In the recent times, it is imperative to fully understand as a lessor that the business of leasing has tilted towards operating leases, due mainly to the operators’ response to market changes. This arises from the dictates of market by corporates willing to divest from other ancillary duties thereby contracting it out to firms that specialises in such duties, this gives them the priviledge to focus squarely on their core business.
Equipment Leasing Act (ELA 2015) Definition of Operating Lease
However, for you to succeed in this business, you must continuously seek innovative strategies to satisfy your clients to the optimum level. By implication, you must ensure that you fully understand the operating modalities of this type of lease. You do not necessarily rely on the rentals in that period for your return but looks for recovery of the balance of your cost and profits from secondary leases, or sale of the returned asset at the end of the lease period.
Also, you must ensure that your leases are priced or structured so as not to recover your entire investment (principal) plus management’s targeted rate of return over in a single lease period. A residual position must be taken and put into consideration in the structuring process.
Moreover, your structuring must be done to meet the cash flow needs of your client – the lessee.
Other requirements for operating lease agreement in accordance with Section 4 of the Equipment Leasing Act 2015 include:
i. Statement to the effect that the lease is Operating lease
ii. Description of the asset to be leased
iii. Total rental or instalmental lease rental payable by the lessee
iv. The date which rental is payable
v. A clause affirming the title of the lessors
vi. On termination by expiry of time, unless a renewal is granted or the lessor agrees to sell, the lessee shall return the asset.
Leasing Operators therefore need to perfectly understand the dynamics of this business model and learn the secrets to succeed as operating lease is globally acknowledged as the future of leasing business. Learn from the experts and learn from the best. Visit the Secretariat or call 08023176691, 08023179048, info@elannigeria.org for further engagements