Asset Life Cycle Management: A Key Factor in the Acquisition of Capital for Technology Intensive Companies

Requiring many financial institutions to hold a risk-adjusted amount of capital when granting funds, the Basel II framework implies a risk dependent cost of capital for borrowing firms from year-end 2006 onwards. This novel policy of allocating capital creates and intensifies new challenges for manufacturing companies in innovative and capital intensive branches. In this regard, banks and other financial institutions increasingly rely on alternative financial instruments such as leasing. Against this background, firms should view the life cycle of manufacturing equipment from the lessor’s perspective. In doing so, they will be able to finance their investments at lower costs.