Lease financings

An accountancy term referring to a method of financing the purchase of an asset. Instead of a company borrowing money from a bank and buying an asset, the bank buys the asset and leases it to the company with the agreement that after a certain amount of time the asset becomes the property of the company. The reason for this is that if the company goes bankrupt, the bank already owns the asset and does not have to negotiate with other creditors to get compensation for their loan. As the risk to the bank is lower, the interest paid by the company is less.