Who Else Wants a Creative Way to Finance Business Growth?

If you have equity in your property, you can still finance your business in this recession. You just need to get a little more creative. Sale/leaseback arrangements can provide companies and business owners that own real estate assets (with significant equity), with capital needed for expansion or debt reduction.

Under a sale/leaseback, the real estate is sold to an outside interest, which leases it back to the business. The greatest advantage of sale/leaseback arrangements is that you free up capital from non-business (non-earning) assets, and thereby improve the organization's financial situation. A sale/leaseback can dramatically improve the organization's debt-to-equity ratio and reduce interest costs.

The business is also freed from the burden of managing the property - which is usually not your core business.

If you are thinking of entering into a sale/leaseback contract, you need to focus on two major variables: the real estate's sale price, and the terms and rate of the lease. With interest rates at all-time lows, and investor appetite starting to return, sellers can still recognize gains in asset values. This means that it is a good time to consider this kind of transaction as you may realize a very nice return on your real estate right now.

Why not consider this as a way that you can free up a large amount of cash to invest in your business?

The terms and rate of your new lease will have a direct impact on the proceeds of the sale as the investor will use that information to formulate an offer. The rate should reflect both good value to you as the new tenant, and also be reflective of the market in general as an over-inflated rent can make the property less liquid to potential buyers when they are considering their ultimate exit from the property.


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