Sale and leaseback advisory services NEXTRE Baltics Latvia Lithuania Estonia

Sale and leaseback transactions by NEXTRE Global in the Baltics – Latvia, Estonia, Lithuania

As fully integrated real estate services company, NEXTRE Global is able to meet a client’s specific needs and also provides comprehensive answers to questions on sale and leaseback transactions.

NEXTRE Global consultants understand all aspects of sale and leaseback transactions, and thus are equipped to negotiate the most favourable economic terms in the most expedient manner.

Short tips provided by NEXTRE Global:

Sale and (&) Leaseback is a simple method of raising funds from your existing assets without having to dispose of them.
As the name – Sale and (&) Leaseback suggests and agreement is made to “sell” the company assets to a financial institution who in turn agrees to lease the items back to your company for an agreed rate over a set period of time.
In most cases within the transaction of Sale and (&) Leaseback 100% funding against the assets valuation can be achieved and on certain classes of equipment this can be increased.
The transfer is seamless and will not impact on the day to day running of the business.
In this way your company can utilise existing equity in “owned” (or financed) assets to provide essential working capital.
Ownership of the assets to be transferred back to your company after the primary lease repayments have been made.

Advantages for the entire lease:

Better cash flow: leasing gives you access to the asset with minimal up-front payments and helps spread the cost over time. You can pay for the asset with the income it generates while minimising the drain on your working capital.
No debt: an operating lease preserves your credit options and does not influence your credit limit as it is generally not classified as debt but as an expense (note that this advantage does not apply to finance leases), therefore it is kept off the balance sheet.
Maximise financial leverage: your lease can often finance everything related to the purchase and installation of the asset, including maintenance, and may free up cash flow to pay for other items.
Simplified cash flow management: lease payments are usually flat, making cash management more predictable and easier than with a variable rate loan. The fixed interest rate of a lease also helps if interest rates rise.
Tax: avoid paying VAT up front. Also, operating lease payments are generally tax deductible.
Flexible time frames: leasing contracts can be structured to fit your requirements. Use an asset as long as you need it without owning it forever.
Hedge against obsolescence: depending on your end-of-lease option, just return the asset to the lessor. You will not have the hassle of selling the used asset or run the risks related to residual value and (technical) obsolescence.
Less worry: no need to worry about an overdraft or other loan being withdrawn at short notice due to changes in bank policy or personnel.
Less risk: the risk is carried by the leasing company.
Better discount: the leasing company can usually obtain better discounts due to their greater purchasing power.

Disadvantages:

More expensive: a finance lease is usually more expensive than an outright cash purchase as the payments include finance charges. However, leasing may cost less than other forms of financing. Also consider the tax advantages when making this calculation.
Fixed term: it may be impossible, or at least costly, to terminate a leasing contract early.
Fixed interest rates: interest rates are usually fixed throughout the lease, which may prove a disadvantage in times of falling interest rates.
Ownership: you don’t own the asset, except eventually in the case of hire-purchase.

IMPORTANT POINTS:

Return of Asset Conditions.
If you choose to return the asset at the end of your lease, the condition in which and the place where it must be returned are important aspects to consider carefully.
Notice Period.
If your lease includes the option to renew take note of any time periods in which to give notice in case you do not want to renew the contract. Some leasing companies will automatically renew the contract if you fail to give notice.
Purchase Rights.
If negotiating the right to purchase the asset at the end of your lease, a predetermined fixed price offers more value as the ‘fair market value’, which theoretically is always available to you.
Maintenance Responsibility.
Clarify which service and maintenance programs are included in the lease. If you are responsible for service and maintenance, make sure you do not have to provide an unreasonably high degree of it.