What is meant by off balance sheet funding?
Depending on the nature of your business, ultimate ownership of your asset on your balance sheet may not be very important. Businesses which already have significant assets on their books may not want to unnecessarily add to their asset base. Publicly listed companies with shareholders to please may actively try to keep the asset off the balance sheet because this will enhance their return on capital employed (ROCE). Finance products such as Operating Leases or Contract Hire allow companies (subject to their auditors’ approval) to keep the vehicles off the balance sheet, at the same time improving their financial gearing because the leased asset will not count as interest bearing debt.
