Tweet

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

Guest post by: Stan Prokop

Article Overview: The article provides insight the benefits of a business owner or financial manager considering a sale leaseback transaction for alternative financing purposes .

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

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 a sale leaseback 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.

A sale leaseback transaction is the right transaction 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 sale leaseback 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 a sale leaseback 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.

Related Articles
  Canadian Sale Leaseback Financing – Part 2
  Is it Advisable to Consider Sale-Leaseback Financing?
  Equipment Finance – Sale and Leaseback Solutions Canada
  Sale Leaseback Financing Canada
  Canadian Sale Leaseback Financing – The Basics
  What Are The Advantages of Sale Leaseback Equipment Financing In Canada? Are There Alternatives?
  What is a Sale-Leaseback and What Are the Qualifications?
  Delve Into Canadian Sale and Lease Back Financing – Benefits Of This Type Of Leasing Of Equipment
  The Evolution Of The Sale Leaseback Transaction In Canada . Get The Most From Your Lease Finance Company
  Which Of The 3 Asset Financing Structures Works For Your Firm ? Right Choices With Equipment Leasing Companies in Canada
  5 Guaranteed Business Working Capital & Cash Management Solutions For Liquidity - Canada
  Scientifically Proven ? An Asset Lease Whether Operating Or Capital Works For Financial Bridging of Canadian Business Financing
  How To Get The Best Finance Deal When You Lease Equipment from Commercial Leasing Companies
  Equipment Loans And Leases In Canada ! Which One Of Three Options in Business Leasing And Financing Works For Your Firm?
  Construction Manufacturing Equipment Financing – Options for New and Used Equipment
  What Are The Options For Short Term Financing And Bridge Loans In Canada ? Specialized Financing Can Help
  Business Equipment Leasing And Financing In Canada . When And With Whom To Lease
  Stuck In Business Financing Traffic? Raising Sources of Funding For Loans In Canada
  Business Equipment Leaseback Loans
  Financing Working Capital For Business – Canadian Business Cash Flow Alternatives

Article Tags: alternative financing, business assets, sale leaseback transaction



Related Forum Posts
Internet Users Hbk http://www.internetscamsanonymous.com - Current site for sale of our handbook as a Clickbank product Welcome any and all feedback: Sale page Content Handbook Content Pricing Too Big Considering braking it to 2 volumes: Avoiding Scams Online and Doing Business Online and maybe ad 3rd volume related internet technology Kind of like selling preventive medicine!! Thank you in advance for your interest and comments
Re: What's in a Name? - Sale or promotion relies a lot in name chosen for product/business.
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
The Little Man Introduction - Good Morning, This is John Hoover from Little Man Consulting. Our company has been floating along as a after thought for a few years. This year we decided to make a go of it. So far we are doing great. We are Virtual Administrators, Web Developers, Database Designers, and Software instructors. Basically, if you have someone in your office to do it, we can do it virtually. Our company was created to "Provide Big Business Resources to the Small Business". Wish me luck, I plan on revolutionizing the small business world with this!
Re: what position to request? - Hi Michael, How about Online Business Development Manager? Good luck with your start-up. David


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Work Place Counselling

Top Ten Home-Based Businesses

Four Secrets to Earning Income as an Author

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.