Pursuant to Article 113, Law on Credit Institutions 2010, Clause 7, Article 3 of Decree 39/2014/ND-CP on financial leasing and related guiding documents, finance lease is the extension of medium- or long-term credit via assets leasing under a financial leasing contract between the lessor (the lease company) and the lessee. The lessor purchases assets required by lessee and holds the ownership over the leased assets during the lease term. The lessee uses the leased assets directly for business and/ or manufacture during the lease term, makes payment of lease rentals under the contract.

Financial lease amount is the amount of money that the lessee must pay to the lessor during the lease term, specified in the financial leasing contract. Finance lease includes principal debt – which is the money the finance leasing company spends to buy assets for the lessee, and interest, calculated on the principal balance decreasing over the actual number of days of debt of the period.

Finance Subject Assets Money  
Ownership of Subject Lessor Customers (borrower)  
Collateral Basically, unnecessary Basically, additional collateral is required Depend on the credit rating of the lessee
Financing Ratio Can be up to 100% value of asset including its associated expenses Basically 60-70% value of asset, excluding its associated expenses Depend on the credit rating of the lessee
At the end of the contract period

Flexible to choose one of 3 options:

1. Lessee purchases the leased asset with the amount agreed by both sides and both sides end the lease contract.
2. Lessee continues to lease the leased asset with value/ terms agreed by both sides.
3. Lessee returns the leased asset to the BSL.

The borrower pays off the debt and finalizes the loan contract.”  
Accouting The lessee is entitled to pepreciation of financial leased assets. Depreciation time varies depending on the terms at the time of signing the contract, specifically:
1. In case the customer commits to buy the leased assets after the end of the lease term: The lessee is allowed to depreciate the leased fixed assets as if it were a fixed assets owned by the enterprise according to current regulations.
2. In case the customer commits not to buy the leased assets after the end of the lease term: The lessee is allowed to depreciate the financial lease fixed assets according to the lease term in the contract.
3. If it is not certain that the lessee will have ownership of the assets at the end of the lease contract, the leased assets will be depreciated over the shorter of the lease term or its useful life. .”
The borrower records fixed assets and depreciates them according to the normal term prescribed.  
  Finance Lease Operating Lease
1. Similar
1.1. Ownership of the leased assets Ownership belongs to the lessor throughout the lease term
1.2. Right to use leased assets Usage rights belong to the customer (lessee)
1.3. Beneficiary of insurance for leased assets Lessor
1.4. Continue to lease The lessee has the right to choose to continue to lease the leased assets after the initial lease term
2. Differences
2.1. Nature of leasing Provide medium and long-term credit Ordinary leased assets
2.2. Lease term A length of the lease term equal to the majority of the asset’s useful life Usually shorter than the useful life of the asset, which can be days, months, quarters, years or per product unit…
2.3. Lease amount includes principal debt (the money the lessor spends to buy the leased assets) and interest rate, which are clearly specified in each part of the lease contract. is a certain amount of money paid periodically
2.4. Record of leased assets in financial statements

The lessee records financial leased assets as fixed assets/long-term assets of the lessee on the balance sheet.

Lessor: recorded off-balance sheet

Lessee: recorded off-balance sheet
The lessor records operating lease assets as the lessor’s assets on the balance sheet.
2.5. Depreciation on leased assets The lessee depreciates the leased assets according to regulations of the Ministry of Finance similar to the case where the lessee purchases the asset itself. In case the lessee commits not to repurchase the asset at the time of signing the lease contract, the lessee is entitled to depreciate the leased asset over the lease term. The lessor depreciates the leased assets. The lessee records operating expenses
2.6. Risk to assets The lessee bears all risks The lessor bears all risks
2.7. Maintenance, servicing, repair and insurance The lessee bears all these costs Depending on the agreement, the lessor bears all these costs
2.8. Option to purchase the leased asset after the end of the lease contract The lessee has the priority right to choose to buy back the leased asset after the lease term at a nominal value, much lower than the original asset value. The lessee does not have the priority right to choose to buy back the leased asset after the lease term. In case the lessee wants to buy back the leased asset, the lessor and the lessee will negotiate the liquidation price of the asset at the market price.

Through BSL, customer can lease assetss procured/ made in Vietnam or directly imported from overseas, including:

  • Construction machines
  • Machine tools/ production lines
  • Transportation means and equipment (passenger car, truck, etc.)
  • OA office equipment
  • Medical equipment
  • Others (upon the requirement of customer and investigation of BSL, and not prohibited by the law)
1. Lease up to 100% of assetss’s value (including costs such as registration fees, insurance, maintenance, etc.).
2. Collateral is unnecessary
3. Increasing working capital when using Sale and Lease back product
4. Flexible termination of the contract: buy back the leased property, return the leased property, or continue to
lease it, and still be able to depreciate the assetss as in the case of self-purchase
5. Effectively utilize cash, and secure borrowing limit from banks
6. Flexible and variable lease term based on the lessee’s needs and types of leased assetss.
7. Effective utilization of funds
8. Depreciation and expenses control:
– Depreciation can be accelerated within the lease term;
– Quick adaptation to technology innovation: By setting shorter lease term, lessee is able to keep track of technological innovation, especially for high-tech machineries and IT equipment

Customer has freedom in choosing assetss upon their needs. BSL will consult quality and supplier of such required assets in case customer need.

The lease term is from 13 months and above. BSL and customers will negotiate depending on the customer’s needs and financial situation as well as the useful life of the assets. The lease term can be up to 72 months.

Insurance for leased assets is required throughout the lease term. Depending on the type of leased assets, BSL and the lessee will agree on the type of insurance to purchase. The lessee will bear the insurance costs for the leased assets, and the insurance beneficiary is BSL. The lessee can purchase insurance for the leased assets and pay the insurance fee by themselves, or BSL can finance this insurance fee, depending on the lessee’s needs.

Lease application procedure usually takes 3 days to 15 days (for new customers) after the day BSL receive the required documents from lessee. The specific time depends on the documents provided by customers, the credit of the business, the value of the leasing transaction and the cooperation of the appraisal from customers. For existing customers, the above time can be shortened.

See more