Lease Back Sale And Leaseback Transactions | 7 Park Avenue Financial

Header Graphic
Call Today For Canadian Business Financing Expertise tel 416 319 5769 !
Leaseback Financing Tips: Sale And Leaseback Transactions Can Be A Winning Strategy
Sale Leaseback Financing Makes Seemingly Impossible... Possible!



YOUR COMPANY IS LOOKING  FOR  BUSINESS FINANCE!

UNDERSTANDING THE SALE AND LEASEBACK TRANSACTION

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

 

sale leaseback accounting

Sale and leaseback transactions are sometimes a truly perfect solution to cash flow needs.  In some ways, it’s a ' perfect storm' of financing - your business gets to keep the asset in question (typically equipment or real estate) while at the same time employing its use and possession.

 

By the way, that could include your corporate jet - although we don't run into a lot of those these days.

 

WHAT ARE THE 5 KEY REASONS FOR CONSIDERING SALE LEASEBACKS?

 

What are the fundamental reasons for choosing the leaseback? It usually comes down to:

 

1. A need for access to capital that otherwise might not be available, or available the rate and structure the business owner/manager desires

 

2. It’s sometimes a more efficient and quicker process than starting the journey into looking for new debt solutions or considering ownership dilution from new equity sources. Alternately the owner/owners of the business are now required to put in additional personal funds as opposed to using a finance lease under the leaseback strategy.

 

3.The ongoing need and use of the asset to operate and grow the business - otherwise, the asset should probably be sold!

 

4.In certain cases, as we mentioned, rates and costs of financing might be more attractive under the sale/leaseback relative to the lease payments and your lease liability

 

5. Because of the nature of how the transaction is recorded, the leaseback, properly structured, can enhance the overall ROI - ' return on investment.’ Discuss leaseback accounting with your accounting team or tax advisor.

 

lease back                              sales and lease back        lease buyback

 

REAL ESTATE IS  A BUSINESS ASSET THAT IS  OFTEN CONSIDERED FOR LEASEBACK FUNDING

 

As we noted, any asset of the business can theoretically be sold and leased back.  A typical solution is business real estate, i.e. the company operating premises. Even Canadian banks in recent years have shed their massive office towers under this effective strategy. - And they, of course, still inhabit the buildings.

 

YOUR BUSINESS ASSETS

 

The other asset category is business equipment, which, while depreciating, still has valuable use to the business. That raises the point that it’s important to consider the leaseback's financial and tax consequences - for example, if the funds received are more significant than the present value of the equipment, a profit on the transaction might have to be reported. The value of the asset in a leaseback transaction can also be addressed via an appraisal, informal or otherwise. Some appraisers do desktop appraisals. Understanding the fair value of the asset or assets in question versus the carrying amount on your balance sheet is key to a successful transaction.

 

WHAT TYPE OF LEASE IS USED IN LEASEBACKS

 

When you enter into the sale and lease financing strategy with the buyer lessor your choices are the same as any other lease financing transaction. You can structure your deal as a capital ' lease to own' or an operating ' lease to use. '  The operating lease might be perfect for things such as a technology transaction for computers and telecom equipt. For example.

 

And that corporate jet we were talking about? All of a sudden is a perfect candidate for an operating lease! Truth be told most transactions are structured as finance leases.

 

IS AN APPRAISAL REQUIRED

 

We caution clients that it's always important at the start of considering such a transaction it’s important to fully understand the value of the equipment or asset being re-financed. That residual value must be well understood in the context of your company's needs for the asset and the financing structure required for short lease term or long-term needs.

 

finance lease vs operating lease

 

CONCLUSION

 

Seek out a trusted, credible and experienced Canadian business financing advisor who can help you put together a winning strategy on refinancing business assets. The impossible just became possible. If you are looking to fund assets you own and still maintain the right of use back from the buyer while accessing capital, call the team at 7 Park Avenue Financial.

 

 

Click here for the business finance track record of 7 Park Avenue Financial





7 Park Avenue Financial/Copyright/2021/Rights Reserved

 

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2022

 

 

 

 

 

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil