What are the steps involved in the booking of lease? It has become necessary to detail the steps involved in the booking of leases as guide to lessors (owners of asset) who may not have had any experience in the business. In doing so, however, this rely on the approach used by a major bank and lessor in Nigeria.
Before a lease is booked, the following minimum steps must be taken by the potential lessor:
- Request for a lease facility is made by a potential lessee through an application, enclosing all the relevant documents-certificate of incorporation, memorandum and articles of association, write-up on the background, ownership structure, management, financial history, projections of cash flow, balance sheets, income statements over the lease tenor and the assumption on which the projections have been made.
- The lessor reviews the application, putting it through his own financial, risk and credit analyses/ checks.
- If the proposal is found to be viable, the Credit Report is then presented to the Board or relevant authority for approval.
- If the Board approves, the potential lessee is then advised accordingly in an offer letter detailing out the conditions of the offer/facility.
- If the lessee finds the offer acceptable, it will then forward the acceptance of the offer letter to the lessor.
- The lessor’s legal department is then requested to prepare the lease agreement (as well as a contract of sale, if it is a sale and leaseback transaction).
- All parties to the deal then review the agreement and sign accordingly.
- The relevant government authority is then notified of the intention of the lessor to incur a capital expenditure for the purpose of capital allowance claims, if it is entitled to claim.
- The equipment is purchased and delivered to the lessee
- The lessee starts paying rentals until the expiration of the lease.
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