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Asset Based Loan

Real Estate Leaseback versus Equipment Leaseback

Why do an Real Estate Leaseback versus Equipment?  If your goal is to get $100,000 or higher, a Real Estate Leaseback may be better.    If your company needs less than $100,000, an equipment leaseback has several advantages over a real estate leaseback.

An equipment leaseback can often times be completed with just a one page application.   An equipment leaseback does not often require a formal asset appraisal by an independent company.  The transaction is faster.   It typically only requires 1 or 2 weeks completion time.   Closing is easier and less documentation is required.
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Since less paperwork and financials are required, less information is analyzed that could cause a decline.   The more documentation that is required, the more likely something will trigger a decline.

The above factors should be considered when deciding which financing to apply for.

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Categories
Asset Based Loan

Leaseback terms; Number of Months

Typically, the maximum term for leaseback transactions involving equipment is 60 months.    In some cases, the term may be longer, though this is not common.    The clear rational for the shorter term on leasebacks is that the equipment’s value will deteriorate too much and the equipment itself will obsolete prior to the completion of the lease, both closely related reasons.

For technology, or computer leasebacks, the maximum term is often 36 months, somewhat inhibiting the size of technology leaseback transactions.   If the Asset is Real Estate, the number of Months may be much longer.   The number of Months may be up to 180 Months or 360 Months with.   If the term is that long, there is often an early payoff option after 24 Months as well as an exit strategy for the borrower.   The exit strategy often involves selling
selling the property.

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Small Business Loan Resources:

U.S. Department of Commerce – Helps american businesses become more innovative at home and competitive abroad.

U.S. Bureau of Economic Analysis – Provides statistics on consumer spending, corporate profits, travel and tourism and much more.

Bureau of Labor Statistics – Provides companies with up to date information on employment, demand, hiring, productivity and other information that may be useful to companies.

International Trade Administration – Creates jobs and economic growth by promotingU.S. companies abroad to governments in other countries.

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Categories
Asset Based Loan

Is Credit Important on a Leaseback?

Is credit important on a leaseback?   Yes,  credit is important for a leaseback.    The vast majority of funding programs are concerned with the ability and the willingness of the borrow to repay.

Many times, potential borrowers ask, there’s enough collateral there, why do you need to look at my credit?     On a leaseback, the collateral may even be Real Estate, or valuable Industrial or construction equipment.    If the borrower defaults, what does it matter.

It  is not the lenders desire for the borrower to default.   In fact, it is typically the last thing they want.    If the borrower defaults, now the lender has to reposes the equipment.   Then they have to hire an outside vendor to liquidate the collateral.   By the time this is all done, the lender has often taken a substantial loss.   The lender would much rather the borrow simply repay the monthly payment. The lender earns their interest, the transaction is fully paid and the lender moves on.

These are the reasons why credit is looked at.   If the collateral is valuable, weak credit may not be a make or break issue for the lender.     With valuable collateral, the lender’s primary interest in looking at the credit is to make sure the potential borrower does not have current past due credit.

As a result,  it is clear that credit is important on a leaseback.   However the transaction may be approved and closed even if the credit is not good.   The Equity in the Asset may override the need for good credit.   These decisions are at the discretion of the Lender.

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Categories
Asset Based Loan

Commercial Real Estate Leaseback

Can a business get a Commercial Real Estate Leaseback in this market with current real estate values?   Yes, Commercial Real Estate Leasebacks are happening.    Full appraisals,  additional scrutiny of cash flows through the review of 2 to 3 years of tax returns, bank statements, rent rolls if not owner occupied, and lower LTV’s, and more may well be required in the current environment.   The lower LTV on a commercial real estate leaseback is a big issue.

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The lender wants to protect themselves in a sinking market by lowering the LTV’s.     Instead of 60%, 70%, or 80% LTV’s, 40% – 60% LTV’s may be in order.     After a sound cash flow situation of the borrower is verified, the lower loan to value will primarily protect the lender in this environment.    This is to be expected to continue throughout 2011 and 2012.

After the full appraisal is completed, if the value is sufficient and credit is acceptable, the lender will do an environmental survey.  Upon passing the survey, the lender is ready to proceed with a Commercial Real Estate Leaseback.

Commercial Real Estate Leaseback Resources:

Realtor.org –  Provides important sales and statistical real estate information

Categories
Asset Based Loan

Traditional 10% – 30% LTV Leaseback

Current funding options with traditional funding sources for a traditional 10% to 30% LTV leaseback remain limited real time.    If a traditional funding institution currently is still considering a traditional 10% to 30% leaseback on equipment and it is approved, be prepared to only receive the standard maximum 30% of the current value of the equipment.

Only hard assets, such high value manufacturing equipment is typically accepted.   In some cases high value construction equipment is accepted as well and will fall in line with the traditional 10% to 30% LTV leaseback.

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However, SmallBusinessLoansDepot.com has a unique program will will pay up to 60% to 70% of the current value on industrial and other types of equipment.    This is far greater than the traditional 10% to 30% LTV leaseback.    The transaction is fast and simple, only a one page application.

Simply click one the “Contact Us” and complete the mini-app, or contact us at Toll Free: 855-787-1113 today to begin the process and get an industrial leaseback against your industrial equipment today!

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Categories
Asset Based Loan

Computer Leasebacks

A computer leaseback is a loan against computer equipment. For businesses that have free and clear new technology equipment. Assets need to be more than $100,000 in value and also less than 90 days old.

What is required?

Simply provide a list of your company’s most valuable computer electronic equipment.
Invoices may have to be provided.    Equipment more than 3 months old may not
be accepted.    The most recent 2 years business tax returns may be required along
with Profit & Loss statement. Purchase Invoices may also be required.

Complete the 1 page application, equipment list.  Your business will receive a response with in 2 business days.   The entire process takes about 5-10 business days or more.    Most computer leasebacks are done in the $100,000 and higher range.

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Categories
Asset Based Loan

Industrial Leasebacks

Leaseback of Industrial Equipment

Businesses considering an industrial leaseback, which is a loan against industrial equipment, are in a strong position to obtain working capital if they have free and clear industrial equipment with significant value.  Often, industrial equipment is valuable and does not lose it’s worth as quickly compared to other types of equipment.

Equipment often used in an industrial equipment leaseback include CNC Milling Machines, manufacturing equipment, conveyor systems, interior cranes, automotive manufacturing equipment, steel manufacturing and producing equipment and molding equipment.

An industrial equipment leaseback is often not as dependent on business credit and personal credit as many other forms of financing are, as long as there is significant value in the equipment.   Other industrial type of equipment may be used such as large Trucks.
Over the Road Trucks, 18-Wheelers can be used to obtain capital.   Terms between 24 and 48 months are available on these.
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Terms on a loan using industrial equipment are 24, 36, 48, or 60 months.   The customer submits a one page application and list of equipment they currently have.    In some cases, if the equipment is free and clear but has a very low balance, the amount owed can be paid off from the proceeds.  For amounts up to $50,000, only a 1 page application and equipment list is required in most cases.  If the request is for over $50,000 then 1 or 2 years financial statements may be required.

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Categories
Asset Based Loan

Labor Productivity

According to Small Business Loans Depot’s review of the Thursday, May 26th, 2011 report of Labor Productivity and Costs by industry as reported by the bureau of labor statistics.

The fact that service providing and mining industries labor productivity, defined as output per hour, labor productivity was up 44% for the most recent reporting period, indicates that labor productivity has increased significantly in at least the last 3 years reported.     Although the increase was higher in years prior, the 44% remains significantly high as companies get the most out of their workers. Workers tend to feel insecure in a down economy, knowing that their production may be what justifies their continued employment.  Employees also realize that many companies are still not ready to here and are using increases in production as a hiring substitute.

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Asset Based Loan

Alternative Loans For Small Businesses

Alternative Loans for businesses

This article will assist small businesses in learning where to find and secure alternative loans.  A full range of topics will be discussed.   Traditional financing, including SBA loans are extremely difficult to get.   Viable options must be made available to entrepreneurs.

The formation of businesses, business credit, loan types and amounts.  Hispanic business loan and other hurdles to minority business loans are considered.   LGBT and gay friendly loan resources are provided.  Also included is how they all affect a business’s ability in obtaining credit.    A number of topics will be detailed and address subjects known by very few business owners nor discussed by credit specialists.    Many of these are critical for businesses to understand in order to secure credit.   Other options include getting loans in smaller segments or increments in order to get funding at all.

Topics include how to apply for a small business loan.   Things not do when applying for a small business loan will be discussed.   Businesses do not need to try to apply for the highest loan possible or use just one loan type to get financing.
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Many business owners request the highest amount possible when applying for a business loan.   This is not the best approach.   If a business requests too much they may be declined simply for asking for too much.   A business may qualify for $100,000.   However, if they apply for $150,000, they may be declined because they do not qualify for $150,000.   If the business only wants $100,000, they should only apply for $100,000.

A business does not need to get all the capital they need from one program and one loan.   A business may be able to get $50,000 on an asset based loan and another $50,000 through a business line of credit.  This tactic will allow the business to obtain all of what they need rather than only getting $50,000 if they had applied for one type of loan.

When forming the business, the business owner should pick the business type they think they will stay with for a few years.   If the begin as a sole proprietor then switch to a Corporation after only 1 year, they should probably start as a Corporation.

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