The companies manufacturing products for various industries with large scale land holding engage in leases leasing. It works this way. If a particular company has been given a lease to operate in a particular area of lease by the government or by another company, that lease will be leased by the company to either seek financial assistance or loan from a bank, a financial institution or from a similar company. Though the leases leasing is not preferred by many companies since it almost amounts to surrendering the assets of the company, it is a last ditch effort by the companies to save themselves from going bankrupt. These days, not many companies engage in leases leasing since it can erode the base of the company. Besides, the company, which leases leasing, will never reach a position to recover the lease.
There are two types of leases leasing. The first leasing relates to the property while the second leasing relates to the machinery of the company. The property is land or idle and vacant building given to the company on lease by another agency. This lease can further be leased to a partner or a new entrant to raise resources for the company. It is a legal measure followed earlier by a number of companies. Normally, companies, which had large land banks, were active in the leases leasing space. Normally, the manufacturing industry, which has a lot of land under its control, was dominant in the leases leasing business. Now, they have ceased this kind of an operation since easy finance options are available to it.
The second lease leasing, which relates to the machinery of the company, can be termed risky. If any component of the leasing turns against the company, it will lose its entire rights over the machinery. That could mean the end of the road for the company, which has given the machinery on lease to another company. It will never be in a position to take over the leased machinery. For, there are chances that the leased machinery is disposed off if the loan taken is not cleared in time by the borrower. A number of banks were active in the leases leasing business when it was the only popular mode of securing funds for expansion and other businesses. Consequently, banks acquired a large number of leases of companies that failed to repay the loans. However, the leases became an unmanageable asset for the banks which were not specialized in handling them. Ultimately, the banks too had to dispose off the leases after securing the loans given to the companies.
However, these days lease leasing is no more favored by any company or bank because of the complexities involved in it. Also, banks offer better flexible financing options these days to the companies instead of going for the lease leasing. It is only as a last effort by the company the lease leasing is adopted.
