Leasing

What’s Leasing?

Leasing is a fixed term, usually non-cancelable, which indicates a loan agreement for the purchase of a capital-based asset and paying on installments. The lessor’s services are limited to financing the asset, and the lessee pays all other costs including insurance, maintenance, and taxes. Finance leases are regarded as essentially-equivalent to a sale by the lessor and a purchase by the lessee (even though the title remains with the lessor). Therefore, leased assets must be capitalized and shown in the lessee’s balance sheet as a fixed asset with a corresponding non-current liability (lease payable).

The lessee acquires all the economic benefits, such as depreciation, and risks, such as the possibility of the loss of the leased asset, of ownership but can claim only the interest-portion (not the entire amount) of the lease payment as an expense. To be considered a finance lease, a lease must meet one or more of these main criteria:

The title of the asset passes automatically from the lessor to the lessee at end of the lease term.
The lease contains a bargain purchase option under which the lessee may acquire the leased asset at less than its fair market value at the end of the lease term.
The lease term is for a period longer than the 75 percent of the estimated economic life of the asset.
The present value of the lease payments is greater than 90 percent of the fair market value of the asset at the beginning of the lease term.

Leasing Types

Direct Lease

Direct Lease is one of the most common forms of financial leasing, a tripartite agreement between asset supplier, lessor, and the lessee. It is a simple lease where the lessee needs to acquire a fixed identifiable business-related asset, through allowing HD Leasing to acquire the ownership of the required asset/s and eventually transferred to the lessee after an agreed upon period (leasing contract maturity).

Sale & Lease Back

A two partite agreement between the seller/lessee and the buyer/lessor, pursuant to this agreement the lessor is allowed to generate funds through transferring the ownership of the underlaying asset to the lessee for an agreed upon period (leasing contract maturity), for the sake of working capital needs finance, as well as relaxing the cash flow of the company. The transaction can be structured in a way that maximize the benefits for the lessor.

Progressive Payments

It is another tool for leasing finance in case asset is still under construction, where at this case the payment could be effected directly to either suppliers (cement, steel, etc…) contractors or sub-contractors or to be affected to the client himself against providing an evidence of use of fund after an agreed upon period of time as per the FRA regulations in this regard. Payment will be executed on phases according to submitted progressive reports, where asset’s ownership will be transferred to HD-Lease after been fully constructed either by purchasing the asset directly from supplier for the client or in form of sale& Lease back from the client.

Structured Finance

Structured Finance and Securitization are solutions offered by HD Leasing Co. highly skilled and experienced professionals to help support and develop the financial market and expand complex businesses by designing new funding instruments for advancing, evolving complex emerging markets. Using structured finance cash flows are transformed attempting to reshape the liquidity of financial portfolios.

Contract Finance

In this case, our finance decision is based on financing assets that will be used for a specific purpose and contract. Hence, the proceeds of this contract will be formally assigned to HD-lease being the primary source of repayment where a tripartite agreement will be signed between HD-Lease, the client & the assigner.
Usually, this tool is used where the company’s general cashflow read a deficit and finance will be on specific contract where leasing finance will be back-to-back to this contract.

Vendor Finance

Is a financial term that describes the lending of money by a vendor to a customer who uses that capital to purchase the specific vendor’s products or services offerings. This type of finance helps cement the relationships between vendors & business owners. It offers numerous other advantages, not only it helps leasing recipients cultivate strong credit histories, but it also allows them to table the use of leasing finance until it becomes a necessary to make revenue boosting capital improvement.

Banking Finance

Cross-selling tool opening a gate to banking finance through HD-Lease where customer could enjoy all corporate products in terms of bilateral or term loans where the assets will be a collateral as HD-Lease will be the security agent. This mechanism will open access to bank’s debts but within a shorter time frame for approval.

Why Leasing

Financial leasing is one of the most efficient financial instruments that suit the Egyptian economic model. Financial intermediaries play a key role in providing funds to entrepreneurs, which is crucial for economic growth, leading to an increase in real growth rates. One of many advantages of leasing in developing markets lie in its separation of ownership from economic use. Leasing offers the advantage of simpler procedures for repossession because ownership of the asset already lies with the lessor. Other advantages to the lessee lie in allowing SMEs to have access to external finance. In addition, leasing enables the lessee to leverage off the purchasing strength of specialized lessor companies.

Why HD Leasing Co.

Fine-tuned operational model that enables its highly experienced team to issue prompt credit decisions and develop innovative solutions.
HD Leasing Co. has received an overwhelmingly positive response from the market, establishing a large base of clients operating in some of Egypt’s most lucrative business sectors.
HD Leasing Co. is a subsidiary of Housing and Development Bank (HDB) which is a one of the largest banks in Egypt, providing powerful synergies for the company to take its business to the next level.