What Is Sale-Back Finance, & How It can Work for Your Business

June 28th, 2021

What if we told you that you can turn the equity in your existing business assets to cash! Sale-back finance is the widely used but under-talked-about strategy that can unlock the equity sitting in your business assets to improve cash flow, raise working capital or expand your business!

We discuss how Earlypay can provide the answer to your cash flow woes with Sale-back finance.

What is sale-back finance?

Sale-back finance has its origins with equipment leases. However, the term is used today to also describe those finance transactions where the loan is secured over existing assets the borrower already owns. These arrangements are a win-win for businesses who need an injection of cash or to free up their cash flow, but still need the use of the equipment to keep the business ticking along.

The unique structure of these finance arrangements makes it possible to free up any capital that is locked away in your balance sheet in the assets you already own.

 

So how does Sale-back finance work?

It’s simple, for example:

  1. You own an unencumbered asset which you use in your business.
  2. Earlypay gives you a loan secured by the unencumbered asset.
  3. You continue to use the asset in your business.
  4. The equity in the asset that’s been unlocked by the Sale-back loan can be used to grow your business or take advantage of new opportunities.
  5. You pay off the loan typically over a 3-to-5 year term while using the asset to generate income.

 

Why use Sale-back finance?

Most companies who use Sale-back finance do so because they recognise the opportunity to utilise the cash they have invested in an asset for other purposes. Eligible assets include vehicles or manufacturing equipment. If your business is asset-rich but short-term cash-flow poor, Sale-back finance allows you to keep using the asset while using it as security for the loan. 

The other main draw card to using Sale-back finance is that it represents an alternative method of raising capital without the balance sheet impact of shareholder equity or capital raising. 

 

Additional Tax Deductions 

The interest or credit charges on a Sale-back secured loan may be tax deductible — speak to your accountant about the specifics of how this works. 

 

Is an Earlypay sale-back secured loan agreement right for me?

There’s only one way to find out! Our tailored asset finance solutions have the flexibility to support businesses of all shapes and sizes. Big or small, early-stage or established — we'd love to help.

To learn more about sale-back finance with Earlypay, please call our friendly team on 1300 760 205 or contact your broker or BDM.

 

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