The Significance And Role Of Leasing In Corporate Financing In Republic Of Croatia

Financing business activities of any company requires the availability of adequate sources of funding in the required amount and in a timely manner. The structure of the funding sources or capital structure, which finances business assets, is one of the main factors, which determines the competitive position of the company on the market and influences growth opportunities and expanding abilities of the business. In today’s complex business conditions, characterized by globalization processes and dynamic socioeconomic relations that prevail in the market, there are a significant number of funding sources that are available to businesses in accordance with their requirements. Those funding sources are different in terms of types, maturities, interest rates, and other contractual terms. Strong competition and market conditions demand a continuous restructuring of the company’s capital structure as well as finding the most appropriate fi nancial mix between owned and borrowed funds of a certain maturity. Available data show that besides the usualexternal sources of funding, such as diff erent types of bank and commercial loans, the companies increasingly are using alternative funding sources such as leasing. The concept of leasing implies a financing of business activities through lease rather than purchase of the necessary business assets. A lease is an agreement in which one party (lessee) gains a long-term rental agreement for the use of some fixed asset, and the other party (lessor) provides that asset and receives a series of periodic contractual payments in return from the lessee. Th e leasing is particularly important for small and medium business enterprises that very often do not have sufficient financial resources to purchase the necessary assets nor can they get bank loans at favourable terms. There are numerous advantages of the leasing compared to other asset financing methods such as simplified management and planning of current and future cash flows, better costs control, flexibility and ease of contracting, tax treatment (benefits) and many others. Therefore, the paper provides an overview of the basic characteristics and types of leasing as an alternative way for financing businesses and indicates the signifi cance and role of leasing for business activities in modern market conditions. Additionally, the paper presents structure and basic features of the leasing market and leasing companies in Croatia.