Leasing and Factoring

 

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Leasing and Factoring

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> A Lease is a contractual agreement

> The owner of the assets or property (Lessor)

> Grants to a firm or person (Lessee)

> The use of the property

> For a specified period

> For an agreed sum of rent

 

 

Leasing finance

1. Financial lease and

2. Operating lease

 

 

Dry lease and wet lease

 

> If the lessee bears the cost of insuring and maintaining the leased equipment – Dry lease
> If the lessor bears the cost of insuring and maintaining the leased equipment – Wet lease
 

 

Factoring
 

> Factoring is a financial transaction and
> a type of debtor finance
> a business sells its accounts receivable to a third party (called a factor)
> at a discount.

Recourse and Non-Recourse Factoring

 

_ Recourse Factoring: business accept total liability for the unpaid invoice
 

_ Non-Recourse Factoring: factoring company accept the liability for the unpaid invoice 

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