Sale Leaseback Agreement

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A sale-leaseback agreement provides you with a cash infusion by unlocking the equity your
business has in its assets such as equipment or real estate property. Converting equity
such as in your machinery, equipment or real estate into cash. This arrangement allows
you to raise capital while retaining the use of the assets. A sale-leaseback can offer the
creation of significant sources of funds that can be used for varied purposes. This includes
payingoff a specific lender, as working capital, to buy-back capital stock, buying out a partner,
orupgrading assets. In a sale leaseback arrangement this is accomplished by conveying the
title of the company’s assets, at an agreed upon value, to a financial institution in exchange
for a lump-sum payment.  Benefits of a sale leaseback can include improving liquidity,
working capital ratios, return on capital and return on assets.

A real estate sale-leaseback agreement is a transaction in which the owner-occupant sells the land and/or building used in its business operations to an investment firm or real estate trust and then simultaneously leases the property back from the investor on lease terms agreed to concurrent with the real estate sale transaction. Typically, this will be a long-term investment for the special purpose investor so the seller is able to negotiate directly with the investor a mutually agreeable and clear set of lease terms. The full value of the real estate is extracted and there is no operational disruption. The seller continues to conduct business in the facility as if they still owned it.

Benefits

Many companies can benefit from sale-leaseback agreements. If your business does not qualify for traditional bank financing or you want to protect your company’s existing credit line, sale-leasebacks can be utilized for investment, to restructure troubled financials.

Sale-leaseback agreements also offer Lessees the chance to reap the various tax benefits associated with leasing equipment. For one, a sale-leaseback allows Lessees to structure a transaction as a taxable sale – an opportunity that can help offset net operating losses that, unless used, would otherwise expire. Since lease payments are not considered preference items, companies that operate under the Alternative Minimum Tax bracket may also benefit from engaging in a sale-leaseback.

If you have been in business for at least six months and own your equipment outright, you may be a viable candidate for a sale-leaseback agreement through Enterprise Commercial Financing.  Clients with no credit or less-than-perfect credit can potentially qualify for sale-leaseback financing, including those which possess open tax liens and previous bankruptcies.

(Note: While there are obvious potential tax benefits related to sale-leaseback agreements, it is always important to consult a licensed professional regarding all accounting and tax related questions and claims.

Terms

1) Typical leases run 10 to 15 years
2) Finance Amounts up to 100% of the appraised value
3) Real Estate Lease Type: Typically Triple Net or Hands Off Lease (Tenant maintains continue control of the property) 
4) Equipment Lease Type: Negotiated by Buyer/ Lesser and Tenant/Lessee
5) Tax Advantages: Write Off Lease Expenses  
6) Typically NO Personal Guarantees

Application Process

ECF's process for qualifying for this type of financing is refreshingly straightforward and easy to complete. Simply complete our one-page application and provide a facilities list outlining all of your equipment involved in the agreement along with your company’s last three (3) months bank statements. Please forward your completed application and all requested documents to loans@ecfinancing.com or via Dropbox.com . Darlene will contact you soon thereafter.

Hard collateral assets such as real estate property, yellow iron, construction equipment, heavy machinery, tractors, farming equipment, trucks, trailers etc. that have auction values of at least $10,000 per unit is acceptable. Soft collateral will not be accepted for this program. Examples of soft collateral include (but are not limited to): gaming equipment, beauty salon equipment, IT equipment, computers, servers, network switches, telephone systems, copiers, faxes, dry cleaning equipment etc.