When you seek to borrow money your credit score is important! Your credit score is…
Sale and leaseback of equipment is a financial option available to businesses that is something of a hidden secret!
It provides businesses with the opportunity to raise funds against business assets that they have purchased and inject funds back into the business.
However, the timing of the loan application and drawn down is crucial.
Why a Sale and Leaseback?
At times, if the business has funds available and urgently needs equipment to meet its operational needs, the owners will choose to pay cash.
However, on reflection they may decide, it would have been better to finance the equipment and retain the funds within the business.
This is when, providing certain conditions are met, sale and leaseback of the equipment may be an option.
How does a Sale and Leaseback Work?
Who Will Finance a Sale and Leaseback?
Most Lenders who finance equipment will also entertain a sale and leaseback arrangement.
That said, if it is to be financed by a major bank, the loan generally needs to be drawn down within 30 days of the original purchase.
Other Lenders will do up to 12 months, however, the interest rates applied will be higher
Types of Equipment Suited to Sale and Leaseback
How Much Can I Borrow?
How much you can borrow typically depends upon the type of equipment you are seeking to refinance. It will be in the range of 50% to even 100% of the current value.
(Whether the sale and leaseback is approved, will also be dependent on your ability to demonstrate the business can afford the proposed repayments).