Company Profile

Hanhua Leasing

Hanhua Leasing Group, the owner of Rutong (Tianjin) Finance Lease Co., Ltd., is a leasing business platform under Hanhua Financial Holding. Hanhua Leasing Group addresses the equipment expansion and upgrading demands of clients in national pillar industries covering transportation, new energy, and equipment manufacturing, mainly through a variety of flexible service methods such as sale and leaseback, direct lease, vendor lease, and operating lease, thereby optimizing their assets and liabilities structure, and helping partners to achieve long-term and sustainable development.

Transportation, new energy, and equipment manufacturing.

Leasing has become an important channel and method for companies around the world to improve the efficiency of capital use, expand product market share, mitigate financial risks, upscale investment, and introduce advanced technologies. The finance lease industry is growing at an average rate of 30% every year, becoming a financing instrument second only to bank credit.

Product Introduction

Typical Cases

Sale and Leaseback

Manufacturing is a key industry for development in China, enjoying an investment increase by the state year by year. Located in an industrial and economic development zone of a city, the lessee is closely connected with the supporting enterprises in the surrounding thanks to the favorable geographical location. The lessee urgently needs working capital to purchase land and build new workshops for the expansion of production, but it does not fit in the criteria for financing from a bank. In this consideration, the lessee turns to the leasing company, seeking for a sale and leaseback of RMB 10 million. Such a transaction can greatly alleviate the working capital pressure, improve the internal financial structure of lessee, and enable it to expand production and accelerate development.

I. Enterprise overview: Established in 1986, A Machinery Factory is located in the industrial and economic development zone of a city, with an existing paid-in capital of RMB 16.7 million and a footprint of 12,000 m2 (including more than 6,000 m2 owned by itself). It has 60 intermediate and senior managers and professional technicians, over 80 intermediate and senior technical workers, and 30 junior technical workers. Its main business is processing materials supplied by customers. In recent years, it has been processing key products including bearing seats of various specifications and models, upper hammers, cross shafts, supports, rolling mill bases, fan shafts, working rolls, guide beam components of rolling mills, front of steam turbine cylinders, boxes, and experimental devices of wind tunnels. Its major customers are all large state-owned enterprises, including a gear company in Chongqing (accounting for 65% of business revenue), a steam turbine plant (accounting for 20% of business revenue), a state-owned key enterprise (accounting for 10% of business revenue), and other sporadic businesses (5%). It owns a number of equipment with a value totaling nearly RMB 20 million, including large-scale CNC horizontal boring and milling machines, vertical and horizontal digital display boring machines and vertical lathes, gantry milling machines, and horizontal lathes, and has fairly strong processing capacity.

II. Enterprise advantages: Thanks to the country's vigorous support for manufacturing in recent years and the increasing investment in infrastructure and large-scale equipment in the manufacturing industry, customers’ business scales are constantly increasing. As the supplier of these three leading enterprises, A Machinery Factory receives increasing and stable orders from existing customers. During the past years, it has established good partnership with these enterprises and enjoys a good reputation, has been awarded "Qualified Supplier" and "Valued Supplier”, which in turn assures a relatively stable demand and powerful competitiveness in the market.

III. Issues in financing: With a short-term loan of RMB 7.4 million, the lessee’s overall debt ratio is not high. The bank cannot provide the loan amount required by the lessee because no land or property can be used as a pledge. However, the lessee has a possession of general-purpose equipment such as lathes and milling machines, which can be easily turned into cash. The leasing company can directly take such equipment as a pledge and provide a loan similar to the bank does. Compared to the bank, the leasing company offers a higher rebate for the equipment, and provides more working capital to the lessee, with no need for additional counter-guarantee measures, greatly solving the issue of no pledge can be provided by the lessee. Therefore, the lessee starts to cooperate with the leasing company.

IV. Design of the lease plan: Equipment amount: RM 16.94 million; security deposit: RMB 1 million; leaseback amount: RMB 10 million; term: 3 years; repayment method: equal principal, quarterly payment of rent; total rent for three years is RMB 11.77 million, service fee is RMB 620,000; source for repayment: main business income of the lessee.

V. Guarantee method: Pledge or registration transfer of the lessee's equipment valuing RMB 16.94 million. Representative of the legal person provides a personal unlimited joint liability guarantee.

VI. Conclusion: The lessee needed a huge amount of working capital to purchase land and build a new factory for production expansion, but could not provide land for mortgage to finance from a bank. However, it had general-purpose equipment, which could be easily turned into cash and considered the most suitable subject for finance lease with minor risks to the leasing company. For this reason, the leasing company provided sale and leaseback of RMB 10 million to rapidly supplement the working capital required by the lessee. After getting money from financing, the lessee purchased land to build a new factory for production expansion. It accelerated the development of the enterprise, greatly speeded up the pace for expansion and strength, and truly solved the difficulties of corporate financing.