Sale-lease-back

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Sale & Lease Back (also SLB, Sale & Leaseback) is a purely object-based financing model for the procurement of liquidity, in which mobile assets or real estate are sold to a lessor and leased back for immediate use. It offers a possible financing alternative to classic house bank loans.

General

With Sale & Lease Back, the future lessee sells assets from his fixed assets to a leasing company. This becomes the legal and economic owner of the later leased object, the object itself remains in the possession of the lessee. At the same time, the leasing company as the lessor and the lessee conclude a leasing contract so that the object is available to the lessee for further use without interruption. The leasing installments to be paid can be generated continuously through day-to-day operations. Since the objects in Sale & Lease Back contracts are purchases that have already been financed in the past, SLB is to a certain extent a retroactive financing option with which tied-up capital is released and fresh liquidity is generated, which is then free for other entrepreneurial tasks without any requirements or restrictions is available.

Since the Sale & Lease Back is a purely property-based financing solution, the lessee must have valuable machinery, equipment or vehicle fleets that are suitable for SLB financing. These should be common and second-market machines, custom-made and in-house products are out of the question. The creditworthiness of a company is not in the foreground.

Demarcation from technical sale & lease back: In the so-called technical sale & lease back, the focus is not on the procurement of liquidity, but rather on the staggered financing of a new acquisition in which the lessee is now also the seller of the leased object in the triangular relationship typical of leasing (supplier-leasing company-lessee).

procedure

An initial preliminary assessment and the submission of an indicative offer for sale & lease back financing can be made on the basis of the asset register from the company's last balance sheet . After the offer has been accepted by the company, an expert assessment of the machine and vehicle fleet is carried out to determine the current values on site. This evaluation forms the basis of the Sale & Lease Back contract. The company then submits various documents, which may vary depending on the situation and which serve to examine property rights and to exclude any rights of third parties. Since Sale & Lease Back financing is purely object-based, the company's economic situation, unlike other financing partners such as banks, does not need to be analyzed further. The entire process is therefore comparatively quick and usually takes 6–8 weeks from the initial contact to the payment of the purchase price.

Contract structure

A typical Sale & Lease Back contract usually consists of the following contract elements:

  • Purchase agreement: A separate purchase and transfer agreement regulates the transfer of ownership ("sale" component) of the leased objects between the lessee and the lessor. Usually, the lessee is already the owner of the leased object, so that a constitution of ownership takes the place of the handover .
  • Lease: The inserted in a sale and leaseback lease corresponds to the essence for a regular lease with the respective design options. The following elements are usually found when used as a lease-back contract:
  1. Special leasing payment: A special leasing payment of 15–20% is agreed as a security discount on the purchase price.
  2. Processing fee: A processing fee of 1% -5% covers structuring and processing costs as well as sales commissions.
  3. Deposit: A deposit of 2–3 leasing installments serves to minimize the risk of future payment defaults.

Special leasing payment, processing fee and deposit are offset against the purchase price claim and thus reduce the net payout amount. These structural elements minimize the lessor's risk, which means that financing is possible even in an economically difficult environment. The leasing rate is calculated on the basis of the so-called rental calculation basis (net purchase price minus special payment). The maturity models are based on the 40-90 rule .

Areas of application and financing reasons

Since the most important prerequisite for a Sale & Lease Back transaction is the availability of a mobile, valuable and second-marketable machine, plant or vehicle fleet, this financing alternative is particularly suitable for companies in the manufacturing industry and in agriculture and forestry. Selected industries are e.g. B .:

  • Machine, plant and tool construction
  • Food production
  • Metal, plastic and wood processing
  • Textile industry
  • Printing industry
  • Transport logistics

Since it is an asset-based financing for which the creditworthiness of a company does not matter, Sale & Lease Back is suitable for many different special situations. These include B .:

  • Restructuring and reorganization processes
  • Financing of isolation plans and transferring renovations
  • Corporate transactions and succession arrangements
  • Bridging liquidity bottlenecks

Advantages disadvantages

As a bank-independent financing alternative, Sale & Lease Back offers a number of advantages:

  • Liquidity in special situations: Due to the purely property-based and creditworthiness-independent financing approach, Sale & Lease Back is particularly suitable for companies in special situations. No collateral is required, the liquidity gained is freely available without any requirements or restrictions. Existing credit lines at the house bank are not affected, which can have a positive effect on possible follow-up financing.
  • Raising hidden reserves: Older machines that have already been written off can also be sold at fair value. In this way, hidden reserves are raised and the company can still use the machines without restrictions.
  • Improvement of the balance sheet and tax advantages: With the sale of the fixed assets, an asset item on the assets side of the balance sheet disappears, while a liability is reduced on the liabilities side. The balance sheet ratio improves. The leasing installments can be deducted from tax as business expenses.
  • Quick implementation: As soon as a current market valuation report has been prepared and the necessary documents for checking the property and insurance situation have been received, the financing can be paid out. This process usually takes no more than 6-8 weeks.

On the other hand, sale & lease back financing is also associated with disadvantages

  • Minimum volume: Due to the fees for z. B. Appraisers only make sense of sale & lease back contracts above a certain value, as the liquidity effect would otherwise be too small.
  • Appraisal: Without the preparation of an independent fair value appraisal , a payout is not possible, as the financing is independent of the creditworthiness and the planned use of funds.
  • Termination in the event of default in payment: In the event of default in payment, the leasing company can terminate the leasing contract early and dispose of the leased goods. In the worst case, this can lead to a total loss of production.

See also

literature

  • Carl-Jan von der Goltz: The use of sale and lease back as a strategic financing component. In: Credit. Edition of February 1, 2015. p. 129
  • Carl-Jan von der Goltz, Hubertus Bartelheimer: Secure company existence through sale & lease back. In:  Journal for the entire bankruptcy law. Volume 20: Issue 42, 2017. pp. 2208–2209.
  • Friedrich Graf von Westphalen: The leasing contract . 7th revised edition, 2015. pp. 827–887.

Individual evidence

  1. ↑ Crisis- proof machine financing. Retrieved July 20, 2020 .
  2. ↑ a b How medium-sized companies can finance future projects through Sale & Lease Back. August 12, 2019, accessed on July 15, 2020 (German).
  3. ↑ Eva Neuthinger: Securing liquidity with sale-and-lease-back. In: Creditreform Magazin. October 18, 2019, accessed on July 15, 2020 (German).