Abstract:
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 other hand, leasing is an asset-backed, term financing product.
It focuses basically on the ability of lessee’s cash flow generation from their regular business
operations to service the lease payment, rather than on the asset base. In this connection, this
paper investigates how as an alternative financing mechanism, leasing can be the useful tool in
facilitating greater access to finance for SMEs. From the survey of the paper it is found that out
from the various sources of finance for SME’s only 5 per cent can be attributed to lease facilities.
So it is strongly suggested that developing the leasing sector as a means of delivering finance
increases the range of financial products in the marketplace and provides a route for accessing
finance to SMEs that would otherwise be impossible.
