Finance Lease

Small and Medium Enterprises(SMEs) play an important role in Chinese National Economy,which can be seen from the contribution to GDP,resolution to unemployment,as well as the meaning to Chinese Development Strategy.However,SMEs in China all face a prevalent and pivotal problem——tightened credit situation.This problem must be settled;otherwise all the enterprises can hardly develop even exist. Currently,because of the global economic downturn caused by the financial crisis of the United States,the financial problems of SMEs have become severe and complicated increasingly.Traditional financial methods can not meet the requirements of SMEs,therefore based on its particular characteristics and financial mode,finance lease opened up a new channel for financing of Small and Medium Enterprises.The main way of finance lease is that the lessors,on the condition of charging rents,purchase the equipments required by lessees,in recognition of the possession and usufruct of lessees,in order to achieve the purpose of"financing"by"financing equipments".In general,lessors purchase equipments from the producers according to the requirements of lessees.For lessees,they can acquire equipments and 100%payments by Finance leasing companies.For lessors,they can acquire full investment and profits just by one contract of leasing, since the lease is usually a long term.At the expiry of the lease, the leasehold can be rented or sold by lessors,while the lessees have the priority right to lease or purchase them.Because of the finance lease' s characteristics mentioned above,compared to other financing methods,such as enterprise endogenous financing,bank credit, commercial credit,equity financing,trust financing and so,financing leasing is much more suitable for Chinese SMEs.However,the industry of financing leasing in China is less developed for many reasons.In order to improve the development of this industry,and to serve the finance lease of SMEs better,this paper analyses involved government, Finance leasing companies and SMEs,as well as giving some policy recommendations about how to improve finance lease of SMEs in China.