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Application Package Requirements: Complete Application signed by all owners Schedule of Owned Equipment Verification of business filing Recent b ank checking statements
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Equipment Sale and Leaseback Financing
Typical transaction: The owners of an established business with good credit recently paid in cash to upgrade their equipment. The company provides copies of the vendor invoice and receipt of payment. Through lien searches, it is confirmed that the equipment is not being pledged as specific or "blanket" security to any creditor. The equipment can be identified by a serial number and its current Fair Market Value (FMV) established. The company sells the equipment for up to 70% of that FMV and enters into a lease agreement for a defined number of months.
Q: The example infers the company bought new equipment. Can this program be used for recently purchased used equipment?
A: Yes for hard assets where the FMV can be valued more accurately. Hard assets are vehicles, trailers and heavy equipment.
Q: The example mentions the company received up to 70% of the current value. Can the funding percentage go higher?
A: Yes. In some cases where the hard asset has been acquired within the last 90 days, funding can be up to 100% of the original invoice.
Q: If the company paid cash for a vehicle or piece of equipment, how could some creditor have a security interest lien on the unit being considered for this program?
A: Many lenders, when they extend a line of credit or small business loan, include a blanket security interest on "all assets now or acquired in the future." Even if the
specific unit was paid by cash, we'll need to confirm there is no open lien such as these blanket filings.
Q: What about vehicles or equipment acquired more than 90 or 180 days ago, can that be considered for this program?
A: Yes, under exception circumstances. We will still need to review the schedule of equipment, the invoices and payment receipts.
These are reviewed on a case by case basis.
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"A" Plan for Titled Vehicles / Heavy Equipment purchased within 90 days Maximum $50,000
(1) no bankruptcy within 36 months 70% of revolving credit available (2) Larger amounts require financials: 2 years personal tax filings 2 years business tax filings Interim business reporting Personal Financial Statement 3) Advance up to 70% of vehicle or heavy equipment value Maximum $75,000 maximum term 60 months 4) End of term: $1 or FMV 1st and last payments at closing Not available with OTR/Sleeper |
Definition: Equipment sale leaseback
is the sale of a recently purchased asset (business equipment under ten years old) for cash. The asset remains on
the your property with a contract to lease it back from the lessor who is
purchasing it. At the end of the lease term, your company has the option of
purchasing the the asset at a pre-determined amount. A leaseback is very simple really. The purpose of the leaseback is to free up your capital investment while allowing you to retain possession and use of the property. The type of property involved can be commercial equipment or vehicles. Why you use your equipment to get working capital?
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"B" Plan purchased within last six months Maximum $30,000
Advance up to: 100% of invoice if within 90 days 70% of appraised value, if older Maximum $30,000 maximum term 60 months
End of term: FMV Deposit equal to 2 payments at closing "B" Plan not available with OTR/Sleeper |
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More Frequently Asked Questions about Sale - Leaseback Financing
Q: How does this differ from a normal equipment lease transaction?
A: Normally, the selling vendor invoices the leasing company who, in turn, leases or rents it to the company who will use it. With a sale leaseback, the company, not the vendor, is selling it to the leasing company.
Q: Is the the approval and closing process the same?
A: We still need to be sure the company has the ability to meet the monthly payment and has a good payment history with other credit grantors. What makes this transaction different from a traditional vendor transaction are two other items:
We need to confirm that the company actually bought and still owns the equipment they are selling.
We need to confirm that no other creditor has filed a specific or blanket security interest / mortgage restricting the equipment.
Q: How do we get started?
A: Download and return credit application package - be sure to include the required supporting documents.
The underwriting process is first with the company and, if approved, then the equipment eligibility and amount.
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