Sale Leaseback In Canada: Truth And Consequences Around The Equipment Leasing Company Reverse Solution

5 Reasons To Consider A Sale LeaseBack In Canada

OVERVIEW – Information on the sale leaseback in Canada. How does the equipment leasing company or commercial lender provide such a solution and what are the benefits?




A Sale Leaseback financing strategy is one of the more unique methods of replenishing your capital and cash flow. Let's examine the truth and consequences

of this business finance strategy, as well as some important considerations. Let's dig in.

Not all Canadian business owners and financial managers are aware of this somewhat unique strategy. At it's essence it's very simple. You are taking an asset you own and in effect ' selling' it back to the Lease Company or commercial finance firm. That entity then ' leases' it back to you via one of three finance vehicles:

Capital Lease
Loan/Bridge Loan
Operating Lease

What then are the 5 reasons that the business owner/manager rationalizes to consider such a transaction. They are as follows:

1. A need for working capital

2. A quicker way to raise cash as opposed to taking on new debt or considering additional equity

3.The unique need to both still use the asset in question as well as to maximize its value to your firm

4. To manage certain debt/equity relationships on your balance sheet

5. Maximizing your ' R O A ‘- (return on assets)


As we noted our described financing has both some consequences and considerations. Naturally the equipment leasing company or commercial finance firm must properly document the transaction from a legal and contract perspective. That's actually a fairly simple matter.

But one other consideration is the accounting treatment of your transaction, often overlooked in the early stages of the owner/managers consideration of a leaseback. You need to discuss, and consider the balance sheet and income statement effects of treating the lease back as either a capital lease or an operating lease.

For example, it might be recommended that you do an ' operating lease ' - in that case your income statement needs to reflect either the gain or loss on the value of the asset or assets in question. (Yes Virginia, some assets actually increase in value on occasion). Company owned real estate is a good example. More often than not we recommend Capital (lease to own) Leasing strategies when implementing a sale leaseback, if only because the accounting, tax and cash flow reporting consequences seem to be a bit straight forward.

We haven’t mentioned your firms ' CASH FLOW STATEMENT ' when it comes to a sale leaseback, but typically your accountant will recommend (or insist!) that your cash flow statement show the leaseback as a Financing inflow on your financials.

People are always going to have ' questions ' and ' issues' with a sale leaseback.

This is everything from a lender viewing it negatively as a cash grab, your accountant raising tax , balance sheet and reporting issues, etc. Nonetheless it’s a proven and often used financing strategy to enhance cash flow while keeping an asset you want to keep, or need for that matter.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in the ' truth or consequences' aspect of Sale leaseback financing.



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.

Info re: Canadian business financing & contact details :

7 Park Avenue Financial = Sale Leaseback Financing Expertise

Stan Prokop

Instant Financing Access To Canadian Equipment Leasing Company Solutions !

Canadian construction, heavy equipment , transportation , and medical lease financing that works for your firm, today!

You're in for a pleasant surprise if you think it’s impossible to quickly and properly access financing via an equipment leasing company in Canada.

But what does it exactly take to be in a position to know what firms offer what type of financing , who and where are they, and what you need to know to ensure you have access to the proper rates, terms and structures that your Canadian firm deserves . Let’s update you on the current lease ' landscape' in Canada, because it's a whole brave new world out there!

Some of our clients seem to find this tough to believe, but there are lessors out there who are very interested in getting your lease finance business. Therefore you need to know who they are and what type of financing they provide based on the asset type that you're financing. We're going to show you one simply, easy solution shortly that will take care of that quite efficiently.

In Canada banks have traditionally exited and entered the leasing market on a number of occasions over the last number of years. Currently in the 2011 environment you can safely say ' they are in! '

Bank leasing is done through separate divisions and companies of the bank, with the major benefit being their very low cost of funds (after all they are the bank, right?!). Challenges to access bank leasing are simply that the credit quality they are looking for must be quite strong, so if your transaction needs to be structured, i.e. due to your firm’s financial health, then bank leasing might not be for you. Also, two types of leases dominate the Canadian marketplace, capital and operating, and the banks don’t offer operating leases , so if you need a ' lease to use ' ( as opposed to a ' lease to own' ) don’t waste a lot of time talking to a bank lease co in Canada .

Your 2nd best bet, bar none (We’ll share the absolute best bet shortly!) are independent lease companies in Canada. They are non bank in nature, are extremely motivated to get your business, and come in all shapes, sizes, and ownership (many firms are doing business in Canada but U.S. based).

The top characteristics of independent lease Co’s in Canada are they are flexible when it comes to structuring a transaction that makes sense for them... and your company! And you'll find often that when you bank can't, your equipment leasing company can in fact provide the financing you need.

The other segment of equipment leasing in Canada you need to be aware of and maximize are the ' captive ' firms. Captive? as in prisoner? Not exactly. Well perhaps, because captive denotes they are a prisoner to their parent company, meaning that many large corporations set up their own leasing and finance firm to lease their own products. I guess in business it’s known as the double, whammy! They make money on the product, and the financing. Think GMAC as an example as it relates to General Motors.

So, minor problem. How do you as a business owner wade through tens and hundreds of lease companies with respect to where they are, who they are, how they do business, what asset type they prefer to finance, and what credit quality they demand ? !! Want an instant solution and access to an equipment leasing company for your financing needs.

The solution is to seek and work with a trusted, credible and experienced Canadian business financing advisor who knows and has access to the entire lease landscape in Canada. The benefits? Save time, get prompt approvals, and get the best rate, term and structure for the asset you are financing. As the guy says on TV ' we urge you to act at once’!





Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/equipment_leasing_company_financing.html