BİRLİKTE. DAHA GÜÇLÜ.

Bank Loans
Other Finance Options (Leasing, Factoring)

LEASING

Leasing is a financial instrument in which the property of the leased asset remains with the leasing company while the lessee obtains the right to use the asset by paying lease rentals for the life time of the leasing contract. At the maturity of the leasing contract the ownership of the leased asset is transferred to the lessee at a symbolic cost.

Leasing is open to any individual or corporation that is a legal entity (corporations and self-employed professionals).

Advantages od Leasing:

  • 100% financing option : With leasing you can finance the cost of the leased asset without using your company’s working capital.
  • Flexible payment plan : You can plan your leasing terms based on your cash flow on the yield and economic life-span of your investment.
  • Middle term financing: You can choose middle and long-term financing options.
  • Operational convenience : All operational procedures related to the purchase of imported or exported assets are performed by leasing company on behalf of your name.
  • Exemption from tax and duties : Your leasing contract and all associated collaterals are exempt from taxes and duties.
  • Pay your monthly rentals with your investments : You can pay your monthly rentals with cash generated from your investments.
  • Take advantage of investment incentives : You can transfer your incentives to leasing company and thus use them in your investments.
  • Fixed financing method : Your rental payments remain fixed throughout the lifetime of your leasing agreement and are not effected by economic fluctuations.
  • Transfer of ownership : At the maturity of the leasing contract the ownership of the leased asset will be transferred at a low, symbolic cost.
  • Opportunity for depreciation : You can depreciate and revaluate your leased asset on your balance sheet.

Disadvantages of Leasing:

  • Lease Expenses: Lease payments are treated as expenses rather than as equity payments towards an asset.
  • Limited Financial Benefits: If paying lease payments towards a land, the business cannot benefit from any appreciation in the value of the land. The long-term lease agreement also remains a burden on the business as the agreement is locked and the expenses for several years are fixed. In a case when the use of asset does not serve the requirement after some years, lease payments become a burden.
  • Reduced Return for Equity Holders: Given that lease expenses reduce the net income without any appreciation in value, it means limited returns or reduced returns for an equity shareholder. In such case, the objective of wealth maximization for shareholders is not achieved.
  • Debt: Although lease doesn’t appear on the balance sheet of a company, investors still consider long-term lease as debt and adjust their valuation of a business to include leases.

What can be leased?

  • Heavy Machinery
  • Automobiles
  • Medical Equipment
  • Agricultural Equipment
  • Printing Equipment
  • Textile Equipmnet
  • Commercial Vehicles
  • Real Estate
  • Office Equipment
  • Manufacturing Machines
  • Technological Equipment

FACTORING

Factoring is one of the oldest methods of financing and collection. In short, it means the transfer/assigning of receivables.

It is the transfer of the receivables of a business enterprise selling goods or services to the “Factor” company. Factoring transactions basically enable you to meet your responsibilities speedily as well as providing financing for the healthy growth of your company. If there is a cash crunch, it becomes difficult to grow a business. Factoring converts your sales into cash and facilitates stable growth.

In factoring, making use of advance payments by transferring receivables on credit terms is a very much preferred method; however collections only or warranty functions are also commonly used.

As the most widespread financing management system around the world after banking, factoring is an effective financial choice for all sizes of businesses at growth stage; both for corporate companies as well as all entrepreneurs doing business on credit terms.

Advantages of Factoring

  • Cash flow is generated by assigning receivables on credit terms.
  • Open account sales become easier and more reliable.
  • The credit terms provided to the Buyers increases the competitive power of the Seller.
  • Reduced receivable and debt entries liquidate the balance sheet of the Seller, leaving room for more operating capital.
  • Intelligence service is carried out by and the credibility of the Buyer is determined by an expert Factor company.
  • Follow up and collection services are provided by the factoring company saving you time and human resources.
  • External financing needs of the companies are reduced.
  • Cash against goods purchases save the buyer abroad the letter of credit costs.
  • Exporters take less risk in new external markets thanks to the guarantee service provided.
  • Companies can expand their market by assigning the buyer’s risk to a Factor in markets abroad.
  • The potential communication problems with the Buyer or Seller are eliminated; possible disputes are resolved through a Factor in your native country in your own language.

Disadvantages of Factoring

  • It is costly, as a discount is to be paid to the factor.
  • Factors may adopt some harsh techniques for the recovery of debt which is not always acceptable to the debtors and ultimately the relationship between company and debtors deteriorates.
  • Factors only purchase the invoices of a reputed company; a new company does not get the benefit of factoring.