What is a Sale and Leaseback?
A Sale and Leaseback is a clever method of asset financing when used correctly. It involves utilising a company’s assets e.g. Trucks, Excavators, Dozers etc that they already own outright and sell them back to the lender. The specific asset is sold back to the lender e.g. an Excavator worth $89k, which then simultaneously enters them into a loan agreement with the lender for 89k to pay them back over a set year term.
This type of arrangement makes financial sense in situations where a business owns some of its assets outright and needs a timely cash injection of capital into their business. The capital injection can be for a specific reason but the main importance about a Sale & leaseback is that the business still requires these specific assets to continue trading so they can’t just sell them off to raise capital as they still need them.
It is an effective way to generate cash flow and a way of raising capital for your business rather than securing a Business Loan where rates are generally higher. Under a Sale and Leaseback agreement, it frees up capital which would be normally be locked on your balance sheet.
Here at Yakka Finance we have assisted many customers in the past with this type of transaction.
Client Examples:
- Small Loan Size using a Sale and Leaseback
A Yakka Client came to us as they needed to secure a large bread run contract in QLD that was highly profitable and went for 10 years. The Bread Run Contract was being sold to them by another transport company for $45,000.
Our client didn’t want to purchase the Bread Run using their own cash savings as it would disrupt the cash flow of their business. The great thing was they owned a 12 Pallet Curtainsider outright in their business. We did a Sale and Leaseback with one of our lender partners on the 12 Pallet Curtainsider for $50,000 (The Truck was Valued at $50,000).
The lender paid $50,000 straight into our client’s bank account and they were able to purchase the profitable bread run. Best thing was they were able to go on manageable monthly repayments on by using the Sale and Leaseback capital injection from the lender rather than spending their company savings up front.
- Large Loan Size using a Sale and Lease back
In this transaction, there wasn’t any cash flow issues within the business, however our client was given a $525,000 loan by another company for 3 years.
Over the three years our client purchased four truck & dogs in which he now owned outright with no finance attached. We were able to get a fleet of trucks and trailers valued at $555,000.
We got the client approved under a Sale and Leaseback Chattel Mortgage with one of our lender partners over a 5-year term. They were able to keep their four truck and dogs to continue generating a business income. The good news was the lender was able to give them $555,000 into their account and go on easily manageable Monthly Repayments to pay it back. They were able to pay back the $525,000 loan to the company that lent my client the money 3 years ago.
At Yakka Finance, we are experts at helping businesses with Sale and Leaseback transactions from small to large transactions to help with the injection of capital into your business.
Want to know more?
Please feel free to call Scott Rumble on 0401 214 427 or email at scott@yakkafinance.com.au to find out more.
