SALES LEASEBACK

A sale-leaseback provides you with a cash infusion by unlocking the equity a business has in its assets. Converting equity such as in their machinery and equipment 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 paying off a specific lender, as working capital, to buy-back capital stock, buying out a partner, or upgrading 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.

 

WHO CAN BENEFIT

Many companies can benefit from this type of transaction. Sale-leasebacks can be used to finance growth, restructure troubled companies or provide tax benefits and balance sheet enhancement to healthy cash rich companies.

 

FROM A TAX PERSPECTIVE

A sale-leaseback offers the possibility of structuring the transaction as a taxable sale which can be offset by net operating losses that may otherwise expire if unused. It may also offer unique economic or tax benefits for companies that have been unable to utilize net operating loss carry forwards for federal income tax purposes. Since lease payments are not considered preference items, companies that are in an Alternative Minimum Tax situation may benefit as well.