Entrepreneurs often see leasing as simpler than a loan: the machinery or equipment provides security and the business does not pay the full cost at once. Leasing is therefore used to renew fleets or acquire machine tools, specialised machinery, commercial vehicles, production lines and other working assets.
Leasing is not automatic approval. The leasing company still assesses whether the business can meet the payment schedule, how reliable the client is, the asset being purchased and whether it could be sold if payments stop.
Businesses may see leasing as simpler than a loan, but it is still a financial obligation. Check repayment capacity, the advance, documents and transaction feasibility before applying.
What can be leased
Leasing most often funds assets needed for operations that are eligible to form the subject of a lease. An identifiable, liquid asset is easier for the leasing company to assess.
More complex assets may sometimes be considered, but unusual items raise more questions about liquidity, the supplier, delivery times and future use.
When leasing may suit better than a loan
Leasing is not always better than borrowing, but it can be more convenient in some situations, especially when the business needs a specific income-generating asset.
When paying the full price upfront is undesirable
The entrepreneur pays an advance and spreads payments over the contract term, preserving working capital in the business.
When the asset itself provides security
A bank loan may require additional collateral, while the leased asset often provides the main security. Leasing may therefore help a business without unencumbered property or other collateral.
When the machinery starts working immediately
If vehicles, machinery or equipment are used in projects, orders or production immediately after delivery, income from the asset may cover lease payments.
When a clear schedule is needed
Lease payments are generally known in advance, helping cash flow planning, especially when the business understands the revenue the new asset will generate.
Do not choose leasing merely because it seems easier. Assess whether the asset can generate enough income to cover payments without creating a cash flow gap.
What the leasing company checks
The leasing company assesses both the client and the asset. Even liquid machinery or equipment may be declined if the business’s financial position is weak.
Trading history
A longer trading history and stable turnover make repayment capacity easier to demonstrate. New businesses face greater difficulty, particularly for large amounts.
Turnover and revenue
The leasing company checks regular receipts, whether cash flow can cover the new payment and whether the agreement would be too burdensome.
Debt burden
Existing loans, overdrafts, leasing and sureties affect the decision. Substantial obligations may make another transaction appear risky.
Advance payment
A higher advance reduces the leasing company’s risk, but may be inconvenient for the business because it absorbs working capital.
Leased asset
Cost, liquidity, supplier, year of manufacture, condition, delivery period, registration, documents and intended use all matter.
Why leasing may be declined
A rejection often means the transaction appears risky or poorly prepared, rather than reflecting the desire to acquire machinery itself.
Low turnover
A lease payment that is too high relative to turnover may lead to rejection or a higher advance requirement.
Heavy debt burden
Existing loans, leasing and other obligations may leave insufficient cash flow for another transaction.
Document issues
Financial statement errors, incomplete documents, tax debts, litigation or an unclear business structure can delay assessment or lead to rejection.
Illiquid leased asset
If an asset is difficult to value or sell, the leasing company may decline it. This is especially relevant to rare, highly specialised or unusual equipment.
Unsuitable supplier
The leasing company may check the seller as well as the client. Concerns about the supplier can prevent approval.
Documents usually required
Requirements depend on the leasing company, amount, asset and business profile. Prepare several groups of documents in advance.
- Russian Tax ID (INN) and company or individual entrepreneur details;
- financial statements or tax returns;
- business bank account turnover information;
- details of existing loans and leases;
- supplier’s commercial quotation;
- description of the leased asset;
- advance payment and preferred contract term;
- documents supporting current business activity for larger transactions.
Before applying, identify the asset, a manageable advance, contract term and affordable monthly payment. This helps select an option sooner.
How to improve the likelihood of approval
Show that the transaction makes sense: the business needs the asset, will use it in operations and can meet the payment schedule.
1. Choose a realistic asset
The asset should match the scale of the business. A small company seeking very expensive machinery may appear risky.
2. Calculate a manageable advance
A low advance preserves working capital but may worsen terms or reduce approval prospects. A high advance reduces risk but may create a cash flow gap. Find a balance.
3. Prepare documents in advance
Prompt provision of financial statements, turnover and supplier and asset information helps the leasing company decide.
4. Explain the economic rationale
Explain how the machinery or equipment will generate revenue: a truck for haulage, a machine tool to expand production or specialised machinery to fulfil contracts.
5. Select the right leasing company
Companies differ in requirements for clients, assets, advances, terms and sectors. Consider more than one option, particularly for unusual transactions.
Subsidised leasing: when to check eligibility
Some businesses may consider subsidised leasing programmes for equipment, vehicles, particular sectors, manufacturers or categories of SMEs.
Subsidised leasing generally has conditions covering the asset type, sector, amount, supplier, advance, term, region or company. Check eligibility for the specific programme before calculating costs.
Leasing can support business growth when the asset is genuinely needed, payments match cash flow and the transaction is prepared in advance.
When to seek help
Start with a preliminary assessment if the business needs vehicles, machinery or equipment but has concerns about the advance, payments, documents, trading history or a previous rejection.
NG Finance helps entrepreneurs, Russian LLCs and individual entrepreneurs select leasing for their needs: vehicles, equipment, specialised machinery, commercial assets or a contract-related transaction. We assess the situation, compare potential options and help prepare the application.
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