Due to lack of working assets and the complexity of the credit financing, some enterprises in Ukraine are not able to provide adequate technological renovation of the manufacture process. To solve the problem the leasing operations are used which make the process of funding simpler and contribute to competitiveness of an enterprise, thus increasing its revenues. The use of leasing in the current economic conditions is an objective necessity.

The lease objects are as follows:

Lessor is a legal entity giving the ownership and use rights of the leased asset to the Leaseholder

Leaseholder is an individual (both legal and physical) who is given the ownership and use rights of the leased asset by the Lessor

Seller (Supplier) is a legal or natural person from whom the Lessor purchases an item that will in the future be given to the Leaseholder as an lease object

Other legal and physical entities that are parties to a Multilateral Lease Agreement

Lease Agreement made in written form. Its main terms are:

  • leased asset (items of fixed assets which are due for lease, should be specified)
  • the term for which the Leaseholder is granted the right to use the leased asset
  • size of lease payments
  • other conditions, in respect of which at the request of at least one of the parties an agreement can be reached

To avoid problems while implementing the operations under the Lease Agreement as well as while using the leased assets, the Agreement should contain the following provisions:

  • the procedure for accepting and transferring the leased asset
  • rights and duties of the parties
  • the procedure of insurance of the leased asset
  • procedures for maintenance and servicing of the leased asset
  • liability of the parties
  • Termination of an Agreement and repudiation from an agreement

There are two main types of leasing at the leasing market today. These are financial and operational leasing.

The main difference between these two types of leasing is the statutory limit of financial leasing term and the procedure of leasing operations registering in accounting.

Nowadays, the leaseback is quite a common thing, which means that the Seller and the Leaseholder is one and the same person. That is the owner of the property sells it to the leasing company so as to simultaneously obtain the property on lease. The leasing company finances the former owner of the property receiving as a collateral the ownership rights. When the term of a Leaseback Agreement expires, the entrepreneur has the right to buy the equipment back, thus regaining the ownership right. As a rule, leaseback is convenient for those business entities that need significant amounts of working capital to operate their business.