Businesses often have their money tied up in working capital. If you purchased all of the equipment for your business from your own pocket or you have customers that are slow to make their monthly payments to you, it will be challenging to keep your cash flow positive. If the money you need is not coming in, your corporate credit may become damaged as you cannot pay your lenders.
One option you have is known as sale and leaseback. A number of businesses have used sale and leaseback to acquire instant cash to pay for other needs of the business. Unlike a loan sale and leaseback involves taking your existing property and selling it to a lender or investor. They will buy your equipment now and draw up a lease where you can buy back the property over time.
Most businesses use sale and leaseback because it will provide you with instant cash to pay for pressing needs. If you need to pay your lenders or you are struggling to maintain your payroll, sale and leaseback can offer you money to fix it now. The good thing is the leasing terms are usually pretty generous so you aren't stuck with a large monthly payment obligation.
Freeing up working capital and improving your businesses cash flow is one of the best ways to keep your business afloat and alive for many years to come. One of the great options about using sale and leaseback is the ability you have to deduct all of the payments from the lease. This tax advantage is huge for your business as you get a generous discount on the taxes and you still have the opportunity to use the equipment without the expensive cost of owning and maintaining it. In essence, the equipment is almost free for your business after the tax deductions you can acquire.
When you do a sale and leaseback, you can usually acquire about 80-100 percent of the total financing amount. A large amount of the loan terms are based on your businesses cash flow and the financial needs you have. The sale and leaseback terms are also based on your industry along with your current market conditions.
Many of the small businesses that use sale and leaseback find that it is a great way to remove short-term and long-term debt. You can acquire the funds now to pay off debts and bank the rest to increase your cash reserves. This way you can dip into your cash reserves when it's necessary.
When a company uses sale and leaseback, they are often struggling and getting close to bankruptcy. Since you may be unable to acquire other loans to pay for the cash flow needs of the business, sale and leaseback may be the only option you have to acquire the money you need.
Sale and leaseback is beneficial to the leaser because they are able to acquire a monthly payment from you for the equipment. They also get to earn interest on the lease so they can generate a decent income from investing the money into your equipment.
In today's economy, sale and leaseback is an attractive option. A number of lenders are not offering any type of small business financing because they are nervous about the risk load that comes with these businesses.
Depending upon the amount of money you need and the lease you agree to, you can have a lease that is anywhere from 1-10 years. It mostly depends on the person that will provide you with the lease. You also need to find out what their rules are if you have slow sales and you cannot repay the lease in the time frame that was originally drafted.
Corporate Credit Concepts specializes in sale and leaseback. For more information about sale and leaseback and how it might benefit your business, please CLICK HERE for a free phone consultation.