A leaseback or sale can help you increase the value of your current technology. Your company can get the cash you have already invested in your IT or industrial healthcare assets. Then, you can lease the equipment back to continue to utilize it.
What is SALE OR LEASEBACK?
Leaseback and sale finance enable businesses to get capital by selling assets they own to a funder or a bank in exchange for cash. The funder lends back the assets to the business within a specified time.
IT equipment is among the assets that depreciate the fastest businesses own. Therefore, numerous small-scale businesses rent their technology to lower the risk and stabilise their cash flow.
For instance, if you’ve bought IT devices, you could transfer them back to a leasing service like Commercial Lending USA. You will get a cash payout. But, if you require IT equipment in your company, then you could rent it out.
What is the process?
Most commonly utilized by businesses with a large amount of costly equipment, leaseback, and sale are viable ways to raise capital. Although a loan will be listed in a company’s balance sheet as an obligation, a leaseback deal could enhance the balance sheet, decreasing the debt amount and increasing the current assets.
After the asset has been removed from the market, the company leases it back to the finance company for a specified time frame at a set monthly cost. The lease typically lasts for three years, but some finance companies are more adaptable to the requirements of the business.
This kind of financing allows companies to increase the value of capital assets. They can also access funds at a lower rate than regular borrowing.
HOW TO USE SALE AND LEASEBACK
Leaseback and sale is a viable financing option to take into consideration for businesses that have valuable assets and want to free up capital and create an injection of cash, but without sacrificing access to their assets in total.
This type of financing is also a good option for businesses that can’t get credit from traditional sources like banks. It is because the business can get money without taking on secured debt.
Is it the right choice for my business?
If your company wants to increase cash flow to grow by making a product or service, forming a team, or purchasing a new website, then leaseback and sale might be the perfect solution. Also, if you’re facing outstanding loans for IT equipment and want to reduce your overall debt, the sale and leaseback option could be beneficial.
As with any other financing option, it is important to remember that not all companies will be eligible for leaseback and sale. Finance companies will evaluate the value of liquidation for the equipment. It is also recommended to look at all options available before settling upon any decision regarding finances that will affect the business, which includes talking to an independent third party.
What types of equipment are available to be resold?
Nearly all IT equipment sale-leaseback. However, this kind of financing can provide benefits to certain assets.
Laptops and desktops are suitable for leaseback and sale since, However, IT hardware infrastructures, including networks, servers, and networks, can all be used.
The assets used to support this kind of financing are typically fixed assets, which include medical equipment and IT hardware:
- Mobile phones
- Forklift trucks
- MRI machines
- PET scanners and CT scanners
- X-Ray machines
What are the restrictions and requirements of SALE and LEASEBACK?
There are two conditions that a company must satisfy to be eligible for sales or leaseback financing. These are:
- The company has to own the equipment in full. The equipment cannot be held by any liens and must be fully paid off or very close to being completely paid off.
- The machine in question should be auction or resale value. If the item has no estimated fair market value, the company will not find a financing partner to buy it.
The benefits of SALE and LEASEBACK
Signing a leaseback and sale agreement can be helpful in many ways, like giving the seller cash while letting them keep using the property. It also doesn’t stop the business because you keep all the benefits of using it and give all the risks of selling and owning it to your lender.
Other benefits of sale and leaseback are:
Full investment financing
While traditional loans don’t cover the entire expense of an investment, leasebacks, and sales financing, typically cover 100 per cent of the investment cost.
A leaseback and sale can help the company generate money through the asset’s sale, which creates capital expenditures based on the currently owned assets. It is not just removing the risk of owning assets, but it also allows for accelerating the pace of projects to come.
Access to the ASSET
Using the asset after the sale through a leaseback or sale is possible. It means you’ll be able to access cash and retain the asset’s value without interrupting your business.
Leaseback and sale agreements typically have a great deal of flexibility. That means to the seller’s needs.
ALGNS USAGE, DEPRECIATION, and a wholesome life
A leaseback or sale finance agreement is designed to match the property’s lifecycle. When the lease expires, the asset could return or be renewed.
Any rental payments made in the leaseback or sale strategy are tax-deductible.
The leaseback and sale of assets reduce the risk for the company. If you decide to dispose of assets, you transfer responsibility to the buyer, and they assume the risk.
THE DISADVANTAGES of SALE and LEASEBACK
Like any other financing method, the sale and leaseback could also bring up certain potential issues.
The most important thing consider is whether your business will lose money by selling the asset. Although you’ll have access to it during the contract term, you won’t be the asset owner. It is especially important to remember any asset that has the potential to grow with time or be purchased outright without an obligation to repay them.
Other drawbacks are:
- Since it is secured through the machine, you risk losing your equipment if you do not pay the monthly instalments.
- The finance company typically values the equipment at Net Book Value or cost. You might get less than the amount you initially paid for it.
- The company financing the loan will be in total control over the assets.
SALE AND LEASEBACK FINANCE OFFERS FROM COMMERCIAL LENDING USA
We can provide your company with the option of leasing and selling various assets. Our process for leaseback and sale isn’t disruptive and allows you to reduce complexity and increase your opportunities for future growth.
If the item is more than four months old, we’ll offer you the purchase price in its original form. If it’s older than 4 months, we’ll give you the value of the book asset.
Additionally, you can benefit from our service at the end of the lifecycle, which includes certified data erasers that can help you meet GDPR compliance.
For further information or to talk about our leasing and sale options and how they could increase the potential of your current technology in greater depth, please contact us.