Sale And Leaseback

Lease purchase works quite similarly to equipment leasing in that it allows you to buy high grade equipment – possibly in quantities or at levels of quality which you couldn’t otherwise afford – and spread the payments over the lifetime of the item.

As with equipment leasing, lease purchase agreements can also be drawn up against used the equipment and so they can be used to raise funds against the value of assets you already own. Essentially, you sell them to the lease company and buy them back. Clearly this is an excellent way of freeing up the value of assets and reducing the strain purchasing might place on capital.

At the end of the terms of the lease – which can run for anything from one year to seven – ownership of the equipment or property comes (or reverts) to you.

Why sell and leaseback?

Why would you not? If you have the right kind of assets the advantages it brings are the ability to upgrade resources for your business and staff without making too large an impact on your capital. In this respect it is much like leasing but at the end of the contract the item belongs to your business out right.

How does it work?

The equipment or asset is sold to a leasing company. They - the lessor – will then produce a finance document and lease the same equipment back you, the original owner or intended buyer – the lessee.

You can use lease purchase for the acquisition of equipment, property (land and buildings) or even entire businesses as part of the purchasing financing.

So, for example, if you are buying a business and sufficient closing funds are not obtainable through normal borrowing channels, unused plant, equipment or vehicles can be sold to a leasing company and then leased back through a normal leasing agreement over a period of time. The capital produced from this exercise can be given to the original seller of the business to make up the final purchase price.

How much does leasing purchasing cost?

It is difficult to calculate a generic figure because each type of lease purchase agreement is different. However, if you do plan to lease purchase equipment here are four factors which can affect the total payment made over the time your lease agreement runs:-

1. Interest and finance charges – clearly, these will increase the amount you pay over the period of the lease purchase to more than the item is actually worth and more than you would pay/or did pay if you bought it in cash out right.
2. Deposit paid – unless you are negotiating a balloon lease purchase, paying a larger deposit could reduce the total cost in the long run. This is because you will be paying interest against a smaller proportion of the item’s value, your monthly payments will therefore be smaller and the cost of interest payments should be less, too.
3. Credit rating – the terms of the lease purchase options available to you will depend on your credit track record.
4. Business/Industry – some industries or types of business may enjoy more flexibility and better credit ratings than others.

Who can lease purchase?

We can arrange great value equipment leasing deals for a wide range of businesses and individuals including:-

• People working in the professions such as accountants, solicitors and dentists.
• Not for profit organisations such as, public or government organisations such as schools, public sector bodies, GP's and hospitals.
• Established and profitable businesses.
• Venture capitalists or companies buying other businesses.

In short, lease purchasing is a straightforward, flexible way to preserve capital and procure the right equipment to allow your business to flourish.

It can help you expand into bigger and better premises, boost the morale of staff by allowing you to provide them with state of the art equipment, impress your customers and keep you at the forefront of your field ahead of your competitors.

If you need to buy equipment, assets or premises regularly and keep them up to date, lease purchasing gives you the freedom to purchase what you need using less capital. At Eland Business Services Limited we can put our experience in your hands to help you select the most suitable items to lease purchase and help you find the best agreements for your business at competitive rates.