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A business finance lease is a type of lease which companies use to rent equipment from the legal owner (lessor) of the asset. The customer (lessee) rents the asset for most of the item’s useful life and has operational control.
Leasing is a way for a business to access the funds required to purchase an asset. The exact finance lease meaning, as defined within the Statement of Standard Accounting Practice is:
"A lease which transfers all of the risks and rewards of ownership of an asset to the lessee."
The ‘lessor’ is the leasing company, with the term ‘lessee’ referring to the business which is using the asset. In most situations the business finance lease will be set for a period of between 1 and 5 years. Although, there will be the option to renew at the end of the contract agreement.