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The advantages of sale and leaseback

The advantages of sale and leaseback, loan and chattel mortgage, Manchester, Cheshire, Lancashire, UK

The main advantages of sale and leaseback are that it enables businesses to release cash from existing items of value such as equipment, plant and machinery. The cash gained can be used for many purposes including business acquisitions or simply providing extra working capital.

The advantages of sale and leaseback as opposed to purely selling the asset are that the business can benefit from continuing to use the asset having released the cash previously tied up.

Depending on the terms, releasing cash this way may be cheaper than financing the new purchase or paying off short-term debts and liabilities in order to continue trading with a bank loan. Another advantage of sale and leaseback.

Initially Sale and Leaseback was the only way to refinance a business's plant and machinery and now has become one of a number of refinance products.

With sale and leaseback the customer raises an invoice to the finance company for sale of the asset that is to be refinanced. The finance company purchases the asset releasing finance to the customer and then leases it back to the business on a traditional finance lease agreement.

A Loan and chattel mortgage however is where instead of raising an invoice for the sale of the asset, a loan is taken out against the value of the asset. This enables the business to keep the asset which may show a loss or gain or a disposal of an asset if sold.

Recently finance companies have become more comfortable with loan and hire purchase back. One can only assume that recent case law has suggested that the asset refinance company can obtain good title to the equipment.
Either one may be suitable for you depending upon your own personal circumstances.

See also

Equipment finance

Asset finance

Refinancing existing machinery