Definition: The Equipment Leasing Company is a non-banking finance company which is primarily engaged in the business of leasing of equipment or financing of such activity.
The term “lease” refers to the contractual agreement between the lessor (owner) and the lessee (hirer) wherein the lessor grants right to the lessee to use the equipment in exchange for the periodical rent payments. The equipment leasing company leases the asset to other companies either on the operating lease or finance lease.
- The Finance Lease also called as Capital Lease is the long term arrangement wherein the lessee is obligated to pay the lease rent until the expiry of the lease contract. Such contract is non-cancelable and the period of the lease agreement usually corresponds to the useful life of the asset concerned.
- The Operating Lease is for a shorter period duration and is often cancelable at the option of the lessee with a prior notice. The lease period is generally shorter than the economic life of the asset and is also called as an Open End Lease Agreement.
Any non-banking finance company may obtain a license to commence equipment leasing subject to, they shall not trade, hold and deal in real estate business and the lease period shall not be fixed for less than three years in the case of any finance lease agreement except in the case of IT and computer accessories.