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Explore new ways using alternative financing methods

Leasing
The design possibilities are various: One distinguishes between two different leasing forms, the financing leasing and the "Operating leasing", which is closer to the rent. The most common distinction of leasing contracts is carried out after the criteria "duration" and "amortization". There are special forms, such as Sale-and-lease back, full service leasing and terminable leasing contracts. Mobile leasing is suitable for the moveable property leasing which includes all ranges of mobile capital goods with good further usability. The property leasing starts in practise with buying cost of 3 Mio. CHF. The trade-off between "credit and leasing" in general is not simple. It is therefore recommendable to pull experts (e.g. tax consultants, Auditors, Lawyers) who offer support at the calculation concerning profitability and to rate legal questions.

Advantages of leasing

  • Leasing spares the equity capital.
  • Leasing makes use of factory-new goods without instantaneous full payment.
  • Leasing looks after liquidity relief at simultaneous capacity extension.
  • Terms can be structured on fixed calculable monthly leasing cost
  • As a rule, the leasing rates are tax deductible.
Disadvantages of leasing
  • Leasing only serves as addition or alternative to bank financing since leasing companies as a rule have similar requirements towards the credit standing as at credit institutions.
  • The leasing rate is a fixed costs block, which has to be earned
  • A cancellation possibility of the leasing contract during the initial contract time, affects balance structure negatively because the leasing object must retroactively be included into the balance sheet of the leasing recipient.
  • The costs of a leasing transaction can be higher than a credit financing.
Factoring
Factoring is the ongoing sale of short-term claims from deliveries and performances to a Factoring company (Factor). The claims arise by the fact that the enterprise grants a credit period and therefore a supplier credit to his customers. The Factoring contract is legally seen as sales contract. The Factoring customer profits from the financing function (in general instantaneous payment of 80 to 90 per cent of the claims), provisions for doubtful debts (exemption of credit risk) and service function (credit standing check, debtor accounting, the system for the collection of outstanding debts and the collection). The Factoring costs are dependent on the respective financing volume. As a rule, the height of the charges lies between 0.5 and 2.5 per cent of the invoice figure. In addition to the fund, usual interest has to be paid for the pre-financing. However, savings can be achieved through cessation of claim losses and improvement in liquidity.

Factoring is particularly suitable if:

  • the buyers are commercial customers
  • the debtor portfolio is diversified broadly
  • the payment terms amount to a maximum of 90 days
  • the performance for the claim has been produced completely
  • no counterclaims exist
  • no claim transfer (cession) or other rights of third parties exist
Advantages of the Factoring
  • Essential advantage is the raise of liquidity through the sale of outstanding debts and the instantaneous payment by the Factoring company. The claim portfolio sinks, the financial flexibility increases simultaneously.
  • Factoring is a reliable protection, because in claim losses, with the purchase of the claim the Factoring company also takes on the credit risk. A valuation adjustment of claims from deliveries and performances does not occur after starting the Factoring engagement within the purchase limit.
  • The takeover of accounts receivable accounting and the system for the collection of outstanding debts by the Factoring company helps to reduce staff and other non-personnel costs.
  • The liquidity resulting from the claim sale can be used to the dismantlement of liabilities. Through this the balance sheet is curtailed and increases the equity capital quota. This contributes to improvement in the Rating.
Disadvantages of the Factoring
  • The Factoring company takes the collection and system for the collection of outstanding debts. As a rule, this is carried out in the standard procedure without custom-designed control. Often these personal relations of the business to customers are basis for a long-term and trusting cooperation. This can be negatively affected under circumstances of a too rigid and not personalized process.
  • A further disadvantage is the lack of popularity of this instrument. The payment of claim to a Factoring company can be connected to a certain negative signal. However, only healthy enterprises can use Factoring. Enterprises facing difficulties would not be accepted by the Factor which must pay attention to its own risk.
  • A purchase of claims is possible only within the limit agreed by the Factoring company.

Interested? Do not wait any longer and contact us right now.



Ranford Consulting GmbH · Mühlegasse 12a · 6340 Baar ZUG · Switzerland
Phone: +41 (0)41 760 70 50 · Fax: +41 (0)41 760 69 55
www.ranford-consulting.com

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