Using Leaseback Financing for Short Term Capital
Several advantages are associated with leaseback financing. This is the practice of a property owner leases a portion of property owned to another party. The seller gets cash flow coming in every month from rental payments, and this can be extremely beneficial for a variety of reasons.
First, this form of financing is advantageous to the seller because he or she can structure the agreement in any desired way. With traditional financing methods, the seller is at the whim of the lender. A bank may offer an undesirable repayment plan with less than stellar interest rates. However, with a sale-leaseback, the property owner is in control.
Next, the seller is turning a fixed asset into a current asset. As a fixed asset, property is not doing anything, and if you do not need all the space in the building you own, then it could just be going to waste. However, by transforming it into a current asset through leaseback financing, you are getting a steady stream of revenue coming in. You may be making additional money through your business ventures, but those monthly rental payments are extra cash you can depend on every month.
This is a viable method for property owners who do not qualify for other financing types. There are many reasons why this might be the case. The property owner may have a poor credit standing. Another reason is that the owner still has debt from a previous loan. He or she may not be able to go to other lenders at this time, but cash flow still needs to be kept steady. Leaseback financing allows you to get the funds you need when nothing else is available.
Finally, going through the process of a sale-leaseback also serves as a deterrent from any corporate takeover that may try to acquire the undervalued property. If other business owners see that your property has underutilized land, then they may try to swoop in and take over. However, if you are conducting your business operations from one part of the property and someone else is leasing another portion, then all of a sudden it becomes much less inviting.
In addition to all that, a sale-leaseback offers certain tax benefits. There are plenty of ways to take advantage of this financing, so speak with your accountant if you are unsure about anything about the process. Leaseback financing can provide you with the capital you need now, so you can be successful in the future.