Is a Sale Leaseback of My Business Assets a Good Thing?

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Sale Leaseback Financing

At various points in the economic cycle a business owner or financial manager considers a sale leaseback financing. Is that type of transaction advantageous, and what are the risks and benefits?

Many firms do not fully know about or understand the advantages of this type transaction. This is a classic alternative financing strategy that works best when it is a good deal for the lessee and the lessor. It does not work well when the lessor presumes it is a 'cash grab' by the lessee.

This type of financing should be contemplated if your firm has the following characteristics:

- Experiencing working capital challenges
- Declining profits
- Excess unencumbered assets
- High amount of debt




If a company has a high amount of debt a sale leaseback transaction can still be a very positive financing event. By structuring the the transasction as an operating lease the debt becomes 'off balance sheet '. This gives the appearance of the company being not so highly leveraged and quite often it can save the company from being in default of its loan covenants.

In many cases the sale leaseback can bring a significant amount of capital back into the firm.

So when does a firm consider such a transaction - every industry is different but if the firm is bottom line, over leverage, i.e. Debt too high, there can be advantages to an off balance sheet sale leaseback transaction.

If a company has historically had pride of ownership, and has significant assets, and is suddenly going through a high growth stage it also becomes a good candidate for a sale leaseback. Cash flows are restructured and the company gains significant new working capital.

The best candidates, overall, for this type of financing strategy are high growth companies who would prefer to invest additional cash in receivables and inventory. Naturally no lessor wants to consider such a financing if the company is in some sort of death spiral.

In some cases when assets have in fact appreciated (not depreciated in value) the company may actually be able to report a gain in earnings, as the sale leaseback transaction in excess of book value allows the company to book the sale leaseback gain into the profit account!

Many government institutions, such as municipalities, hospitals, etc may find this type of financing strategy as optimal in solving temporary budget cuts and working capital challenges.



In summary, a properly structured sale leaseback can provide new cash, enhance earnings, and in effect be a creative way to temporarily re finance the firm or institution.





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop


Article Source: https://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3723483

Equipment Finance – Sale and Leaseback Solutions Canada

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You Probably Want To Know About This Under Used Asset Refinance Strategy

OVERVIEW – Information on the asset refinancing strategy known as the sale lease back solution . The sale leaseback strategy, when properly implemented allows owners/mgrs to access valuable cash flow while maintaining control of key business assets

Equipment Finance is one of the most popular and widely used financing strategies used by Canadian business owners and financial managers. It is a unique financing opportunity because it is kind of the opposite of a normal lease financing strategy. Why is that? Normally your firm has the need for equipment, and has cash flow and working capital to make the payment.

In a sale and leaseback financing the opposite is true. You have equipment, it’s paid for, and the capital is of course tied up in the fixed asset account of your balance sheet. How can you unlock that capital and put it to work to generate sales and profits? The answer is the sale leaseback strategy.

You should consider a sale leaseback strategy when you have a need to improve your liquidity. What is the sale leaseback – very simply speaking it’s the re financing of equipment you own under a lease strategy, so it is not a loan per se. There is one key accounting issue that we should point out though, and it’s simply that if you refinance that equipment and the financing is more than you are carrying the asset for on your balance sheet (you have depreciated the asset over time) then the excess you receive over book value might be taxed as a profit. Bottom line, talk to you accountant on that point.

Implementing a sale leaseback strategy for your Canadian firm is easy – along with the normal business lease application you will need to generate a bill of sale to the lease company that transfers title back to them and title will once again revert back to your firm when the lease is repaid.

Depending on the size of your transaction, or the number of assets involved it might be advisable to get an appraisal , in fact one might ever be a requirement, as opposed to a ‘ nice to have ‘. We point out to clients that often work in your favor as it gives you a sense of what the true value is of the equipment and it might increase the amount you receive under the sale and leaseback strategy.

Another benefit of a sale leaseback strategy is that it potentially will make your balance sheet look better. In many cases your current ratio improves because you use the funds to reduce payables. You are more liquid and can use funds for such things as buying more inventories and taking discounts for prompt payment

In summary, a sale leaseback strategy is a great way to improve working capital and your balance sheet. Speak to a trusted and credible leasing advisor and determine if you can take advantage of those benefits








7 Park Avenue Financial :

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .







7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Stan Prokop