Sale and Leaseback Financing – What is it?
A sale and leaseback financing transaction is where the company sells it free and clear assets and leases it back simultaneously. These transactions can range anywhere from $50,000 to $6,000,000.
This article will encompass the following types of industries and discuss its particulars:
” construction equipment
” manufacturing equipment
” production equipment
” yellow iron
” dump trucks and trailers
” agricultural and farm equipment
” and other heavy equipment
Many seasoned lenders have come up with many industries standards to make the available credit pretty much standard. The first area that the lender will consider is the the value of the free and clear asset that is going to be sold and leased back. Each lender’s formula is somewhat similar but they usually value the acquired asset somewhere between 50%-70% of the auction value. This auction value will come from trade publications and other standards in the industry for these particular assets.
Once the auction value of the asset and/or assets is established, the lender will look at the applicant’s credit. Some lenders will consider the credit irrelevant as they focus on the auction value of the asset. Other lenders will obtain the credit and grade them according. These lenders will come up with a score and give the applicants different lending rates depending upon their credit and the asset involved.
The lender will lease these bought assets anywhere from 24-85 months back to the applicant. Additionally, the lender will offer residual buyout clauses anywhere from 25% residual to fair market value of the asset at the end of the lease. This will keep the applicant’s monthly payment as low as possible.
Sale and Leaseback Financing – What is Required?
Usually, what is required from the applicant is:
” personal financial statements
” a lease application
” a summary telling about the deal and its particulars
” and a detailed equipment list, identifying the assets to sold and leased back
Obviously – bills of sale and title work will have to be performed by the lender.
The proceeds of the these funds can be used for working capital, debt re-structuring, equipment acquisitions, and paying off judgements and other liens.
Sale and Leaseback Financing – Unique Features
Some other unique features of the sales and leaseback program is that usually these transactions are:
” non-bankable type transactions
” home ownership isn’t required
” and poor credit isn’t an issue!
In conclusion, we suggest you shop around for the best deal for yourself and understand all the particulars of the transaction. Hopefully, this article about “Sales and Leaseback” financing assists you with your decision making.
J.M Luna has over thirty years experience in the financial field. This includes accounting and taxes, leasing, hard asset money and working capital loans, and commercial financing. U.S Corporate Capital Leasing Group can assist the startup and seasoned business in all different types of industries.