Finance Lease

What is Finance Lease?

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.

No collateral requirement

Instead of providing assets as collateral for a loan, businesses only need to make monthly payments according to the lease agreement.

This allows businesses to access funding without having to pledge specific assets as security, reducing risk and enhancing financial capacity.

Efficient capital utilization

Rather than spending a large amount of cash to purchase new assets, businesses only need to make relatively small monthly payments to use the leased assets.

This enables businesses to leverage their own capital for other activities such as expanding operations, upgrading technology, or strengthening working capital.

High flexibility

Businesses can customize lease terms, including the lease duration, payment structures, and other conditions based on their specific needs.

This allows businesses to easily adapt to changes in the business environment, evolving asset requirements, or emerging technologies, without the burden of asset ownership.

Why choose Finance Lease?

  • Be financed up to 100% of value of assets
  • No need collateral as normal loan
  • Effective utilization and diversification of funds
  • Secure credit limits from banks
  • Flexible lease term
  • Flexible repayment schedule
  • Attractive lease interest
  • Rationalization of administrative work
  • Comprehensive finance solution

Basic Information

Types of assets (Including brand-new and second-hand)

– Transportation vehicles and equipment;
– Construction machinery and equiment;
– OA office machinery and equipment;
– Medical machinery and equipment;
– Machine tools/ production lines;
– Others (not prohibited by the law)

Lessee

Legal entities and individuals residing in Vietnam.

(Currently, BSL provides this service for enterprises that are legally regulated by the law)

Lease Term

Depending on the useful life of the asset and the financial condition of the lessee. Usually from 3 to 5 years.

Lease interest

Competitive by either floating or fixed rate depending on the agreement between customer and BSL.

Lease currency

VND

Comparison with loans

 

FINANCE LEASE 

LOAN

Finance Subject

Assets

Money

Ownership of Subject

Lessor

Customers (borrower)

Collateral (Depend on the credit rating of the lessee)

Basically, unnecessary

Basically, additional collateral is required

Financing Ratio (Depend on customer’s credit rating)

Can be up to 100% value of asset including its associated expenses

Basically 60-70% value of asset, excluding its associated expenses

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 depreciation 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.

Comparison with Operating Lease

  Finance Lease Operating Lease Note(*)
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. Difference
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.  

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