USE CURRENT ASSETS

                               Equipment Sale-Lease Back

    If you have any equipment that is owned outright than you can use this equipment to access cash. The equity or cash value of the equipment is not helping your company to generate any revenues and in fact it is loosing value over time.
 
    The use of the equipment itself is what generates the revenues not the equity it has. For example: you are in construction and you own 10 pieces of heavy equipment valued at $500,000. The value of this equipment is not being utilized to grow your company. Sure, you have no monthly payments but you are not utilizing the $500,000 to your advantage. 

    With a sale leaseback a lender would purchase the equipment, give you approximately 50% to 60% of the value in cash. The equipment never leaves your business and you receive $250,000 to $300,000 cash. Now you are leasing the equipment from the lender.
 
    If you had received a term loan for the same amount the payments would be approximately the same as the lease payment. Depending on the lease structure the leasing payment may actually be less then the loan payments. Plus you gain a tax advantage because the lease could be 100% tax deductible*. 

    This method of accessing cash is much easier to qualify for than getting a business loan. Depending on the equipment you could qualify with a credit score as low as 600. The appraisal of the equipment is relatively simple and almost any type of equipment would be considered, even office computers.

   
   Sale-leasebacks have been used successfully across a wide range of industries. By providing easy access to capital through a simple transaction, they offer a strategic alternative to traditional bank financing, and can become part of the growth strategy for any competitive business.

                    Download Forms (please complete both):
                       Application       Equipment Schedule
  
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More on Sale Lease Backs

 A Sale-leaseback can turn your existing equipment into liquid assets, making capital available for other business needs. It offers competitive financing rates, while eliminating some of the risks of ownership, like equipment obsolescence and disposal.
 
   With a Sale-Leaseback you sell your equipment to a lender and then lease it back over a fixed payment period. Your equipment never leaves your business. You continue to utilize the equipment to generate revenue. You can sell any equipment that is owned outright and is involved with the daily operation of the business. Because you are securing this financing with equipment it is easier to qualify for. 
 
    This financing method can improve your financial statements. By moving equipment off the balance sheet you can access new capital without creating new debt on your company's balance sheet. As an operating lease the payments become part of the overhead and are 100% tax deductible*.

   Originally Sale-leasebacks were primarily associated with under performing companies that could not qualify for traditional financing. Now even cash-rich, healthy companies are recognizing the tax benefits and balance sheet enhancements afforded by sale-leasebacks. 

    In addition to the tax benefits a sale-leaseback enables a company to choose the optimum mix of existing assets and term financing to obtain the best economic package and accounting treatment. If the sale-lease back is structured as an operating lease, it may enhance such financial ratios as debt to equity, working capital, cash and return on assets.


Accounting Treatment of the Sale Leaseback Transaction.

Summary of Statement No. 28
Accounting for Sales with Leasebacks--an amendment of FASB Statement No. 13 (Issued 5/79)

Summary

Paragraph 33 of FASB Statement No. 13, "Accounting for Leases," generally treats a sale-leaseback as a single financing transaction in which any profit or loss on the sale is deferred and amortized by the seller, who becomes the lessee. This Statement requires the seller to recognize some profit or loss in either of the following limited circumstances:

If the seller retains the use of only a minor part of the property or a minor part of its remaining useful life through the leaseback, the sale and the lease would be accounted for based on their separate terms. However, if the rentals called for by the lease are unreasonable in relation to current market conditions, an appropriate amount would be deferred or accrued by adjusting the profit or loss on the sale. The amount deferred or accrued would be amortized as an adjustment of those rentals.

If the seller retains more than a minor part but less than substantially all of the use of the property through the leaseback and the profit on the sale exceeds the present value of the minimum lease payments called for by the leaseback for an operating lease or the recorded amount of the leased asset for a capital lease, that excess would be recognized as profit at the date of the sale.  Link to this article: http://www.fasb.org/st/summary/stsum28.shtml posted on the (FASB) Financial Accounting Standards Board website: http://www.fasb.org