WHY YOUR BUSINESS SHOULD THINK ABOUT A SALE-LEASEBACK

"A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty." — Winston S. Churchill

DEROTTO is off to a solid start in 2025. In Q1 of 2025, DEROTTO helped 41 businesses with its equipment financing needs. Thanks to everyone who trusted and supported DEROTTO. We gave away $8,250 in gas cards. We are often asked for an overview of some of the financing programs DEROTTO can offer with its lending network. For an overview about DEROTTO’s services click here.

An area where DEROTTO is seeing an increase in demand is businesses needing access to cash. The need for cash may be a result of the increase in labor costs, increases in material costs, payment delays, or debt consolidation, etc. To access cash, one option a business can utilize is a financing strategy called a “sale leaseback”.

What is a sale-leaseback?

Most business owners prefer to finance or lease equipment in order to preserve capital. Typically, when the loan or lease has been completed, the business owns the equipment free & clear. The equity in the free & clear equipment is readily available if and when needed – You just need to know how to access it. This is where DEROTTO can be valuable resource. A sale leaseback enables a business to turn equity in free & clear equipment into liquid cash.

A sale leaseback is an arrangement where you sell equipment you own to a commercial financing company. The finance company then leases the same equipment back to your company. The finance company collects payments at a fix rate from you based on an agreed-upon time period (between 2 to 5 years).

Does a sale leaseback make sense for your business?

A sale leaseback may make a lot of sense for many reasons:

1. Increase tax deductions - This is a big reason. Not all debt is tax deductible. For example, if a business is in arrears to CRA, this debt is not tax deductible. Using a sale leaseback strategy, a business can convert non-tax-deductible debt to tax deductible debt. This benefit can be very effective for your business.

2. Debt consolidation. Managing many payments can be a challenge and consolidating debt into one payment may make sense. A sale leaseback can help improve a business’ debt servicing.

3. Managing cash flow. Many businesses enter into a contract and don’t see any money from the contract for 60 days, 90 days, or sometimes longer. A sale leaseback can help a business bridge the gap during these periods.

4. You keep control and possession of the equipment. A sale lease back allows you to access the equity in your free and clear equipment without having to sell it. You still have control and operational flexibility of the equipment.

5. Your business no longer has access to conventional financing. Many businesses don't have access to as much credit as they once did. A sale leaseback is a finance option that many businesses are not aware of and can provide a timely capital injection into the business.

6. Need capital for expansion. Money from a sale leaseback can be used to meet expansion demands of your business.

If a sale leaseback sounds like something you want to explore, then reach out to DEROTTO Leasing. DEROTTO works with several lenders that specialize in sale leasebacks.

 Listed below are several transactions DEROTTO has financed in Q1 of 2025:

1. A new specialized spray machine with a purchase price of $18,500 financed over 36-months at single digit rates.

2. 2007 Kenworth crane truck with a purchase price of $90,000 financed over 60-months at bank rates. This transaction was a private sale.

3. A new specialized bottle filling machine with a purchase price of $12,000 financed over 36-months at single digit rates.

4. A sale leaseback for $80,000 financed over 48-months at single digit rates.

5. 2024 CNC machine with a purchase price of $85,000 financed over 60-months at bank rates. The vendor on this file required progress payments.

6. 2025 Western Star cement mixer with a purchase price of $420,000 financed over 60-months at bank rates.

7. 2019 Ford F550 service truck with a purchase price of $125,000 finance over 60-months at bank rates.

8. 150 new 95 gallon trash cans with a purchase price of $20,000 financed over 36-months at single digit rates.

9. 2019 Isuzu dump truck with a purchase price of $45,000 finance over 60-months at bank rates. This transaction was an inter-provincial private sale.

10. 1989 Ford roll-off truck with a purchase price of $20,000 financed over 24-months at single digit rates. This transaction was a Ritchie Brothers auction sale.

11. A $50,000 unsecured working capital loan.

IMPORTANT TO NOTE:

There are times when the lender will require the principal(s) of a business to be listed on the finance paperwork. One of the main concerns business owners have when this situation arises is how this may affect their personal credit reports. The short answer is “it won’t”. When this concern is brought up by the business owner, he or she is more or less concerned about how the business financing will be reported on their personal credit bureaus. All of the lenders DEROTTO works with only report to the business credit bureau of the company. If the principal(s) are required to be on the financing paperwork, then no reporting is reported to their personal credit bureaus. This is important because it won’t impede the personal borrowing capacity of the individual for a mortgage, a car loan, or the like. If you have questions on this subject or anything else, then give DEROTTO a call at 855.337.6886 or visit our website at www.derotto.com.