Equipment Leasing 
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Equipment Leasing, with option to buy the equipment for its residual value at the end of a pre-established period.

Background

Equipment Leasing is a financing operation which consists of the assignment of the use of a certain asset by a Lessor (Bank) to a Client (Lessee) over a period of time against the receipt of a rent. In these operations, the Client has the option of purchasing the equipment at its residual amount at the end of the leasing period.

Advantages

From the Client’s perspective

  • Free choice of the supplier and of the equipment it intends to make use of.
  • Flexible initial deposit. At best, the amount of the equipment may be fully financed, with no initial deposit.
  • Medium/long term financing, thereby allowing the operational costs to be borne by the profitability deriving from the use of the equipment.
  • The VAT on rents is deductible.
  • Operations exempt from stamp duty on the use of credit and on interest, given that Leasing is considered as a service.
  • Matching of the financing period to the service life of the asset.
  • Direct payment to the supplier made by the Bank.

From the Supplier’s perspective

  • Increase in sales volume.
  • Increase in percentage of cash sales.
  • Greater Client loyalty when replacing the equipment.
  • Removes financing analysis charges and collection risks.
  • Financing sales of its Clients avoids banking ceilings being filled.
  • Greater revenue security since liquidation of receipt is undertaken by the Bank. 
Beneficiaries

Companies and Individual Entrepreneurs that need to invest in equipment goods.

Eligible Operations

Leasing of Equipment
Financial leasing operation in which the contract begins upon delivery of the asset by the supplier to the lessee.
Any equipment or heavy-duty vehicle may be leased, except for vessels.

Lease-back
Operation in which the seller and the lessee are the same legal entity.
Note: Generally, all import operations shall be financed through lease-back.

Operations with a grace period
Financial leasing operation in which the contract begins upon delivery of the asset by the supplier to the lessee, but the rental debt is only charged by BPI as from the date agreed upon in the future. In the event a grace period is also given by the supplier, there shall be no interest during this time period.

Operations with pre-financing
Financial leasing operations in which, during a pre-established period of time, there is one or more capital advance provided by the lessor and in which the lessee is only charged the interest amount. The contract is started at the end of this period.

Assignment of contractual position
Consists of a change in the contracting party during the duration of the contract. The Client (transferor) assigns its contractual position to a third party (transferee), thereby maintaining all rights and obligations established by the contract in force. Such processes involve the issuing of a three-party assignment of contractual position agreement, which is supported by the financial leasing contract initially entered into.

Operations with mutual guarantee
In order to mitigate risk in leasing operations, the decision maker may require the contracting of a mutual guarantee as a condition. This type of guarantee is also often used in the lines involving protocols where, usually, the guarantee fee is born/subsidized by the entity managing the line with such a protocol.

Eligible Operations

To be defined on a case-by-case basis.

Term

To be defined according to the useful life of the equipment, considering that the maximum legal term is 30 years and there is no minimum term.

Guarantees

To be defined on a case-by-case basis.

Conditions

Interest Rate
The operations may be contracted under the following modalities:

  • Floating Rate - made up of a variable index (indexed to a market reference rate) + a commercial spread;
  • Fixed Rate - made up of a fixed index throughout the whole operation + a commercial spread – see conditions for application of the Fixed Rate.

Rents
Rents are made up of capital and interest, and may be:

  • constant or variable, with fixed or decreasing capital amortization;
  • advance or non-advance;
  • monthly, quarterly, half-yearly or annual.

Residual Value (Purchase Option)
The residual value is a mandatory condition which translates into the possibility of the Client (lessee) purchasing the equipment at the end of the contract. When the purchase option is triggered, this results in the ownership of the
leased assets being transferred to the lessee.

Taxation
Leasing operations are subject to VAT which is deductible in accordance with current legislation. Leasing operations are not subject to stamp duty on the use of credit and interest, as is the case with credit operations.

Accounting
The equipment is recorded in the lessee’s fixed assets, the interest is accounted for as costs and the equipment is subject to amortization by the Client, in accordance with the existing amortization tables.

Type of solution

Equipment Financial Leasing Agreement through which BPI, against payment of an annuity, and for an established period, grants the use of a capital asset purchased or built upon the request of the Client. The company may purchase the asset at the established Residual Value at the end of the established period.


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