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Lease back for financial optimization

1.Product features

If the financial structure of a company is not ideal, the company may sell the equipment first and then rent it back to improve the financial structure.

2. Product profile

If the liability asset ratio of a company is high or if a company wants to turn short-term liability to long-term liability, or a company has many due liabilities recently, or the cash inflow and outflow are not compliable and the company has difficulty in capital turnover, but the company owns production equipment or other big equipment that has not been mortgaged. The company (the lessee) may make application to China Huarong Financial Leasing (the lessor) to sell the equipment  it owned to the lessor at a reasonable price and then rent the equipment back from the lessor. During the lease term, the lessee pays rent to the lessor. After the expiration of the lease term, the lessee buys back the equipment according to the agreement.

3. Applicable area

The overall liability asset ratio of company is relatively high or the liability ratio is high in the short run. The company needs to improve the asset liquidity, financial structure and financial statements. The company owns production lines, complete equipment, a series of  equipments or individual equipment, cars, ships, airplanes and other transportation facilities which are owned by the company legally and are not mortgaged.  

4. Advantages and functions

(1)The nature of the equipment is not changed. The equipment is still used by the lessee.

(2) The lessor pays the price for equipment assignment in a lump sum. The lessee can get a big cash flow to improve its financial structure quickly.

(3) The lessee may choose financial leasing mode to rent the equipment, which can turn short-term liability to long-term liability to improve the liability structure quickly.

(4)The lessee may choose operating lease mode to rent the equipment. The equipment project is not listed in the balance sheet of the business, which can reduce the liability asset ratio quickly.

(5) The rent during the lease term is determined by the lessor and the lessee through negotiation, which will have a better tax saving or postponing result.

(6)After the expiration of the lease term, the lessee buys back the equipment again according to the agreement and will hold the ownership of the equipment again.