Information on sale leaseback strategies in Canada . Asset loans via a bridge loan / lease back provides valuable working capital and cash flow when you need it most
A sale leaseback bridge loan in Canada is often the answer to a working capital or cash flow shortfall. The fact of the matter is that every business, probably yours, has its own story as it relates to business financing needs. Utilizing asset loans on equipment, real estate and other assets you own (i.e. technology, etc) is a time proven fix to capital and funding needs that are often driven by short term fluctuations in your business. Let's dig in.
Hopefully everyone understands the lease back concept. It couldn't be simpler. Your firm refinances, via a bridge loan or lease an asset or assets that you already own and are unencumbered by any liens. Typically your goal is to continue to use and benefit from the asset, as title reverts back to your company at the end of the lease or loan.
Depending on what asset/assets you are refinancing an appraisal often will protect both the seller and the financier. The concept of ' fair market value ' is key in asset loan refinancing. Be forewarned though that often lenders will take a prudent approach and in some cases focus on liquidation value as opposed to market values.
Owners and financial mgrs should also understand there are some accounting issues that come with bridge loan leaseback financing. This involves your balance sheet as well as issues that might come up in original cost, book value, etc. Although the majority of business assets ( depreciate ( unfortunately !) the reality is that certain fixed assets, as well as real estate of course could appreciate and grow in value over time.
Sale leasebacks are structured in various ways, but it's a short list. Typical transactions use capital lease paperwork. Term loans via a bridge loan can also be utilized, and in the case of real estate commercial mortgages are often utilized. Remember that notwithstanding what we call the transaction, or how it is ' papered ' and ' collateralized ' the reality is that you still use and benefit from the asset , while at the same time benefiting from the cash and working capital received under the leaseback.
While there might be cheaper ways to borrow cash or monetize owned assets the reality is that asset loans deliver on raising cash when it's often most needed. Remember also that in many cases this type of strategy allows you to re-do' your overall financing strategy as it relates to debt load, ratios, and bank covenants. It's a real win win when your use of funds is used to generate further sales and profits.
If you're focused on refinancing assets via the lease back strategy seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you understand risk and benefits.