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Leasing as a method to finance corporate assets

Vol. 25, Iss. 5, MAY 2019

PDF  Article PDF Version

Received: 19 February 2019

Received in revised form: 27 March 2019

Accepted: 10 April 2019

Available online: 30 May 2019

Subject Heading: BUSINESS VALUE

JEL Classification: G20, G21, G23, G28

Pages: 1183–1204

https://doi.org/10.24891/fc.25.5.1183

Shchurina S.V. Financial University under Government of Russian Federation, Moscow, Russian Federation
sv-valentinovna@mail.ru

https://orcid.org/0000-0001-6864-4281

Bardunaev A.S. AO Sberbank Leasing, Moscow, Russian Federation
artem.bardunaev@yandex.ru

https://orcid.org/0000-0002-2728-5013

Subject The Russian government implements the lease support program, notwithstanding that there is no versatile method to evaluate finance lease. Lease companies have to consider interests of all partners, whose services are ultimately paid by leasee. In the mean time they shall be competitive against bank lending propositions. Leasing requires to conduct a preliminary study into the leasee's financial position, forecast its future dynamics in the market.
Objectives The research specifies the substance and types of leasing and outlines recommendations for choosing an effective finance lease evaluation method as an alternative to traditional lease and bank lending when lease is used as a method to finance corporate assets.
Methods The research relies upon the generalization and synthesis, methods of comparative analysis.
Results Considering expensive traditional lease and credit institutions' requirements for borrowers to provide a 25-percent finance for the acquisition of a fixed asset, it is advisable to use lease, thus substantially reducing the amount of prepayment and debt burden. Finance lease allows companies to expand the composition of fixed assets. Based on the case, we substantiate the efficiency of lease as a method to finance corporate assets.
Conclusions and Relevance Lease is much more cost effective than direct lending since it implies the tax shield arising from the depreciation of the asset leased, governmental programs for subsidizing and opportunity for lease companies to claim VAT refund and utilize it to reduce the loan balance.

Keywords: leasing, finance, lending, capital expenditures

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