A financing solution where a company owns a device and sells it to a financial institution (ILS) to lease it to ILS for a specified period of time. You must meet two main conditions to be eligible for a lease of sale. These conditions are as follows: LeasePlan makes leasebacks as lucrative and easy as possible for you. The process begins with a comprehensive market analysis of your assets by our truck and equipment specialists in order to provide you with the most money for sale. A sale-leaseback allows a company to sell an asset to raise capital, and then allows the company to lease that asset to the buyer. This way, a business can receive both the money and assets it needs to run its business. If your company is considering completing the leasing process for the sale of equipment, we are here to help and work in all industries and types of equipment. “SouthStar used my current equipment as security and structured a lease for new equipment for us, doubling our capacity! From start to finish, they were there to guide us through the process and answer all our questions. A leaseback is an agreement whereby the company selling an asset can lease the same asset to the buyer. In a leaseback – also known as a sale-leaseback – the details of the agreement, such as lease payments and lease term, are made immediately after the sale of the asset.
In a sale-leaseback transaction, the seller of the asset becomes the tenant and the buyer becomes the lessor. Sale-leaseback financing is a unique and effective method of generating capital for your business needs. You use your equipment to get the capital. There are many potential benefits for your business if you choose this option. With a sale-leaseback, you can continue to use your equipment, so productivity never slows down and your sales need to stay constant. The extra capital you receive can be used to grow your business and increase sales, as it can be used for any purpose. Companies that use it as a capital option can save up to 37% on tax. Since you will be renting your equipment, the full monthly payment is 100% tax deductible. The most common users of sale-leasebacks are builders or companies with expensive assets such as real estate, land or expensive large equipment. As a result, sale-leasebacks are common in the construction and transportation industries, as well as in the real estate and aerospace sectors.
A sale-leaseback is neither debt financing nor equity financing. It`s more like a hybrid debt product. With a sale-leaseback, a company does not increase its debt burden, but accesses the capital required by the sale of assets. A loan must be repaid and appears as a debt on the company`s balance sheet. A sale-leaseback transaction can actually help improve the health of a company`s balance sheet: liabilities on the balance sheet decrease (avoiding new debts) and current assets increase (in the form of cash and lease). Although equity does not need to be repaid, shareholders are entitled to a company`s profits based on their share of its shares. With a lease of sale, your business may be eligible for section 179 benefits and premium amortization, among other potential benefits and deductions. Often, your financial partner will be able to make your sale-leaseback very tax-efficient. Depending on how your sale-leaseback is structured, you may be able to amortize all payments on your taxes.
Sell a company asset, usually in the form of equipment, and get enough working capital in return for all the company`s expenses! A lease of sale is usually a long-term lease, so you have time to decide what you want to do at the end of the lease. At the end of the sale-leaseback period, you have options that depend on how the transaction was structured. If your sale-leaseback is an operating lease in which you have relinquished ownership of the asset, here are the typical end-of-contract options: sale-leaseback financing consists of three main components. You sell your equipment to a financial company (the Lessor), which in turn agrees to rent the equipment to you (the tenant) without interruption of use in exchange for an agreed monthly payment (the Rent). Advance payment amounts vary depending on financial, credit and guarantee verification. So let`s say your business doesn`t have a line of credit (LOC) or you need more working capital than your LOC can provide. In this case, you can use a sales lease to raise capital to launch a new product line, buy a partner or prepare for the season in a seasonal store, among other things. Since you bring the equipment to the table, your financial partner doesn`t have to take as many risks. If you own valuable equipment, you may be eligible for a sale sale leaseback, even if your business has adverse elements on its credit report or is a start-up with little or no credit history.
Sale-leasebacks usually involve a fixed term and a fixed interest rate. So, with a typical sale-lease-leaseback, your business receives a lump sum in cash at closing and then repays it in monthly installments over time. Here you will usually find the most competitive rental solution for selling equipment for your business. What for? Simple – Independent financial firms don`t have all the regulations imposed on them by banks and are usually able to customize a solution that most effectively meets your financing needs. As a rule, the cost of capital is higher than a bank, but they are characterized by creative structuring and can close your transaction in a few weeks. Another way to imagine a leaseback is like a corporate version of a pawnshop transaction. A company goes to the pawnshop with a valuable asset and exchanges it for a new infusion of money. The difference would be that there is no expectation that the company will buy back the asset.
Why would you want to rent a device you already own? The main reason is cash flow. If your business needs working capital immediately, a sale-lease-sell contract allows you to get both the money you need to operate and the equipment you need to get the job done. However, the sale and rental of equipment is more flexible. With a sale-lease-lease-buyback of equipment, you can pledge the asset as collateral and borrow the funds through a $1 buyback lease or equipment financing agreement. Depending on the type of transaction that meets your needs, the resulting lease may be an operating lease or a capital lease. Assignment-lease-lease-assignment transactions can be structured in different ways that can benefit both the seller/lessee and the buyer/lessor. However, all parties must consider the commercial and tax implications as well as the risks associated with this type of agreement. Whether you have large growth and acquisition projects, need to stock up, or have expensive debts to pay, a sale-leaseback agreement can potentially give your business the capital it needs to thrive.
Once we have jointly determined which sale-leaseback solution is best for your business, a proposal will be created outlining the terms and conditions of the transaction. After the proposal has been accepted by both parties, the due diligence process begins. Although real estate companies often use sale-leasebacks, entrepreneurs in many other industries may know nothing about this financing option. However, you can make a sale-leaseback transaction with all types of assets, including commercial equipment such as construction equipment, agricultural machinery, manufacturing and storage equipment, energy solutions, etc. In real estate transfers, the financial partner usually creates a triple net lease (which is a lease where the tenant must pay the real estate costs) for the company that has just sold the property. The financial partner becomes the landlord and collects rent payments from the former landlord, who is now a tenant. Can also be called a nominal or ($1) dollar buyback lease. These leases share the benefit of fixed monthly payments, but with the guaranteed option to purchase the equipment at a nominal price upon closing the lease. With this type of lease, there is no uncertainty about the value of the equipment when the lease is terminated, as the redemption terms are usually part of the initial agreement. The main difference between a line of credit (LOC) and a sale-leaseback is that a LOC is typically secured by current assets such as debtors and inventory, and the interest rate changes over time. A company will use a LOC if necessary to meet current cash flow needs.
We work with a variety of companies that may not be familiar with how this process works or that may not fully understand what sale-leaseback financing is. A sale-leaseback for the sale of equipment offers options to companies that want to increase liquidity, optimize cash flow and improve balance sheet presentation. For companies that need flexibility in structuring financial matters, leveraging the equity of their working capital is a strategic way to raise capital for growth or restructuring. .
