FINANCIAL SERVICES FOR VENDORS
LEASING
Medium-term renting based on a lease contract
Finance (Financial) leasing
According to IAS 17, a finance lease is a lease that transfers, from the lessor to the lessee, substantially all the risks and rewards related to the ownership of an asset. A finance lease will be capitalized in the lessees balance sheet, even if the legal title of ownership has not been transferred from the lessor to the lessee. IAS 17 provides a number of criteria to distinguish finance leasing from -> operating leasing. The distinction according to national regulations varies from country to country. Typically, a finance lease is a full-pay-out, non-cancellable agreement, in which the lessee is responsible for maintenance, taxes and insurance.
Operating leasing
IAS 17 defines operating leasing as leases that are not > finance leases. They are treated like rental agreements, by which the lessor capitalizes and depreciates the objects in his balance sheet; the payments are treated as income/expenses. To distinguish operating leasing from > financial leasing, IAS 17 provides a number of criteria. The distinction according to national regulations varies from country to country. Operating leases are generally used for short term leases of equipment; the lessee can obtain the use of equipment for just a fraction of the useful life of the asset.
Sale and lease back (with or without right to sublease)
An arrangement whereby SG Equipment Finance purchases equipment from a lessor (manufacturer or distributor) or from a company owning and using it; the equipment is then leased back to the original owner, which continues to use it or leases it on.
Full-service leasing
Special type of leasing where the lease instalment covers additional services such as repairs, servicing and insurance.
LENDING / LOANS
Arrangements under which SG Equipment Finance lends money to vendors or end-users to finance their sales or investments
Investment loans / equipment loans
Special type of loan for end-users to finance their investments in capital equipment.
HIRE PURCHASE
Renting of capital goods that automatically become the lessee’s property at the end of the defined term.
INVENTORY FINANCE
Financing of a vendor’s inventory and presentation objects, based on a general agreement that allows flexible loans. This enables vendors to optimise their stocks of equipment for presentation purposes and short-term deliveries. For control purposes, additional information about accounts, equipment stocks and loan maturities can be provided.
RENTAL FLEET FINANCE
Financing of leased equipment or a vendor’s stock of rented equipment, based on an individual or general agreement.
RISK POOLING
SG Equipment Finance and the vendor share the rewards and residual default risks of leased or financed equipment according to a previously agreed risk-sharing arrangement in cases where one of their joint customers becomes insolvent.
SYNDICATION
Cooperation of several financial institutions to share risks and assets of a vendor’s sales financing activities.
BLOCK DISCOUTING
SG Equipment Finance purchases a number of financing agreements or leases from a vendor under one contract. This reduces the processing work involved for both partners and leads to cheaper funding, especially for small transactions in large volumes.
REFINANCING
Funding of vendors’ captive sales financing programmes through -> sale and lease back, -> undisclosed vendor programmes, -> factoring or -> loans
Off-balance-sheet refinancing/structuring
Funding method based on lease financing that avoids the consolidation of assets and liabilities on the balance sheet.