Sale Leaseback Financing
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Sale Leaseback financing is an effective way for a company to access quick capital by converting illiquid equity in equipment or real estate into quick cash. Similar to a pawn shop transaction, a Sale Leaseback transaction works in the following way:
1.) You (The Lessee) sell your equipment/real estate to a finance company
2.) The finance company (The Lessor) agrees to lease the equipment/real estate back to you
3.) You receive uninterrupted use of the equipment/real estate in exchange for a monthly payment
Sale Leaseback financing comes with many advantages as opposed to other forms of financing. Unlike a regular asset-based loan or a mortgage, a sale leaseback enables a borrower to unlock 100% of the value of its assets, as opposed to the standard 50-65% LTV offered by ABL and mortgage lenders. Sale Leaseback financing is also 100% tax deductible where the Lessee can write-off its entire lease payments, unlike a mortgage where a borrower can only deduct interest and depreciation expenses. Sale Leaseback is also structured as an off-balance sheet transaction that does not increase a company's debt load while increasing its cash-flows with the sale of its assets.
Sales Leaseback financing is ideal for companies who want to increase cash-flow that cannot access traditional debt products or are looking to clean up their balance sheets and retired other forms of debt.
Transaction Size: $250,000 to $100,000,000
Advance Formula: Up to 100% FLV on eligible hard assets such as machinery & equipment and real estate.
Criteria: Sectors best suited for an sale leaseback are companies that use high-cost hard assets for operations. For real estate, typically structured as a NNN lease where the lessee is responsible for utilities, insurance, maintenance, and taxes. 3rd Party appraisal is typically required.
Features: Fast closings - term sheets can be delivered within 2 days or less. No financial covenants. No credit check required. Fixed monthly payment. Greater leverage. 100% tax deductible. Less costly compared to Mezzanine or other forms of financing. Can be classified as either Operating or Capital Lease.