Sale and Lease Back On Scaffolding Equipment
You would be surprised how many scaffolding companies buy scaffolding equipment for cash, then come to us to undertake a sale and lease back a few days/weeks later.
In this article, we will be talking about:
• the reasons why scaffolding companies finance equipment via sale and lease back
• Benefits of doing so
• Downsides
• The process involved
So why do scaffolding companies finance kit via a sale and lease back?
1. A range of our scaffolding clients buy equipment direct from China or other countries. Deposits need to be paid and often full payment will be expected prior to delivery. Organising a lease for a UK company and paying an international supplier is not easy. Hence, you would buy the equipment and then we would buy it off you.
2. Speed of paperwork. We do turn around lease paperwork quickly, however, there will be times when you need the kit quickly and the leasing company cannot pay your supplier in time. In this instance, scaffolding companies pay outright for the equipment then undertake a sale and lease back a few days later.
3. New orders / cash flow. One of the main reasons is that you have the money today to pay for the equipment and then circumstances change within a few weeks. This often happens when you might win a new contract you were not expecting or decide to take some cash out of the company.
4. Bad debt, late payers. We have seen instances where a scaffolding company has the money to pay for kit on the basis they know money is coming in from a client. This money is then delayed, leaving you with a short-term cash issue. A sale and lease back quickly raises the valuable funds you need.
The benefits of scaffolding sale and lease back
1. Clearly, the main benefit is that you get the cash you have spent back into your business immediately
2. All the payments you will pay will be allowable against tax, there could be some tax benefits here
3. VAT. We pay your invoice in full, plus the VAT. You will only pay VAT on the monthly payments
4. Evens out your longer-term cash flow and makes budgeting every month easier
Downside
1. The main reasons why companies do not finance scaffolding equipment is due to the interest on the lease. You are in effect borrowing money, hence there will be a charge for this and one could argue it is a waste especially if you have cash in the bank already
2. Some people do not want to sign directors guarantees (sometimes needed especially for new start companies.) A number of people we speak to do not like the paperwork involved even though it only takes ten minutes to complete
3. You cannot sell the equipment that is on lease as you do not own it
Process involved
1. A key thing to consider is how old are your invoices. We can normally do a sales and lease back on scaffolding equipment where your invoice is up to 12 months old
2. Have you paid the invoice, do you have title? We will need to get confirmation the invoice has been paid in full
3. We arrange credit clearance for your scaffolding company and will send you the rental documents. You sign and return them to us
4. You raise a sales invoice stating exactly the same description and price that is on your supplier invoice. Our funder will then pay you within 48 hours, and the lease agreement will start.
It’s as simple as that! A quick and easy way to get cash back into your account and allowing you the financial freedom to grow your business.
Please call me, Carl Redding, on 07712 357675. I will be more than happy to talk through in more detail about how it works and will quickly come back to you with a credit decision in principle.
