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Sale and Leaseback

Sale and Leaseback, loan and chattel mortgage, Manchester, Cheshire, Lancashire, UK

Sale and Leaseback is the most commonly used name for refinance of a business’s existing plant and machinery and over the years has become a generic name for a variety of refinance products. Sale and Leaseback enables businesses to release cash from plant, machinery and equipment which has value and therefore the potential to provide much needed cash to a business. Cash can be used for just about any purpose including business acquisitions or simply providing extra working capital.

Sale and leaseback

Once upon a time sale and leaseback was the only way to refinance a business's plant and machinery. The customer would raise an invoice to the finance for sale of the machinery or whatever was being refinanced. The finance company would then lease the equipment back to the business on a traditional finance lease agreement. For a while this was the only facility available because finance companies believed that this was the only way to obtain good title to the equipment.

Loan and chattel mortgage

Then came along loan and chattel mortgage. Rather than raising an invoice for the sale of the machinery or equipment, a loan was provided against the value of the machinery. The advantage of this being that the business did not have to sell the machinery and avoid the possibility of showing a loss or gain on a disposal of an asset. The finance company would take a charge or chattel mortgage over the equipment and register a charge at company’s house.

Loan and hire purchase back

More 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.

Today all three products are available and which one is best for your business depends upon your own personal circumstances.

See also

Equipment finance

Asset finance

Refinancing existing machinery

Advantages of sale and leaseback