Business Funding Secrets

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Equipment Sale Leaseback Financing

With some of the major investment banks themselves experiencing financial difficulties, it is obvious that the credit crunch will continue for some time. However, there are still a tremendous number of businesses that are looking to fund the expansion of their operations. One option of funding is to use the equity in the business’s equipment. This financial tool is called Equipment Sale Leaseback

Equipment Sale Leaseback is the sale of currently owned equipment for cash. The asset remains with the seller who contracts to lease it back. By using equipment equity a business can quickly obtain cash they need for working capital and expanding their business.

Sale Leaseback financing varies from traditional leasing in that instead of purchasing equipment from a vendor and leasing it to the business. The leasing company buys the equipment from the business and then leases it back to the same business.

Leasing companies do perform their due diligence on used equipment the business expects to use in the transaction. The leasing company will verify that the equipment was actually purchased and is still owned by the business. By performing “lien searches” the leasing company will be looking for other lenders who may have already filed a lien against the equipment. Blanket Liens are a type of lien the Leasing Company will be looking for. Many lenders, when they provide business funding will include a Blanket Lien against "all assets now or acquired in the future." This affects all of the businesses assets, even when the business pays cash for a piece of equipment. Equipment expected to be used for a Sale Leaseback transaction cannot be encumbered by any type of lien.

Equipment Sale Leaseback Financing

Advantages:
1. Non functioning equity can quickly be turned into useable cash.
2. Write off the monthly leasing payments.
3. No restrictions on how the money is used.
4. The equipment does not need to be removed, or taken off-line.
5. Leasing may provide lower monthly payments than a loan.

The Process:
1. A business owner completes the Leasing Company’s application and provides the required documentation.
2. Lien searches will be completed by the lender to confirm that the equipment is not being used as collateral by another lender.
3. The equipment is identified by its serial #.
4. Fair Market Value (FMV) of the equipment is established.
5. The business sells the equipment to the finance company and then leases it back.

Typical parameters (will change depending on the lender):
1. The equipment will be purchased by the funder at 70% of the FMV.
2. The equipment cannot be encumbered by other liens.
3. Amounts below $50,000 may only require an application.
4. Amounts over $50,000 may require full financial documentation package.
5. Equipment up to 10 years old.
6. Commercial equipment or vehicles.
7. Equipment lease property tax paid monthly.
8. Restrictions may apply to certain types of equipment.

Equipment Sale Leaseback financing is a tool that can quickly provide working capital to a business searching for financing. It is an alternative that both business owners and brokers should consider during the current credit crunch.

Sources for Equipment Sale Leaseback

Glossary of Leasing Terms

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Tips
1. All financial tools should lead to higher profits. If the financing doesn’t assist in making the company more money, is it really a wise decision?
2. When a company provides clear and concise information - up front, they will receive quicker and more informed responses from their funding sources.
3. Companies that have skeletons in their closets need to open the doors. Those doors will eventually be opened anyway, so why waste everybody’s time. Skeletons can be dealt with when they are honestly presented.

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E-mail Replies

If you have questions about funding a project do not reply to this e-mail address.

Contact: theprojectcorp@msn.com with your funding request.

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Professional Reps Needed

I need 2 Professional Representatives for a project.
You must be able to make a professional phone presentation.
You must be able to commit to at least 10 hours a week for 6 months.
This is a “commission only” project. theprojectcorp@msn.com

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Incorporating

Many Brokers and Consultants we work with run their business as a Sole Proprietorship. I want to strongly suggest to those of you in that category, for your own benefit, consider incorporating. For assistance with incorporating check out: TheInformedInvestor

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Real Estate

Packages for:
Tax Lien Investing
Title Searches
Financing with your IRA
Learn more at: TheInformedInvestor

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Web Site?

Do you need a website or are you unhappy with your current web host? We use 1&1 and are happy to recommend them. If you aren’t adept at building websites, 1&1 does have templates that you can use to easily and quickly get your site up and running. They also have a phone number with customer service 24 hours a day if you are having difficulty developing your web site.

People go to the Internet to find information, so make sure your information is out there to be found.

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Until next time,

Brad MacLiver