Asset Backed Finance | Sale and Leaseback
Having access to sufficient and required amount of capital is important for every business in order to operate effectively and to maintain a reliable rate of growth of business. It enables you to facilitate every phase of business with the needed finance. However, using your own cash reserves is not advised and thus there is need of the funding as your business continues to develop. So, in spite of holding back, applying for an asset-backed finance will help you to enable and receive a lump sum amount of funding to enhance the capabilities of your business.
Asset backed finance is described as secure finance solution. It includes using of your company’s assets or collateral for providing you with specific amount. So, as per the type of finance agreement you have considered, collateral is established using anything from your company’s capital such as invoices, equipment, machinery, vehicles, property, etc.
Asset-Backed Finance is used for?
What assets can be used as collateral?
- Accounts receivable
- Inventory
- Equipment
- Property
Asset-Backed Finance could be used for raising funds for the various business phases and requirements that can be for new equipment, property purchases, renovations, refurbishments, working capital expenses and growth projects to cash injections. Asset-Backed Finance describes a wide range of finance products such as
How it works
01
The asset backed provider performs and complete its due diligence process.02
In due diligence process, the lender has to calculate the value of collateral which acts as an asset for the loan.03
Collateral value is determined and accounting book is inspected by the lender. 04
Sometimes an onsite visit can be held.05
As per the diligence process the amount to be financed is derived and it is analyzed that the requested amount can be lent or not.06
Terms and conditions for the financing and the returns are described.07
As soon as the term and policy is accepted by you and the provider, process is taken further.08
You are provided with the requested amount or funding.
Sale and Leaseback
The sale and leaseback is a type of transaction in which a firm sells its property to a bank or another company and then leases the property being sold. The firm that sells the asset or collateral becomes the lessee, and the buyer or the one being purchasing the asset becomes the lessor. In such transactions, the lessor can be an insurance company, a finance company, a leasing company, a bank, a limited partnership, or an institutional investor.
This is done with the understanding that the lessee (seller) will immediately leaseback the property from the lessor (buyer). The details of the agreement are arranged for a specified tenure and a set payment rate.
Why sale and leaseback
The specific reason for adopting such a financing method is to release the cash tied up with the asset prior to selling it. Not only this, it also provides continuous benefit from the usage of the asset. It helps the seller in releasing the cash that was tied prior to the sale and leaseback.
Benefits of sale and leaseback
- check_circle_outlineResults in generating cash flows for the seller-lessee.
- check_circle_outlineRepresent an alternative and more effective method of finance.
- check_circle_outlineHelps to transfer the tax ownership to the buyer-lessor.
- check_circle_outlineStrengthen the balance sheet of the seller as it results in reflecting a lower amount of financing.
- check_circle_outlineRelease the cash tied with the asset.
Benefits of investing in asset backed finance:
- check_circle_outlineHigh credit quality
- check_circle_outlineAttractive yields
- check_circle_outlineDiversity and investment diversification
- check_circle_outlinePredictable cash flow
- check_circle_outlineReduced event risk
Why choose asset-backed financing from Connect2India?
Our dedicated teams work with domestic as well as international clients and Connect2India partners to offer a complete package of asset-backed services. Connect2India provides customized services focused on:
- Structuring
- Execution
- Arrangement
- Securitization
- Underwriting
Through securitization, we enable your company to use your assets for obtaining debt for your overall capital structure.
