A "sale/leaseback" or "sale and leaseback" is a transaction in which the owner of a property sells a real estate asset, and then leases it back from the buyer. In this way the transaction functions as a loan, with payments taking the form of rent.
Alternative business financing model
- Many companies possess the necessary properties and / or real estate to generate their products and / or services.
- Leaseback allows these companies to reduce their investments in non-vital or central goods for the operation of their business.
- Leaseback allows these companies to "freeze" money on those assets by selling them, and leasing them.
- Leaseback allows the company to separate the value of its asset from the utility value of the asset.
- A business financing alternative
- Replaces classic model of bank financing:
- When the company has difficulties to receive bank credit.
- High interest rates
- Conditions of obtaining credit are not reasonable.
The company sells its asset (s) to the entity that proposes the leaseback.
At the time of sale, the company (seller) automatically and simultaneously leases that asset at a predefined term and rate in the leaseback agreement.
What is the right moment for your company?
- Does your company can not or will not contribute money to mortgaging your asset?The leaseback does not require financial contributions from your company for its execution.
- Do you want to improve the financial balance of your company? With this financial instrument you will achieve it.
- Does your company need capital for growth and / or business actions?
- The leaseback gives you this option with your own assets, avoiding bank loans. It can also be seen as an alternative if the latter is already used.
- Leaseback gives your company the opportunity to generate and convert your own non-income asset that is out of your financial balance sheet into a productive asset with growth in your working capital.
- Leaseback has few exceptions or contractual restrictions, which gives your company great flexibility for discretionary use of funds in what you need.
- SDoes your company have financial difficulties? The leaseback gives you the option to settle debts and / or avoid a liquidation.
- Does your company need restructuring? The leaseback offers you capital for reorganization.
- Does your business need money urgently? Leaseback is a fast and effective process for urgent financial needs.
Do you want to sell your company?
- Leaseback allows you to sell your goods at an ideal price. Also to remove them from the sale of your business by optimizing the return on the overall value of your business by segregating your assets from purely corporate value and goodwill. This guarantees a greater overall sale value than if you do not make a leaseback on your assets.
- You can negotiate prior to the sale of your business, a long leaseback contract of your goods and with this not only of optimizing your sale, you can also settle debts to leave your business perfectly ready for a sale in ideal conditions and positioning.
What benefits are there for your company?
1. Great flexibility in the terms of the lease:
- As your company sells and leases its own property, it has the power to negotiate and structure the lease in flexible terms and in accordance with the need and financial reality of the lease.
- Ability to negotiate lease extensions at the end of the leaseback agreement.
- Possibility to include terms of anticipated contractual termination if it suits your company.
2. Keep control over your assets:
- Your company will continue to have control over taxes, insurance and maintenance of your assets in leaseback.
- Long-term leaseback contracts give your company a similar control as if you were always the owner of the same even if you are leasing it.
- Your company can always negotiate and include options in the leaseback contract that will give you future extensions and even a possibility to sublet the good.
3. Tax advantages
- Your company can deduct the inherent interests of the leaseback
- Your company will avoid the property tax
- Your company may deduct the cost of the lease as a business expense
- Your company can avoid eventual surpluses
4. Appreciation of the good of your company
- As opposed to a bank mortgage, the leaseback could be negotiated to cover from 80 to 100% of the commercial value of the asset if the conditions are appropriate.
- The leaseback becomes a very effective business financing instrument so that the real estate investment of your company is really valued and optimize.
- An appraisal within the stock market owned by each city and / or certified appraisers is necessary
5. Fewer requirements and / or contractual restrictions
A mortgage has requirements that the leaseback technically does not require, such as:
- secured debt coverage insurance
- Requirement of monthly / annual financial reports
- Liquidity or asset turnover ratio
- Minimum stock capital requirements
- Base limits of indebtedness
- Less demands and / or restrictions give your company greater control over your business and operations.
6. Very attractive implied financing rates
- The interest rates included in the leaseback costs are very competitive in the mortgage market.
What other advantages?
- The financing model offered through leaseback fundamentally gives your company a useful and highly valued use of your assets.
- Thus, with reduced exceptions and restrictions, with a quick analysis of your business, with the possibility of not providing capital, improving your balance sheets and fiscal situation and obtaining favorable / flexible terms in your contract, leaseback is a unique tool and an ideal alternative for your company.
If you are interested in carrying out a feasible study for your company, email us at:
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