Question

Why do you think it is easier for companies with weak credit positions (scores) to obtain leasing financing than to secure a bank loan?

Answer 1

It is easier for the companies wity weak credit position to obtain lease financing than to secure loan are as follows-

A. Securing loan is based upon the credit repayment ability of the borrower whereas while obtaining loan through lease financing will be comparatively easy because it does not lead to looking up on the past performance of the borrower in regards to credit.

B. Securing loan will also be looked upon the current liquidity and solvency of the company after ascertainment of financial ratios of the company whereas leasing will be comparatively easy process in which the lessor will be trying to pay off the repayments through the assets leased by the lesser.

C. Securing loan will also need collateral whereas getting a loan through lease financing does not mean placing collateral.

D. banks will be checking the borrowers credit repayment ability through their standard approach whereas leisure will not be looking for the credit repayment ability but he will be looking for the income generation capacity from the Asset.

E. Leasing will not be leading to insolvency of the company whereas failure to repay the loan will be leading to bankruptcy.

F. There are easier terms and condition in leasing than in securing a loan.