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Understanding Sale Leaseback Financing Sale leaseback financing is not as complicated as it sounds or as it may appear to be at first sight. It’s a great way to obtain working capital for your business. It is very similar to a traditional secured loan with a slight difference. Instead of using real estate as collateral, you use equipment your business already owns outright (not on a lease or loan –or nearly 100% paid*) Chances are that you have looked at your balance sheet and seen an asset that you bought for say, $40,000 5 years ago and thought, okay – I have a $40,000 asset, my Balance Sheet looks good. Read carefully because this might hurt. It’s not worth $40,000 anymore. Almost certainly not close to that either! Why? Traditional accounting leads you to record the value of your asset at historic cost, i.e. the cost at which you bought the asset, in this case, $40k. As you probably already know, assets tend to lose value as you use them. Now you’re thinking, yeah I know that – that’s why we depreciated it. Here’s the messed up part – depreciation that you’ve recorded is only an estimate – it’s not real, it’s not accurate, and it’s not necessarily showing what your asset is really worth. Sale leaseback financing values your asset its auction value. Therefore, the value of your asset is that which you can expect to get from it if you were to list it in an auction. Now that we’ve got the technical side of our sale leaseback financing valuation methods, we can move on to how you can go about getting approved for it! We accept all types of businesses as long as they are in the US All you need to do is put up one (or several) of your assets as collateral against the lease amount you are looking to get. That’s it? Yep! Pretty much. What kind of equipment can we approve? The equipment should have some market. This means that traditionally we have not been able to use computers as collateral. They lose their value to quickly. We consider all types of equipment but the ones we like to approve are construction equipment, trucks with trailers, medical equipment, manufacturing equipment, and industrial equipment. The process: 1. We receive your application 2. You provide a list of the equipment you want to use along with serial numbers (if available). 3. Provide pictures of the equipment 4. We need a condition report detailing the current condition of the equipment. Please mention any parts that have been replaced or reconditioned. 5. Financial information needed: 3 months bank statements (first page only with opening closing balances on them). 1 year tax return maybe required. For startups this tax return will have to be a personal tax return. Once we have all the information and the equipment looks like something we will finance against, we will set up a time for an inspector to come to your location to inspect the equipment and match the serial numbers. In terms of credit, we consider A – D credit and the program is open to startup businesses! To get your sale leaseback financing process started, click here!
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