“Leasehold Improvements Can Potentially Be Financed Through An Equipment Lease Facility”
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“Equipment Leasing Specialist Providing A, B, & C Credit Solutions For New And Used Equipment
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“Municipal Equipment Leasing Options For All Asset Types”
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“Equipment Leasing Can Be An Effective Way To Restructure Short Term Debt”Equipment leasing through a sale and leaseback process can be a very efficient and effective way to restructure the short term debt on your balance sheet. When we speak of the need for short term debt restructuring, this refers to situations where the business is behind on short term debt obligations such as trade credit, operating accounts, and government remittances. If these accounts are not brought up to date, the business runs the risk of having credit reduced or eliminated and having collection action taken against it which can restrict the ability to operate or even stop business operations all together. When there is considerable equity in equipment assets, the best solution for generating additional capital to pay up short term debt and then repay the refinanced amount over future years is through equipment leasing. The equipment leasing process for debt refinancing, described as a sale and lease back transaction, has the lender or leasing company purchase the assets from the business in return for incremental capital and an equipment lease that allows the business to retain exclusive access to the equipment during the term of the lease. At the end of the lease term, the equipment is typically bought back from the leasing company for some nominal amount that was determined at the outset of the financing. The leverage that can be secured from this type of transaction will depend on a number of factors including the type and condition of the equipment and the financial profile of the business. Basically, the more stable the business operation and the longer the remaining life of commodity type assets, the more leverage that can be secured. Debt Restructuring Through Equipment Sale And Leaseback Can Be A Business SaverIn most cases, the cost of a sale and leaseback transaction for the purposes of debt restructuring is going to cost more than conventional financing for the purchase of a new or used piece of equipment. But when you compare the incremental cost of financing to the business risk that is being reduced or eliminated with respect to trade credit and government remittances in particular, the additional cost can prove to be insignificant. That being said, equipment refinancing costs can also get quite high if the business is considerable financial distress, so the cost of the debt restructuring action should always be weighed against the benefit being gained from doing so. The primary goal here is to develop structured repayment of short term debt into an equipment leasing facility so that the short term debt that has built up can be paid back over a longer period of time without causing any further financial distress to the business. |
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“Refinancing Equipment Through An Equipment Leasing Facility Is Common Place In Most Industries”The process of refinancing existing equipment that has either been paid for in cash, or has had a loan or lease against the equipment which is now paid off, is most typically done through an equipment leasing process known as a sale and lease back. The other equipment refinancing scenario would be when equipment has a current lien or charge against it and you wish to get a new loan or lease in place to pay out the existing charge, plus potentially provide additional capital, assuming that there is enough equity in the equipment to justify an increased borrowing or leasing amount. Under this second scenario, a sale and lease back option is still going to be the most common form of equipment refinancing in most situations. With a sale and lease back transaction, your existing assets you own, or the assets that you are leasing that are owned by another leasing company, are sold to an equipment leasing company that is prepared to finance your used equipment for an agreed up amount, rate, and lending term. Most equipment financing companies have a standard rule that if you have purchased an piece of equipment for cash or self financed it, you can readily apply and receive an equipment loan or lease up to 6 months after the date of purchase without much issue. This is because most financing companies consider an asset purchased within six months to be new and apply their financing criteria accordingly. But once an asset is owned or leased for more than 6 months, additional lender and funding criteria can come into place before you will be able to come an equipment refinancing transaction. Refinancing Equipment Can Require You To Meet A Higher Lending StandardIf you’d like to get the best available rates, or close to them, from an equipment refinancing transaction, then you’re going to have to prove to the lender through your financial statements and credit profile that purpose of the transaction is to fund growth or restructure the balance sheet in a stable business operation. If the business is in financial distress, it is unlikely that “A” lenders are going to consider providing an equipment refinancing facility. In cases where additional cash is required and the business is not financially stable, the borrower or lessee will have to consider “B” or “C” credit options which fall more into equity based lending whereby the lender will assess the market value of the asset based on a forced liquidation appraisal and provide a percentage of that value in the form of a loan or lease. The rates for equity based or asset based loans or leases of this nature are considerably higher than “A” lender rates and are only provide for one or two year periods, allowing the business time to either improve their financial position so they can qualify for lower rates, or sell the assets off under orderly liquidation in order to preserve their equity.
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