Business Operations: Leasing, Renting, Factoring, and More

Posted on Jan 6, 2025 in Business Administration and Management (BAM)

Leasing

Leasing is a method of financing that allows a company to use assets in the medium and long term without the need to own them. It is a credit operation. The leasing operation is a contract in which the lessor leases an asset to a company in return for the payment of lease installments.

Renting

Renting consists of leasing movable assets in the medium to long term. In the contract, the renting company agrees to pay a monthly rent for a fixed term, and the renting company agrees to facilitate the use of the asset and maintain it during the contract’s duration.

Factoring

Factoring consists of a specialized company taking charge of the collection of receivables from other companies. The disadvantage of this method is its high financing cost.

Briefing

A briefing informs the company, providing specifics on the advantages of its product compared to the competition and the positioning objectives it intends to achieve in the market.

Marketing Mix

The process is called the planning and execution of the concept, price, promotion, and distribution, as well as service, to create exchanges that satisfy individual and organizational objectives. Dr. Kamil listed the marketing mix with 12 elements, and later it was simplified to the classic 4 elements, or “4 Ps”: product, price, promotion, and place by McCarter in 1960. Later, 3 traditional elements were added: personnel, process, and physical evidence.

Facing Financial Difficulties

Over the years, companies face many questions that they must address. When this happens, the company must legally undergo a procedure that leads to two irregular situations: suspension of payments and bankruptcy.

Suspension of Payments

This occurs when a business owner has sufficient assets to cover all their debts but foresees that they will not be able to pay them at their due dates due to temporary illiquidity. The business owner is not to blame if the company does not pay its debtors; it may also not pay its creditors. If this happens, only they can apply for a suspension of payments.

Request for Suspension of Payments

  1. The requesting company must deliver the accounting documents that the judge considers to the judge. If the insolvency is not the fault of the business owner, it is declared in suspension.
  2. The “wait and removal” means that once the suspension of payments is declared, the first general meeting of creditors is held to reach an agreement with the business owner to solve the problem. This agreement may consist of a debt reduction, a delay in payment, or both. If the business owner fulfills the agreement, bankruptcy is avoided.
  3. Effects of the crisis: The suspended business owner can continue their business activity under the supervision of judicially appointed intervenors.

Bankruptcy

This is the situation that occurs when the company’s debts exceed the value of the assets they own, meaning it is definitively unable to pay its debts.

  1. Bankruptcy Petition: It can be requested by the company or any of its creditors.
  2. Disqualification of the Employer: Once declared bankrupt by the court, the bankrupt is unable to manage their property, and contracts will be made void.
  3. Constitution of the Collectivity of Creditors and the Bankrupt’s Estate: This is the collectivity of creditors and the mass of goods to be distributed.
  4. Order of Preference for Receivables: The law establishes an order of preference for collection, usually starting in favor of Finance, Social Security, and the municipalities.

The Commercial Code distinguishes three types of bankruptcy:

  1. Fortuitous: Results from circumstances beyond the employer’s control.
  2. Culprit: The employer is to blame for the situation, which may be due to excessive personal expenses disproportionate to their economic capacity, etc.
  3. Fraudulent: Occurs due to the distortion of accounts, withholding information on its balance sheet, signing alleged debts, etc., and represents greater culpability on the part of the employer.

If the bankruptcy is not fraudulent, the employer may agree on an arrangement with creditors.