownership of its own fixed assets to a financing leasing company to obtain the price (monetary funds) it needed. At the same time, it leased the fixed asset from the company, so it did not prevent the continued use of the fixed asset in the slightest. Of course, it may well be possible to obtain a loan from the bank by mortgaging the fixed assets to the bank, thereby achieving the same effect as described above.

The reason why a company in which a client holds shares or controls to increase the liquidity of its assets is often due to the need for information disclosure, that is, to optimize indicators such as liquidity ratios and quick ratios in its financial situation, thereby increasing its The credit rating of funds and capital markets; or to obtain cash directly for debt service, to reduce their long-term borrowings and increase the flexible portion of their bank credit lines. This method can also be applied when the short-term position of the company in which the principal is a shareholder or a shareholder is insufficient. The method is to first conclude a sale and leaseback financing lease contract and take the money from the financing lease company. Once you have the money, even if the contract has not expired, you can completely end it in advance and return the money to the financing lease company. .

(4) If the company in which the principal is a shareholder or holding company is in an industry with a rapid technological update, especially in the high-tech field, it is its priority to avoid the risk of stale equipment and control the initial investment, then it can be leased through commission , Use operating leases with medium and long-term financing to obtain such equipment. The main point of this method is that the rent is not calculated on the basis of amortizing the total purchase cost of the equipment, the fixed asset is not capitalized on the leased enterprise's account, and the risk of depreciation of the residual value at the end of the lease term is determined by The seller associated with the financing lease company bears.

(5) If for the company in which the principal is a shareholder or holding company, the fixed assets obtained are reflected on its own balance sheet, depreciation will be withdrawn by itself, and therefore its own liabilities will also be increased. The rental expenses can be in the name of current expenses. (Income tax) Full payment before tax can accelerate depreciation (minimum depreciation period is not less than 3 years), that is, to obtain the effect of on-balance sheet financing, which is more beneficial to yourself.