Unlock Working Capital with Sale Leaseback: The Lease Back Bridge Loan For Business Needs

 

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YOUR COMPANY IS LOOKING FOR A SALE AND LEASEBACK SOLUTION!

Working Capital Woes? Sale-Leaseback Financing Can Bridge the Gap

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

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

 

BRIDGING THE GAP WITH SALE-LEASEBACK FINANCING - UNLOCKING THE VALUE OF BUSINESS ASSETS

 

A Sale-leaseback strategy, if executed properly, is a classic refinancing scenario.  In this financing arrangement, a business sells an asset/assets and then leases it back - this provides valuable working capital that frees up the equity that was in the asset - This type of ' bridge loan' provides needed liquidity for the cash flow/business needs of the company via short terms loans that are strategically structured around immediate business needs.

 

A CREATIVE FINANCING SOLUTION FOR WORKING CAPITAL NEEDS

 

Leasebacks can be accomplished via business asset or real estate financing solutions for a property sale and leaseback lease financing or under various asset-based lending solutions in corporate financing In Canada.  Sale Leasebacks provide business liquidity without the company considering additional capital investment or debt financing as part of its financial planning for additional financial flexibility. The equity release in the refinanced asset is a solid alternative financing option for many businesses.

 

How does the lease back work as a finance source, and whether it’s a bridge loan or finance lease, what are the key benefits and mechanics of this financing solution when you might be at your borrowing limit?

 

 

WHY A LEASEBACK - EVALUATING THE PROS AND CONS OF BRIDGE LOAN 

 

 

It greatly appeals to small and middle market companies looking for business financing options, a financing rate, and lease terms that match their particular needs when they don't have access to more sophisticated capital markets and still want to keep the utility value of assets in question. In some cases, this type of transaction allows cash distribution to the owner/owners. Let's dig in.

 

 

WHY CONSIDER THIS TYPE OF FINANCING -  LEASEBACK BENEFITS FOR EXPANSION AND GROWTH

 

Sale leaseback transactions are typically utilized when a firm such as yours is looking to generate cash proceeds and working capital from unencumbered business assets and who at times are unable to access bank financing from business credit markets while giving you at the same time bargaining power regarding your assets.

 

These assets on the balance sheet can be almost any tangible asset, including trucks/vehicles, real estate assets, technology, shop floor equipment, etc.  In the case of real estate it's an alternative to mortgage financing. An owner-occupied real estate investment is a great investment to keep for the long term. They still have operating value to the firm. Proceeds of a company sales transaction bring value back to the balance sheet.

 

 

 

HOW DOES SALE LEASEBACK WORK? 

 

The legalities of the transaction are simple. As the owner of the asset, your firm sells it back to a leasing company. That creates a lease financing (or, in some cases, a bridge loan) which not makes your company the lessee or borrower in the transaction as part of a short-term or long-term lease agreement.

 

 

CASH GENERATION / MAXIMIZING LIQUIDITY 

 

Naturally, the key benefit of the deal is your ability to generate cash from the deal, while at the same time using the asset to hopefully generate profits and operational efficiencies within your firm at a time when all the bank credit you need is not available.

 

DETERMINING TRUE ASSET VALUE

 

A key factor in the whole transaction is, of course, the value of the asset. As we've experienced over the years business owners tend to place a higher value on the asset or assets in question as opposed to the lender!  So how then is this problem or challenge addressed?

 

POTENTIAL NEED FOR AN APPRAISAL

 

Typically the answer is a third party appraisal. Larger sale-leasebacks are rarely consummated without an appraisal. In years gone by, lenders were skeptical of this method of refinancing simply because they viewed it as a ' cash grab ' by the customer.  These days, when properly structured and valued, it’s a solid mechanism of refinancing that, more often than not, makes a lot of sense when it comes to a tailored lease payment to your cash flow via market lease rates, etc.

 

FINANCING ALTERNATIVES

 

Companies looking at financings such as a  mezzanine debt financing tool from alternative finance and mezzanine lenders will generally find that sale leaseback transactions are less costly and extension options deliver maximum flexibility in areas such as lease expiration.

 

  

THE IMPORTANCE AND VALUE OF APPRAISALS  

 

A common mistake many business owners and financial managers make is to solicit an appraisal on their own looking for greater value in the asset. That problem complicates two main things -

 

Lenders like their own appraisers, not yours!

 

Dollars can be spent on the wrong type of appraisal (there are three types)

 

Obviously, the best solution is when you and your lessor or lender agree on who will be performing good due diligence efforts via the appraisal, and what type is mandated for a timely investment decision and an offer price acceptable to both parties. The three types of appraisals include

 

FAIR MARKET VALUE VIA MARKET RESEARCH

ORDERLY LIQUIDATION

FORCED VALUE LIQUIDATION

 

Lenders and lessors will more often than not  ' go conservative ' on the asset and focus on the dollar value of the orderly and FLV asset liquidation prices. Because most (not all) lessors and lenders don't have significant asset expertise in diverse industries they want to know they can be disposed of an asset quickly in a worst-case scenario, even a real estate asset.

 

That worst case is of course a business failure. Equipment proceeds and real estate proceeds can bring significant cash to the balance sheet via sale leaseback proceeds. In the real estate this scenario for property owners will be more expensive than mortage rates but less expensive than mezzanine finance - these days any basis points make a difference. 

  

 

  

DO YOU NEED A BUSINESS PLAN?

    

 

For certain transactions, it might be appropriate to have a business plan in place - particularly more significant transactions where your firm is trying to position the true value of a transaction. 7 Park Avenue Financial prepares business plans that meet and exceed bank and commercial lender expectations.

 

SALE AND LEASEBACK ADVANTAGES AND DISADVANTAGES

 

Sale-leaseback financing brings immediate benefit in the form of cash flow and working capital from the equity in business assets and or real estate. This short-term infusion of cash allows businesses with assets/equity ownership to maintain the use of the assets while gaining access to business capital. Due to the specialized nature of these financing options, sale-leasebacks come with various tailored terms and structures customized to the needs of the business borrower.  Assets that were originally financed at high-interest rates can be refinanced in a lower-rate environment.

 

It's important to note that a leaseback or bridge loan has some tax purposes and accounting implications, so generally, sale-leaseback accounting should be reviewed with your financial team or 3rd party accountant. In some cases tax savings and book values of assets will come into accounting play.  When it comes to financing rates the interest rate on your transaction will vary with transaction size and overall credit quality of your company and the asset/assets.

 

CAPITAL VERSUS OPERATING LEASES

 

There are two types of leases in Canada - capital and operating. Operating leases are less in vogue due to international accounting standards being rewritten. So most often, the sale-leaseback/bridge loan is constructed as a full payout capital lease with fixed interest rates and monthly payments. The bottom line is still the same - new cash on your balance sheet.

 

 

In a small number of cases, equipment already under the lease can be refinanced also, although this is not really a classic leaseback... it’s just refinancing an unencumbered asset such as real estate or equipment. In some cases, an alternative to the lease back is to simply pledge the asset or asset in question under another type of financing arrangement, depending on overall credit strength.

 

  

CONCLUSION - UNLOCKING WORKING CAPITAL WITH SALE-LEASEBACK FINANCING

 

  

Our bottom line for the business owner looking to benefit from some asset company sale transaction?  Let this method of refinancing existing assets make sense for your firm when the planets align relative to asset value, cash needs, your growth objectives and accounting sense and as an alternative to mezzanine capital.

 

 

If you are forced to maximize liquidity with sale-leaseback financing arrangements, speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your refinancing needs - it's a great short-term solution to a long-term problem of capital structure and your company's balance sheet.

 

  

 FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO /ASK MORE INFORMATION   

 

What is sale-leaseback financing, and how does it work as a bridge loan for working capital?

 

Sale-leaseback bridge financing is a business financing solution whereby a company can sell business assets or property it owns and then enter into a leaseback transaction structured as a   term loan or lease; the equity in the asset allows the company to receive cash for short-term funding to cover operations or other business needs from appropriate bridge loan lenders or other alternative lenders.

 

 What are some of the risks associated with using sale-leaseback financing as a bridge loan for working capital?  

Business owners should consider any risk involved in sale-leaseback financing/bridge loans. In certain situations, the terms of a transaction can be regarded as onerous as it relates to interest rates and financing costs. Additionally, companies should consider the potential depreciation of the asset or assets being refinanced. A default in the leaseback arrangement could trigger business disruption and risk losing required assets. Bridging loans can be accessed much more quickly than financing from traditional financial institutions such as banks - Financing can also be used to retire government super priorities.

 

    

What is the main advantage of a bridge loan?   

 

 

 

The main benefit of bridge debt financing is that bridge loans typically can be accessed relatively quickly. Borrowers in some cases, may pay high-interest rates, but most bridge loan structures are typically short-term loan structures with some associated closing costs and an origination fee.  Typically a bridge loan is not a long-term financing solution - allowing the company instead to meet some urgent current expenses.

 

 Are bridge loans/leasebacks expensive? 

Bridging loans can be expensive as a typical leaseback/bridge loan might include an interest rate as well as an origination fee or closing fee - It is important to note that bridge finance solutions such as the leaseback are usually short-term financing solutions with a goal towards a long term financing permanent solution that might be more traditional. The rate of interest in a bridge loan lease solution might be either a monthly payment structure or; interest will accrue with no monthly payment or interest payments under a balloon loan type structure,

 

Click here for the business finance track record of 7 Park Avenue Financial

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Sale leaseback financing is an often underutilized part of the Canadian Equipment and Leasing industry. Many business owners and financial managers in Canadian firms may not yet be aware of the wide popularity and increasing use of this type of alternative financing facility.



For various economic and financial reporting considerations, this finance strategy continues to be scrutinized as a financial option for Canadian business. Let's dig in.

WHAT IS A SALE AND LEASEBACK?

Sale and leaseback financing is a process whereby your firm can sell an asset and lease it back from a financial firm, typically a leasing company , the ' lessor ' ,as it pertains to equipment, or a mortgage firm of some type if it pertains to real estate,( sale lease-back commercial real estate ) such as owner owned premises. At the time you negotiate such financing you have the ability to set out terms of repayment, typically the term of the transaction and payment schedule. As a seller of the asset your firm effectively becomes a lessee with the financial firm becoming of course the ' lessor '.

SHOULD YOU CONSIDER A SALE LEASE BACK

Companies that are capital intensive via investments in fixed assets, equipment, or real estate and ROLLING STOCK are typically great candidates for leaseback financing. The ability to recoup some of the cash in past investments, in times of need is the common reason for considering this type of financing. When a company looks to avoid external financing leasing back owner owned assets makes a lot of sense - especially if there is a consideration for the debt to equity ratio of a company.

Although the transaction does, in fact, show up as debt on the balance sheet that debt goes down with each installment and the company has an offsetting infusion based on the cash received in teh transaction. The process can sometimes be confusing to owners as it is really a combination of sorts of both debt and equity financing by virtue of the cash received.

EXAMPLE OF AN EQUIPMENT SALE LEASEBACK DEAL

Let us assume a transportation/trucking firm has a significant investment in its truck fleet. At the start of the transaction, the trucks are unencumbered with liens by virtues of the ownership of the assets. The trucking firm sells the trucks to the commercial leasing company at an agreed-upon fair price which in some cases can actually be higher than the accounting ' BOOK VALUE ' of the trucks. The proceeds of the transaction typically used for any general corporate purpose, for which there might be a number of reasons.

This financing transaction works well when your firm has the ability to pay back the installments on the transaction and the commercial lender has a comfort level around your financial statements and the understanding that the transaction has a long term benefit to your firm. The borrower must be able to prove proof of ownership of the asset or assets in question and its important to allow for time to close the transaction given that it has a bit more complexity and paperwork than a traditional lease financing transaction.

KEY BENEFITS OF A LEASEBACK TRANSACTION

1. This is an accepted way of raising capital that has a couple key benefits :

2. The company has the right to still use the asset for its original purpose

3. Your firm receives a cash injection based on the amount of the transaction and can preserve existing credit lines or loans with other lenders, allowing your company to maximize cash flow drawdowns


4. It removes the potential requirement of the firm to raise additional equity capital which would dilute ownership holdings - Some experts have compared the transaction, however simplistic, to a pawn shop transaction, whereby the owner has an asset/assets and requires temporary cash. The difference in that transaction though is that the seller in a leaseback is committed to regaining title and ownership of the asset!

5. Financing rates are competitive with general market conditions and your overall ' credit profile '

6. While traditional EQUIPMENT LEASE FINANCING solutions might require a down payment on the transaction leasing back an asset typically does not require a downpayment, sometimes called ' the downstroke '!

7. With business interest rates being at all-time lows for the foreseeable future companies have the ability to take advantage of those low rates

8. Balance sheet improvement - allows the company to reduce fixed assets and increase ' cash on hand '





The overall sale leaseback strategy has been around for a very long time, and, as noted, continues to gain in popularity. The primary reasons for its increasing usage are the ability of business owners to enhance their profits to a certain degree, as well as, even more importantly, to generate additional cash flow for the business. That is the key benefit of the latter would appear to be the most obvious benefit.



Business people continually look for 'creative' solutions to financial and cash flow challenges. Who wouldn't want that? Luckily these days more and more alternative solutions to cash flow needs are around.



The basic strategy? It's simple. Your firm has equipment that has been fully paid for and is currently unencumbered collateral. Your interests are simply that you wish to take advantage of the equity in the equipment, but at the same time you wish to continue to use the asset.

LESSOR APPROVAL CHARACTERISTICS

At 7 Park Avenue Financial we talk to clients about 3 key issues in ensuring faster approval.

1. The ability to demonstrate clear ownership of the asset, free from encumbrances

2. Mutual agreement of borrower and lender of the value and age of the asset - KEY POINT - In many cases it is very appropriate for some additional cost around a 3rd party appraisal by a qualified EQUIPMENT APPRAISER to determine the full proper current value

3. The ability of the borrower to demonstrate the true value and use of the asset in generating sales and profits for the firm.




Naturally, the asset base of consideration for such strategies involves a broad number of industries and an even broader number of assets. More often than not, the need is very basic - how can you leverage assets to bring more cash into the firm? In certain cases, if a transaction is managed properly, you can enhance your overall financial statement ratios.



So, ask our clients, how does it work? You 'sell' the equipment back to the finance or leasing company. Under the umbrella of equipment financing and lease documentation your firm 'leases' the asset back from the finance firm.



There are of course some key accounting issues that Canadian business owners and financial managers have to take into consideration. Based on the value of the transaction your firm may have to book either a gain or loss on the transaction. The ability to capitalize on cash received will always be a key consideration as other financing arrangements your firm might have in place, such as lines of credit, etc, stay intact.




What are some of the other motivations for considering such a strategy? We can broadly group them into a couple of categories - i.e. Cash flow, accounting and tax, and balance sheet, and income statement enhancement.



If your firm structures the transaction as a true operating lease when you enter into the sale leaseback you have somewhat magically taken debt off your balance sheet and improved many of your key operating and loan covenants.



Payments create a monthly expense and this amount more often than not is less than the depreciation taken on the asset, so, via the magic of accounting, your firm has created additional earnings! In cases where you do in fact have a 'gain' on the sale leaseback those also of course add to the profits of your firm. We love those accountants, right?!



In summary, Canadian business owners and financial managers should investigate the strategy of a sale leaseback of assets. In the current economic environment such a strategy can enhance your firm's overall liquidity and profitability. That's a good thing.

KEY POINT - Entering into the sale leaseback consideration there should be a solid understanding of issues such as balance sheet effects, interest rates and financing costs, the difference between a CAPITAL LEASE and an OPERATING LEASE and the purchase option at the end of the term of the lease. ( A higher purchase option has the effect of lowering the monthly payment on a financing lease transaction.

POTENTIAL DISADVANTAGES OF A LEASEBACK FINANCE

In evaluating a commercial financing transaction of this type it is sometimes easy for inexperienced business people to misunderstand this type of transaction, so your firm's goal should be to understand what the financing can do for your firm, ensure you understand any potential risk or disadvantages, as well as understanding how the transaction process works. The one clear and simple disadvantage of the transaction is simply the non-ownership of the asset - many companies have a pride of ownership mentality.

Another potential disadvantage is the potential complexity of working with any existing lender or most importantly your senior lender to get the asset released from their security - this is accomplished through a simple waiver process.

Additionally, proper consideration should be given to the amount of depreciation and obsolescence of any given asset or asset class, and the consideration around an operating lease vs finance lease . Due to changes in worldwide accounting rules off balance sheet financing does not always have the same benefits it used to have .

HOW TO EVALUATE A SALE-LEASEBACK

Generally speaking, a sale leaseback makes sense when assets transferred have value and are appreciated ( example - real estate ) or alternatively they are revenue and profit-producing assets of the business.

Assets that aren't critical to the use of the business are often simply sold and deemed as not being core to the operations of a company. But the refinancing process we have outlined releases equity in assets you own and can provide valuable working capital at a time when it is really needed.



CONCLUSION

Companies have the ability to consider numerous benefits of the sale leaseback process. It is important to ensure that the appropriate business, tax, and accounting considerations are taken and assessed properly. Utilizing this financing strategy allows companies to benefit from tax issues related to sale leaseback accounting, as well of course as utilizing the cash to grow sales revenues, clean up the balance sheet and reduce other more expensive debt.


Seek out and speak to a trusted, credible, and experienced Canadian Business Financing advisor to ensure you are working with the right sale lease-back companies.


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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial





Stan Prokop
7 Park Avenue Financial/Copyright/2020

SALE LEASEBACK LEASING IN CANADA - SALE LEASE BACK 101 !

Is it Advisable to Consider Sale-Leaseback Financing?

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Many business owners and financial managers are often faced with the consideration of utilizing a sale - leaseback to generate cash. This strategy became much more popular over the last year or so as banking and credit liquidity scenarios deteriorated.

The overall strategy can be viewed as giving some operational flexibility to the business. The bottom line of course is that it brings additional cash into the company at a time when ash is king. The customer is of course, essentially 'tapping into equity 'that the firm has built up in the asset. What is that asset?

Typically assets given up for consideration in sale leasebacks are manufacturing equipment, computers, and even a firm's real estate.

Sale-leasebacks have to make sense to both the lessor and the lessee. We view the largest ' negative ' aspect to such a transaction being the potential perception by the lessor, or other lenders that the firm is making a last ditch ' cash grab '. There has to be, as referenced above, an agreement that the transaction works for both parties.

If we analyze a typical example of a transaction we will hopefully get a better sense of why this strategy can in fact be a common sense financing alternative. Company A has manufacturing assets, shown as fixed assets on the balance sheet. In the sale - leaseback scenario the assets of course remain at the company - they do not move. The company receives cash for the sale of the asset to the lease firm. Quite frankly customers who consider this transaction have explored other traditional options by this time, such as reviewing additional financing with their bank or other senior lenders. Naturally the equipment is used on a daily basis to continue to generate sales, (and hopefully profits) for the firm.

In certain instances the sale-leaseback can in fact enhance the customer's balance sheet. One additional major flexibility is that the new sale-leaseback financing can in fact be used to generate additional flexibility at the end of the lease - i.e. the customer can again regain ownership of the asset if it will have economic value, or might choose to negotiate a return of upgrade with the vendor or lessor.

In summary, does a sale-leaseback of assets make sense? The answer as we have seen is ' yes ' if in fact it is done for the right reasons and makes sense for the customer and the lender.

Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com The company originates business financing for Canadian companies,specializing in working capital, cash flow, and asset based financing. In business 6 years the company has completed in excess of 45 Million $ of financing for companies of all size.

For info on Canadian business financing and contact details see:

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







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

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: http://EzineArticles.com/expert/Stan_Prokop/432698

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

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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.

Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :

http://www.7parkavenuefinancial.com

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














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

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

Sale Leaseback Financing In Canada : Saying Yes To The Sale Lease Back Cash Flow Solution

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Cash Flow Challenge ? Sale-Leaseback Financing ? Yes, You Read That Right !

Information on the sale leaseback business financing solution in Canada . The Lease Back delivers on your company's temporary cash flow needs via refinancing of existing assets

Many business owners and financial managers are often faced with the consideration of utilizing a sale - leaseback to generate cash. This strategy became much more popular over the last year or so as banking and credit liquidity scenarios deteriorated.

The overall strategy can be viewed as giving some operational flexibility to the business. The bottom line of course is that it brings additional cash into the company at a time when ash is king. The customer is of course, essentially 'tapping into equity 'that the firm has built up in the asset. What is that asset?

Typically assets given up for consideration in sale leasebacks are manufacturing equipment, computers, and even a firm's real estate.

Sale-leasebacks have to make sense to both the lessor and the lessee. We view the largest ' negative ' aspect to such a transaction being the potential perception by the lessor, or other lenders that the firm is making a last ditch ' cash grab '. There has to be, as referenced above, an agreement that the transaction works for both parties.

If we analyze a typical example of a transaction we will hopefully get a better sense of why this strategy can in fact be a common sense financing alternative. Company A has manufacturing assets, shown as fixed assets on the balance sheet. In the sale - leaseback scenario the assets of course remain at the company - they do not move. The company receives cash for the sale of the asset to the lease firm. Quite frankly customers who consider this transaction have explored other traditional options by this time, such as reviewing additional financing with their bank or other senior lenders. Naturally the equipment is used on a daily basis to continue to generate sales, (and hopefully profits) for the firm.

In certain instances the sale-leaseback can in fact enhance the customer's balance sheet. One additional major flexibility is that the new sale-leaseback financing can in fact be used to generate additional flexibility at the end of the lease - i.e. the customer can again regain ownership of the asset if it will have economic value, or might choose to negotiate a return of upgrade with the vendor or lessor.

In summary, does a sale-leaseback of assets make sense? The answer as we have seen is ' yes ' if in fact it is done for the right reasons and makes sense for the customer and the lender.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com

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










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

Article Source: http://EzineArticles.com/3556312

Sale Leaseback Asset Finance : 7 Reasons To Consider The Leaseback Financing Solution

Note To Self : Check Out Sale LeaseBack Financing

OVERVIEW – Information on the benefits of sale leaseback financing in Canada . Asset finance, via a lease back , can bring significant financial benefits to any business considering the transaction

Sale Leaseback is an often overlooked form of business asset financing in Canada. How does this financing work, and, more importantly, what are the benefits. Let's dig in.

Let's explore those potential benefits around the ' lease back ' of business assets, including by the way, real estate.

1. Some leasebacks could bring significant balance sheet and tax advantages to your firm. Although probably the majority of transactions are structured as term loans or capital leases it is of course possible to structure a deal as an ' operating lease ' - allowing the monthly payments to become an immediate expense. Depreciation benefits may also come to bear.

2. The possibility to structure a lease back can really be undertaken at any given time. If there is not immediate financing need (there usually is though!) your company has the opportunity to do a transaction when market conditions on rates are optimal. Today’s current low rates are clearly an example of that

3. The concept of considering lease backs is sometimes just all about focusing on what your business does best. The pro's call it ' core competency. As an example many Canadian chartered banks have sold off their prestigious bank towers on Bay St, utilizing capital in other parts of their business. Pride of ownership is sometimes, unfortunately, a thing of the past in today’s competitive environment.

4. Many transactions in this area focus on elimination of debt - this often improves borrowing ratios which more traditional lenders focus on and allow capital to be deployed in other areas relative to growth, more profits, etc

5. Employing assets via a leaseback will often improve your firms overall return on investment.

6. The unique nature of this type of financing allows you to still use the assets you need - i.e. equipment, real estate, etc - you just don't own them.

7. In many cases the selling of an asset allows owners to take out equity in their business - More often than not, in the case of real estate the assets are in a separate legal entity anyway.

Although some might view this method of financing as ' alternative ' in nature in reality its as much ' traditional' in nature. Final rate pricing and structure depend on the overall asset and credit quality.

So should you check out sale leaseback financing? If any, or several, or all of our 7 benefits can help your firm seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with you asset finance solutions.



Stan Prokop - 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 90 Million $ of financing for Canadian corporations . Info /Contact :


7 PARK AVENUE FINANCIAL = CANADIAN SALE LEASEBACK FINANCING EXPERTISE









Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:
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 '

Stan Prokop

Lease Back Financing Tips : Sale And Leaseback Transactions Can Be A Winning Strategy

Sale Leaseback Financing Makes Seemingly Impossible .. Possible!

OVERVIEW – Information on the ‘ leaseback ‘. Sale and leaseback transactions, done properly, can be a solid cash flow tool . Here’s some key considerations







Sale and leaseback transactions are sometimes a truly perfect solution cash flow needs. In some ways it’s a ' perfect storm' of financing - your business gets to keep the asset in question (typically equipment or real estate) while at the same time employing its use and possession.

By the way, that could include your corporate jet - although we don't run into
a lot of those these days.


What are the fundamental reasons for choosing the lease back? It usually comes down to:

A need for access to capital that otherwise might not be available, or available the rate and structure the business owner/manager desires

It’s sometimes a more efficient and quicker process than starting the journey into looking for new debt solutions or having to consider ownership dilution from new equity sources. Alternately the owner/owners of the business are now required to put in additional personal funds

The ongoing need and use of the asset to operate and grow the business - otherwise the asset should probably simply be sold!

In certain cases, as we mentioned, rates and costs of financing might be more attractive under the sale/leaseback

Because of the nature of how the transaction is recorded the lease back, properly structured can enhance the overall ROI - ' return on investment’

As we noted any asset of the business can theoretically be sold and leased back. A typical solution is business real estate, i.e. the business operating premises. Even Canadian banks in recent years have shed their huge office towers under this effective strategy. - And they of course still inhabit the buildings.

The other asset category is business equipment, which, while depreciating still has valuable use to the business. That raises the point that it’s important to consider the financial and tax consequences of the leaseback - for example if the funds received are greater than the present value of the equipment a profit on the transaction might have to be reported.

When you enter into this financing strategy your choices are the same as with any other lease financing transaction. Simply speaking you can structure your deal as a capital ' lease to own' or an operating ' lease to use '. The operating lease might be perfect for things such as a technology transaction for computers and telecom equipt. for example.

And that corporate jet

we were talking about? All of a sudden is a perfect candidate for an operating lease!

We caution clients that it's always important at the start of considering such a transaction it’s important to fully understand the value of the equipment or asset being re financed. That residual value must be well understood in the context of your company's needs for the asset and the financing structure required.

Seek out a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in putting together a winning strategy on refinancing business assets. The impossible just became possible.




Stan Prokop - 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 90 Million $ of financing for Canadian corporations . Info /Contact :

7 PARK AVENUE FINANCIAL = CANADIAN SALE AND LEASEBACK EXPERTISE








Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:
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 '

Stan Prokop

The Sale Leaseback Option . Here’s What The Business Doctor Says About An Asset Financing Lease Back

Searching For The Right Reasons To Consider A Sale Leaseback?

OVERVIEW – Information on the sale leaseback transaction in Canada. When it comes to asset financing what considerations and issues does the lease back require Canadian business owners/managers to consider




A Sale Leaseback asset financing option works best when it's done for the best reasons. What then are the considerations the business owner or financial manager makes when executing a lease back option. Let's dig in.

All types of business have the ability to consider a sale lease back strategy. While the core of the transaction is the asset itself a number of other considerations and issues arise. While the transaction typically is done for fixed assets of a firm, we must point out also that even real estate is a prime candidate for this method of refinancing.

The asset or assets are the heart of the sale leaseback - these assets must be unencumbered and free of all lines and collateral registration by other lenders. In some cases when it makes sense current financing on assets can also be paid out in the course of the new financing. This typically is done when a relatively small balance is still owing and the asset itself still has considerable value.

More often than not we are in fact seeing company owned assets being refinanced under our strategy. The primary reasons for that tends to be a realization by the business owner that owning real estate is in fact not the core business of the firm, and capital could be better deployed elsewhere.

In some cases the main purpose of the refinancing is simply to pay down debt that has come due, matured, or is weighing down cash flow and working capital.

How then can we summarize the key benefits

of asset financing under a sale leaseback. Key reasons are as follows:

Owners of the company wish to take out capital in the business while not depleting operating cash flows

Capital in the sale lease back can often be used to enhance the marketing and revenue prospects of the company

Funds from a leaseback can be used to grow profits and more strongly enhance the firm’s ability to enhance returns on investment and capital

Additional assets can be purchased with the lease back funding, and funds could also be used to grow the firm’s investment in R&D

In certain cases it might make sense to refinance the business at lower rates than were previously available - currently business interest rates are at an all time low

It's important to understand the manner in which a leaseback is created. As the lender, typically a bank or commercial finance firm is focused on the asset itself (real estate, equipment, technology, etc) an appraisal is typically required. Various types of appraisals exist and are mandated by particular lenders. In some cases it can simply be a ' desktop ' appraisal, where informal research is done on the asset. (Thank You Mr. Internet).

In other cases extensive analysis and diligence is carried out by a professional appraisal that focuses on current market values, liquidation values in a worst case scenario, etc.

It's important to note that two, let us call them ' subsets' of the lease back exist. One is that the transaction can be structured as a bridge loan with varying terms. The other is in the context of an Asset based line of credit, where your asset/assets are monetized within a revolving credit line. Same benefits, different paperwork.

At the end of the day what makes a good sale leaseback when it comes to asset financing/refinancing. We think it’s when both the lender and the borrower are properly satisfied with the financial benefits of the transaction -simple as that.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can ensure you're doing the deal for the right reasons for this valuable business finance options for many firms in Canada.



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 = Canadian Sale Leaseback Financing Expertise


Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?


CONTACT:
7 Park Avenue Financial

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


Phone = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

Stan Prokop