By :
Rob Renk
As a savvy business owner, you may be aware of what a Sale Leaseback is, or may be you don’t, but the Sale Leaseback type of lease is one of the most underutilized tools available in the financial market, offering significant advantages for today s business owner.
Here is the book definition of a Sale Leaseback : An arrangement whereby a company sells fixed assets, currently owned, for cash to a lessor and leases the same from the lessor. Converts a fixed asset to cash. Selling price can be appraised value or book value, acceptable to the lessor. Book value may be best for the lessee to eliminate taxes.
Huh?
Put simply, this type of lease will get your cash out of an asset, such as a truck, that is free and clear. There is no lien against the truck and you owe no money on the truck. The bank will be able to appraise the truck and tell you how much it is currently worth and offer an amount of cash in return for monthly lease payments back to the bank for the cash you received. You can then purchase the vehicle at the end of the lease for as little as $1.00 and you will again have the vehicle owned out right.
This is a tremendous financial tool to be able to use in times of a cash crunch. You can release the cash out of your equipment at anytime when the need arises. To have the ability to create another source of capital for yourself is priceless.
Here are the main things to remember about the Sale Leaseback:
*The Bank will pay cash for an owned asset.
*Can be used as a safety net for a business if cash flow unexpectedly decreases.
*Treated the same as a lease, the bank takes ownership of the equipment and the customer now as a monthly payment.
*Similar to refinancing a home, but equity in the equipment must be 100%.
You will be selling your free and clear asset and lease it back simultaneously.
The types of industries where the equipment has the most long term value are:
*Construction
*Manufacturing
*Industrial Production
*Yellow Iron
*Dump Trucks and Trailers
*Agricultural and Farming
*Heavy Equipment
*Trucks in general
You would usually have to qualify as you would for a normal lease, but the Sale Leaseback gives you tremendous leverage in using your equipment to provide you with quick cash in a snap. The proceeds from this lease type can be used for working capital, debt restructuring, additional equipment acquisitions, and paying off judgments and other liens.
This type of leasing also qualifies for all of the different types Flexible Payment Options that allow your payments to be structured to fit your needs. Such as, Deferred Payments that give you time to install and start using your equipment so that it begins to generate income before you start making payments and Seasonal Payments that will give you a break on your payment amounts, if your business is seasonal or has a slow time of year.
The value of your equipment and technology comes from using it, not owning it. When acquiring assets the best rule to remember is to own assets that appreciate and to lease assets that depreciate. You can buy your leased asset at the end of the lease for as little as $1.00!
In conclusion, keep this type of capital procurement in the back of your mind. You never know when the Sale Leaseback could be utilized to provide your business with Quick Cash.
Author Resource:-
Rob Renk writes about business credit and finance. He specializes in writing about commercial equipment leasing and how it can help businesses save working capital in today’s credit environment. He is also the owner of www.EquiLeaseOne.com – your complete source for information about equipment leasing for your business. Also an excellent source for information on Municipal Financing and the Sale Leaseback.
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