Small-business owners may have money trapped needlessly inside their companies. Forget getting a loan; free the cash you already have. Access the Hidden Cash in Your Business.
Over time businesses can acquire a significant number of valuable assets: manufacturing equipment, transportation equipment, vehicles, office buildings, industrial real estate, retail stores—the list goes on. Even a business with less than $10 million in revenues could easily amass $5 million or more in assets. In most cases, the businesses buy the assets because they serve as the means to an end; you buy a retail store so you have somewhere to sell your inventory; you buy a fleet of trucks because you need them to execute customer deliveries. Businesses don’t buy these assets because they want to own them or see them as good long-term investments. If your business needs cash, selling these assets and leasing them back from the buyers gives you the best of both worlds: You get to use what you need without owning it.
Welcome to the world of “sale leasebacks.”
A sale leaseback transaction is a relatively straightforward way to extract the trapped value in your hard assets. Your company sells certain assets to a buyer (typically a financial institution that specializes in these transactions), which immediately leases it back to you. When executed properly, it’s a win-win situation.
As the seller, you:
- Retain the rights to use the building, equipment, vehicles, etc., through the lease agreement.
- Are paid 100 percent of the market value of the assets, providing a bundle of cash that you can reinvest in growth opportunities for your business like marketing, sales or acquisitions.
- Avoid the hassles and low approval rates of bank loans.
- Eliminate the need to sell equity to investors for capital, which dilutes your ownership and weakens your control.
- Are required to make periodic lease payments to the buyer who is now also the lessor.
