Canadian business owners and financial managers realized in 2008-2009, despite economic and financial challenges, that they had significant equipment and assets that were available to generate additional working capital and cash flow for their firms.In essence they were equipment rich and cash poor, as a significant amount of assets was tied up.
How can your firm free up the cash flow and working capital in these assets and put those funds to work for sales and profit generation? The answer is a sale leaseback strategy.
In many instances if you owe money on the equipment those payments can be stretched out to lower amounts, and at the same time improve working capital and liquidity.
Is it difficult to engineer a sale leaseback financing. The answer is categorically no if you employ a trusted, credible and experienced advisor in lease financing in
The one caveat that we warn clients on is that the sale leaseback should not be greater than the book value on your financial statements of the asset being financed.
If in fact that value was greater you would incur a tax on the financing which might negate the positive aspects of the sale leaseback.
So how do you get your sale leaseback financing completed? In effect you are selling your equipment back to the lease company, so you are required to prepare an invoice and a bill of sale. That invoice of course means that you are warranting that the equipment is free and clear of liens and that you have valid title to the asset.
So how does the lease company register their interest in your asset? In
There are a large number of assets that actually hold their value, sometimes increase in value, and in some circumstances only depreciate a modest amount. In that case we recommend to clients that they invest a nominal amount in an appraisal – this may well generate a larger amount of working capital and cash flow coming back into your firm. Prudent customers will generate an appraisal known as a fair market value appraisal – unfortunately many lenders will focus on a liquidation value appraisal, which is of course much more conservative .
Are there different documents used in a sale leaseback transaction? No! They are the same lease type of documents that you would expect in any type of equipment financing transaction.
Carefull attention should also be paid the ‘type ‘of lease that you consider in such a transaction. You essentially have two choices in
In summary, sale leaseback financing allows you to generate working capital and cash flow from unencumbered assets. It can be done for any asset, including real estate by the way. Work with a trusted, credible, and experienced lease advisor to ensure you structure your transaction properly for maximum cash flow and working capital gain.
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http://www.7parkavenuefinancial.com/sale_leaseback_financing_canada.html
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