Two Kinds Of Leasing
- Operating lease or hire-purchase
- Financial lease
We will discuss only financial leasing. The difference between the two being that operating lease is not a means of financing equipment purchase – only short-term use of equipment: e.g., car rentals. Maintenance and obsolences risk lie with the leasing company as against the lessee in financial leasing.
- A contractual arrangement that allows one party (the lessee) to use an asset owned by the leasing company (the lessor) in exchange for specific periodic payments. This requires:
- Separation of legal ownership from economic use
- Credit analysis focuses on lessor’s cash generation capacity to finance lease payments rather than relying on credit history
- Security is the asset itself
- As such, this product is particularly suitable for new Micro, Small or Medium Sized Enterprises
(MSMEs) without a long credit history of
Why Has leasing grown so fast?
Beneficial to both lessee and lessor.
- Fewer requirements about balance sheets.
- Leasing may be the only source of financing
- No outside security/collateral needed
- Low documentation cost
- Leasing can finance a higher % of equipment than bank loans
- Governments allow lessees to deduct full lease payments from their income before tax.
- Ownership of asset
- Transaction costs lower
- Lighter regulations, because they are not deposit taking institutions.
- Tax incentives, although they are eroding.
- Better control on utilization of funds.
Impacts Of Leasing:
- Impact on Broadening the Financial Sector Development: Leasing companies have helped develop capital markets by increasing financing options for segments of the market which previously relied on informal financing, supplier credit, and internal cash generation – Filled the gap left by banks
- Impact on Capital Markets: As leasing firms grow, their needs for diversified funding sources becomes eminent – leading to the use of securitization, issuances of bonds and other capital instruments.
- Increased Competition: The entry of leasing firms in financing the MSME has encouraged competition in many markets, whereby some of the banks started to go down-market in order to serve the smaller clients.
Why consider the Leasing option?
Improved financial management
At MWI, we know that pumping equipment can be a significant investment. Time to buy does not always go hand in hand with your needs. Our leasing program can allow you to acquire the pumps you need when you need them – without forsaking your total budget at one time.
Payments made by lease program participants are considered operating expenses and not capital expenditures, so they can be written off immediately. This often accelerates tax deductions when compared to depreciating assets over five to seven years.
Advantages of Leasing
- Smaller initial investment required (better for the liquidity of the leaser)
- Payments made over a long period of time – e.g. quarterly, six monthly, yearly, according to what is stated in the contract.
- The leaser can Lease approximately four or five pump stations at once rather than buying only one pump station.
- Leaser has the option of purchasing the pump station at the end of the contract, at a price agreed upon in the contract.
- MWI Egypt is responsible for all maintenance for the pump stations during the contract (MWI offers 24 hour assistance to support any breakdown)
- MWI Egypt will always have any spear parts required for the pump station (which saves the Leaser of going through the process of importing any spear parts, which saves time and cuts costs.
- Lease program participants are considered operating expenses and not capital expenditures, so payments can be written off immediately.
Procedures required to go through with Leasing
- Agree on the following
- Leasing amount of the pumping station
- Method of payment
- Time instalments must be paid
- Price of the unit if the Leaser decides to purchase the unit at the end of the contract.
- Signing the contract
- Supply of the units according to the beginning date of the contract.
Pumps beginning from 2`` to 60`` with discharge of 12 liters/second to 6000 liters / second, such as:
1- Hydraflo – hydraulically driven axial and mixed flow pumps, 8`` to 60``.
2- Duraflo – hydraulically driven submersible trash pumps, 4`` to 12``.
3- Rotoflo – well point de – watering pumps, 6`` to 12``.
4- Primerite – automatic self-priming pumps, 4`` to 12``.
5- Jet Pump System – high pressure jet pump system, 2`` to 8``.
6- Complete Pump Station on wheels:
a. Mobile Hydraflo
b. Mobile Lineshaft
c. Mobile submersible electric – complete pump & power station on wheels
Water treatment plants in all fields