Leasing: An Alternative Financing Mechanism for SMEs

In almost every developing country Small and Medium enterprises (SMEs) are treated as the engine for economic growth and the availability of external finance for them is a topic of significant research interest to academics and policy makers around the globe. SMEs need improved access to finance especially for acquiring capital equipment and applications of new technology for operations. However, their access to finance is restricted because they do not have reliable credit histories, adequate capitalization or additional assets for collateral. Most of the financial institutions are reluctant to provide term loans or cash flow based lending to the SME sector. Thus, SMEs face severe disadvantages while trying to obtain financing relative to larger and more established firms. On the…