Sale-leaseback is a financial transaction that businesses enter into with the buyers of their fixed assets. These are generally in the form of real estate, property, or even expensive equipment. Under this arrangement, the businesses can lease back the assets they sell to the purchasers for a specific period. Taking this step helps them to improve their overall cashflow position. This is because businesses are able to raise sufficient funds from the sale of these assets.
Moreover, they can still use these assets for their commercial activities by leasing them from their purchasers. This enables businesses to significantly increase their revenue and profits. It is a better alternative to issuing equity shares or taking out a loan.
Sertant Capital – Why should businesses choose to raise cash through sale-leaseback transactions?
Sertant Capital is a popular finance company conducting its commercial activities from its headquarters in Irvine, California. Sertant Capital specializes in providing small businesses with customized equipment financing solutions that suit their specific needs. These include sale-leasebacks, capital leases, attractive refinancing options, off-balance sheet financing, progress payments, and TRAC leases.The qualified professionals of this corporate enterprise have the necessary skills, knowledge, and experience to ensure their clients get the best deals.
The experts here say entering into sale-leaseback transactions is a convenient way for businesses to raise capital. Many of them generally own vast real estate, which they would like to put into good use. Businesses notice a continuous increase in the value of their real estate assets over time. However, they also see a decline in rents because of a fall in the market interest rates. In this situation, businesses opt to sell their real estate to the highest bidder to raise adequate capital. Then, they enter into a long-term lease agreement with the purchaser. This enables the businesses to continue to use the assets for their commercial activities. This enables them to generate adequate revenue while keeping operating costs low.
The financial specialists here further point out the following five benefits for sale-leaseback transactions for businesses and purchasers:
- Businesses claim deductions on lease payments they make to the purchaser to reduce their overall tax liability,
- Sale-leaseback transactions enable businesses to raise cash for their expansion needs and to conduct their commercial activities,
- The owners of the asset in sale-leaseback transactions earn a steady income in the form of lease payments,
- Sale-leaseback transactions is a cheaper and convenient way for companies to raise capital than taking loans, and
- Businesses are in a favorable bargaining position to structure the terms of sale-leaseback agreement with the purchaser.
The experts of Sertant Capital sum up saying sale-leaseback transactions can be advantageous for both businesses and purchasers. The businesses can raise the funds they need for their commercial activities and expansion needs. It is a cheaper and suitable alternative for them than taking loans. The businesses can even claim tax deductions by charging the lease payments as an expense in their income statement. This helps to reduce their overall tax burden. Even the purchaser of the asset can earn a steady income stream creating a win-win situation for everyone.