Leasing loan – is it worth using this option?
What is a leasing loan?
The use of leasing services is for Polish companies one of the most important ways to obtain funds for investments in machinery and equipment necessary to conduct business. Recently, companies providing such services have offered, apart from standard leasing, a completely different solution, i.e. a leasing loan.
The product name perfectly reflects its character, because it combines the features of credit and leasing. In fact, it is a special-purpose loan for companies for the purchase of fixed assets, which is called ‘leasing’ because of the purpose (leasing also allows financing fixed assets).
The above product was created because traditional operating or financial leasing did not meet the needs of all enterprises. The loan turns out to be a better solution when obtaining EU subsidies, as well as for companies that are not VAT payers.
We will explain these issues in the following paragraphs, in which we will also explain in more detail what a leasing loan is and what its advantages and disadvantages are.
Leasing loan and leasing – what are the differences?
Despite the similar purpose of both products (purchase of fixed assets), leasing and leasing loan are in fact completely different solutions, which in addition have different tax and accounting consequences.
1. The issue of ownership of a fixed asset
The main difference in the subject of leasing loan and leasing is the ownership right to the fixed asset purchased with their help. In the case of classic operating leasing, the car, device or machine remains the property of the leasing company throughout the duration of the contract.
The enterprise using the service has the right only to use the fixed asset. In turn, after taking out a loan, the entrepreneur immediately becomes the owner of the fixed asset.
The consequence of the difference regarding ownership of a fixed asset is also the right to make depreciation charges. The lessor has operating leases, while the enterprise has a loan which has bought a machine or device thanks to financing.
For non-VAT payers, one of the biggest benefits of a leasing loan is that VAT is not added to your monthly loan installments. In operational leasing, the entrepreneur has to pay monthly leasing installments plus VAT.
4. Leasing loan and leasing – formal issues
The method of obtaining financing and the formalities related to it are quite a significant difference. First of all, leasing requires a certain amount of own contribution, while loans allow you to finance up to 100% of your investment. When considering what is better, leasing or leasing loan, it is also worth paying attention to the duration of the contract.
In the case of leasing, it cannot be arbitrary, because the restrictions on this are imposed by the Accounting Act. In practice, it is a minimum of 2-3 years. The loan agreement can be concluded for any period – usually from several months to 7-8 years.
It is worth remembering that with a leasing loan, security is often used, such as: registered pledge, promissory note, assignment from insurance, and transfer of receivables from an EU subsidy.
Is a car leasing loan a good solution?
One of the most frequently purchased fixed assets by companies is a car (passenger or delivery vehicle), which is often also the subject of leasing contracts. It is therefore worth considering whether a car leasing loan is a good idea. The use of this solution is supported by:
- simpler procedures related to applying for a loan than for a bank loan,
- lower requirements for creditworthiness than for loans (e.g. for freelancers loans without income certificates are available),
- purchase of a car, not taking it into use as if leasing,
- the option of buying both a new and used car,
- no own contribution, which is obligatory for leasing,
- the possibility of flexible adjustment of the loan repayment period, and thus also the amount of the monthly installment to the financial capabilities of the enterprise.
The leasing loan can be used to finance not only passenger cars and trucks, but also other fixed assets such as:
- semitrailers, trailers, specialized vehicles,
- machines and devices (e.g. production, construction),
- specialized medical devices,
- agricultural machinery and vehicles,
- IT equipment
Who is the leasing loan for?
Due to the purpose associated with the purchase of a fixed asset, a lease loan can be used by all enterprises. However, considering the specific features of this product, it is suitable in particular for the following entities:
- companies that are not VAT payers,
- members of the professions, especially doctors, who often buy equipment with an 8% VAT rate,
- farmers, also not conducting business activity,
- companies applying for subsidies from the EU.
It is worth mentioning that the discussed financial solution is particularly popular among enterprises using EU funds. It is for them that some leasing companies have special leasing loans for subsidies. Purchase of a fixed asset on the basis of a loan immediately gives the ownership right to it, which is necessary to obtain funding.
What are the costs of a leasing loan?
For companies that are interested in leasing loans, costs and interest are usually of great importance. Although each leasing company offers slightly different conditions in this respect, it can generally be considered that they are similar to the conditions of traditional investment company loans, which are proposed in banks.
Among the available offers you can find very interesting suggestions. An example is the possibility of financing the purchase of a vehicle or other fixed asset in a net or gross amount (i.e. including VAT).
You can also find solutions taken from car loans, i.e. 50/50 loans, where the repayment is divided into two installments, regulated every 12 months, at an attractive interest rate.
When it comes to the cost of the leasing loan, it is worth paying attention to the method of its settlement, which affects the profitability of this solution. The entrepreneur may include in the tax deductible costs the interest part of each installment and make depreciation charges every month.
However, the total cost of the loan may be increased by additional fees, e.g. related to establishing a registered pledge.
Where can you find a leasing loan?
If you want to use this form of financing, you should look for offers in leasing companies, including those operating at banks.
The leasing loan is available, among others, at the following institutions:
- PKO Leasing,
- Alior Leasing,
- BNP Paribas Leasing Services,
- European Leasing Fund,
- Idea Getin Leasing,
- SGB Leasing.
If you buy a car, leasing loans are often available directly from dealerships.
What are the pros and cons of a leasing loan?
Before making a decision on a leasing loan, it is worth getting to know this financial product closer. This type of offer is favorable from a tax point of view. Jenak is a great solution for people who are not VAT payers. However, like any product, a leasing loan also has its drawbacks.
|Simple formalities, quick decision||It is possible to finance only the purchase of a fixed asset (this is not a loan for any purpose)|
|Possibility of using without own contribution (it depends on the amount of financing)||It is not possible to replace a fixed asset, e.g. a car, with a new one after the end of the contract, as is the case with leasing|
|No minimum funding period||Additional costs associated with establishing collateral|
|Possible long financing period, and therefore low monthly installments||Difficulties in obtaining financing for unusual machines and devices|
|Ownership of the asset after purchase||The loan agreement goes to BIK, which then translates into the company’s creditworthiness|
|Possibility of making depreciation charges||No tax benefits for companies that are VAT payers|
|Less burden for the company due to the lack of VAT added to the loan installments||Inability to include the entire installment in operating costs (interest can only be included)|