Whatever company you’re in, the chances are the equipment you use is the lifeblood of your business, without it, you can’t make, design, produce the product that you feel will revolutionise people’s lives. However, that equipment has a lot of money tied up in it, money that isn't working for you, choosing a sale & leaseback could start putting that money to good use once again.
What is a Sale & Leaseback?
Going down the sale & leaseback route allows you to leverage the value of your existing equipment, whatever that may be, that the company already has on its books. The company owner sells the equipment to the leasing company for its base value. Once sold, the leasing company leases the newly bought equipment back to the business.
The business now gets a cash injection it otherwise wouldn’t have. This injection of money gives a business the chance to purchase equipment or anything else that they need - equipment, office space or free up money to take on another member of staff. Sale & leaseback can happen with almost all types of equipment so don’t feel that this option doesn’t apply to you.
What’s in it for me..?
- It preserves existing cash - taking out a big wad of cash for a downpayment on equipment or office space can cause real damage to a company’s bottom line. Going down the sale & leaseback road allows a company to have the best of both worlds - keeping the cash in the business as well as having the latest equipment.
- It frees up cash that would otherwise be tied up in company equipment - yes, granted, you have a lot of money invested in your equipment but it's frankly useless because it's all tied up. Use a sale & leaseback to get that cash back on the field and working for you.
- The responsibility of maintenance and repairs becomes the leasing company’s responsibility - sale & leaseback deals usually mean the leasing company will take ownership of any repairs or maintenance that the equipment might need to undergo during its life.
- Give yourself the opportunity to upgrade your equipment - once your agreement with the leasing company ends, it's likely they will offer you the chance to upgrade the equipment, replacing the outdated stuff.
- Improve your balance sheet… instantly - usually, any equipment is considered a fixed asset on a balance sheet. However, when the equipment is sold and leased back, this removes the equipment from the fixed asset section and is treated as an expense instead. The helps boost the ratio of current assets to current liabilities which is a key indicator of a company’s ability to deal with short-term debt.
- Save on that pesky tax bill - lease payments can be treated as a business expense that's written off each year. This is miles better than deducting the depreciation and equipment maintenance expenses… a big advantage for SMEs.
Don't be afraid of not having enough cash in your business to grow. There are several options, including sale & leaseback, which can help you free up money so you can spend it where it really matters. It's a tried and tested method, designed to help you grow.
Need some more convincing? Give Alex, Jack or Andy a call, they’ll be happy to answer any questions you have about future investments.