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Financing Leasehold Improvements

“Leasehold Improvements Can Potentially Be Financed Through An Equipment Lease Facility”

If you are looking to complete some leasehold improvements in a rented space you may be looking for ways to finance the related costs so as not to drain your cash flow.

Probably the most common or well known source of leasehold financing is the small business loan programs provided by the federal government that provide guarantees to banks to make these types of loan to small and medium businesses.

A lessor known and growing option for this type of financing is through equipment leasing programs.

Leasing companies will consider financing leasehold improvements for businesses and business owners that have very strong financial and credit profiles.

The most common industry that current takes advantage of this type of financing is the medical industry where doctor practitioners in the various field utilize lease financing for equipment and leaseholds.

The major differences between a small business loan and a lease for this type of financing are 1) the speed of getting financing in place, and 2) the amount of leverage that you can secure.

From a speed point of view, while a small business loan can take over a month to process and get approved prior to funding, the average turnaround time for a leasehold approval is about a week.

And even though these government sponsored small business programs promise to be able to finance up to 90% of the cost of your leaseholds, they typically top out at 75%, provide a further cash drain to the business.

With leasing, depending on the strength of your financial profile and the amount of funding you require, you can potentially get 100% of your lease holds financed, less one or two payments in advance.

And while most leasehold leasing situations are incorporated into a package that includes equipment purchase as well, there are leasing companies that will strictly lease finance the leaseholds all by themselves.

Because the value of the security is low to nil for leasehold improvements, the financing approval is primarily based on non asset factors such as financial earnings of the business, credit profiles, and personal net worth of the guarantors.

If you are looking for a financing option for leaseholds and want to better understand how an equipment leasing source may be a fit, I suggest that you give us a call so we can go through your requirements in detail and provide relevant options for your consideration.

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