Leasing: Direct and Indirect Leasing Dependent on the financing modality and the relations that arise in the course of the leasing transaction, we distinguish: Direct leasing, or leasing in a broader sense Indirect leasing, or leasing in a narrow sense Direct leasing Direct leasing is a business transaction whereby an asset is acquired using a single contract. The contract is formed between two parties: the manufacturer as the lessor and the lessee. Given the direct relationship between the manufacturer and lessee, the manufacturer has to solve the problem of their own financing. They do so by resorting to a financing institution (bank, factoring company, etc.) and selling them their receivable. The lessee pays rent to the financial institution, while the manufacturer remains a debtor of the financial institution, until the lessee pays their obligation in full. Indirect leasing Indirect leasing is a tri-lateral business transaction which involves a manufacturer (supplier) of an asset, a lessee or leasing recipient, and a leasing organization or lessor. The individual parties to this transaction have already been discussed. Indirect leasing, or leasing in the narrow sense, is characterized by two separate contracts as follows: A sales contract between the manufacturer and the leasing company, and A contract of lease between the leasing company and the lessee. Indirect leasing involves the sale of the leased asset, while financing proceeds through the leasing company (which is a party to the leasing contract itself). Cross-border leasing Cross-border leasing is a leasing transaction where the lessor and the lessee are based in different jurisdictions. The most complex cross-border leasing transactions may include an unlimited number of participating countries. The first cross-border leasing transactions were made by US companies in the 1950s, when various types of equipment were transported to other countries. The advantages of cross-border leasing include the tax benefits available in some countries. It can also serve as a mechanism for selling equipment manufactured in the lessor's country. There is significant risk, however: different judicial systems, the risk of double taxation, wrong estimation of credit risk, political risk, or currency risk, etc. A characteristic example of such transactions is shipping financing. Hypo Leasing Austria actually owns a separate affiliate that deals only in financing vessels, and its clients are individuals and companies from across the region.
