My Business Credit Journey to 1,000,000

Filed under Business Credit, Resources

Leaseback options have always existed but we are now seeing them showing up more and more in the business credit arena. A leaseback option is typically where the owner of a property(real estate, equipment ect.) sells the property, and leases it back from the buyer. Some leaseback options allow the seller, or lessee to buy back the property at a later date. If the seller files bankruptcy or is audited at anytime, the leaseback option can be deemed as fraudulent or a means of hiding assets by the seller and the leaseback will be reclassified accordingly.

In the business credit arena, we are seeing this term showing up more and more. What is happening is that consumers have limited options of acquiring large lines of cash credit and service providers are getting more and more creative in providing leaseback options. In this situation a leaseback option looks like this:

A client who has strong business credit and needs access to cash gets approved for a lease of equipment from a company that agrees to do a leaseback option. Lets call the client, ClientA and the company doing the leaseback option, CompanyB. ClientA goes to CompanyB with strong business credit and gets approved for; let’s say $50K; to purchase IT equipment. ClientA leases 50K worth of equipment from CompanyB and CompanyB buys back the equipment from ClientA for $45K. The financing for the 50K of equipment comes from an external source such as BankC.

In many cases a small amount of equipment is left with the seller but in some situations, no equipment ever changes hands. The legality of this has to be examined from various angles. The financing agreement from the Banks may or may not allow the seller to sell the leased equipment. Every case is different, but this is the basic drift of a leaseback option in the business credit world.

We have seen various deals come up like this that require and PG and some simply require very strong business credit. I suggest that when doing this kind of deal, you should work with parties that have experience and know exactly what they are doing.