In recent years, the local start-up ecosystem has seen significant development, which has placed Romania among the fastest growing EU countries of the economy. This phenomenon is mainly due to young entrepreneurs with vision and courage, who set up new companies in different sectors of activity, such as IT, digital marketing, food industry, HoReCA, etc.
The biggest challenge that a start-up may face is to “survive” more than a year, given that approximately 33% of the start-ups newly set up are bankrupt after their first year of operation. The main causes of bankruptcy are those of a financial nature, such as unexpected expenses in the original business plan, which can significantly affect cash flow and prevent the business from continuing to operate.
A first financing solution that a business might try to use is bank credit, but start-up companies in the first 3 years of operation don’t meet the eligibility conditions imposed by most banks for obtaining a loan. In such situations, leasing is an ideal solution for start-up businesses that need accelerated growth.
What is leasing and how does it work?
In its simplest definition, leasing is a form of credit by which a business (the applicant) can obtain the financing of an asset through a leasing company (the financier), subsequently paying it a monthly rate predetermined in the contract.
What are the main types of leasing that a start-up benefits from?
In order to be able to continue operating and grow, a start-up can choose either a financial or an operational leasing. The main difference between the two types of financing is the obligation to transfer ownership. In the case of operational leasing, at the end of the contractual period, the assets must be returned or replaced by a new contract. Instead, by using a financial lease, the applicant company becomes the owner of the property at the end of the contractual period.
What types of assets can be purchased by financial leasing?
Many entrepreneurs associate the idea of "leasing" only with leasing for automobiles, but many companies currently offer financing for a wide range of useful assets for various sectors of activity, such as IT or medical equipment, construction machinery or woodworking machines. Some companies, including OTP Leasing Romania, also offer financing for new or second-hand cars, trucks and vans. In order to meet the start-up companies, OTP Leasing Romania offers a customized product for them: Start-up Leasing.
If the assets for which a start-up is applying for financing are not included in our standard offer, we can make an assessment of the financial situation of the applicant firm and, as a result, funding can also be provided for those types of assets.
What are the advantages of a financial lease vs. a bank loan?
Firstly, in the case of start-ups, most banks do not agree to give credit at all to start-ups, which are considered to have too high a degree of risk.
On the other hand, leasing companies are much more flexible, offering financing to start-ups. Since start-ups also represent a risk for leasing companies, in some cases, the latter require an advance which may also be up to 50% of the value of the purchased asset.
In conclusion, in the case of a start-up, choosing the sources of financing for the implementation of investment projects, supporting the business or growing and developing it, is a challenge for any entrepreneur. It is therefore very important that each of them knows all the options available, because access to the necessary financial resources is a decisive process, which makes a difference in the subsequent evolution of the business.