More Confusing Than That ‘ Dark Matter’ Mystery ? The Sale Leaseback Doesn’t Have To Be That Way

OVERVIEW – Information on the sale leaseback financing option in Canada . How does the Sale Lease Back work and what do Canadian business owners/managers need to know to success complete this cash flow strategy successfully

A Sale Leaseback transaction in Canada. Does it has to be more confusing than that ‘ dark matter’ mystery we’ve read about – you know the one, that stuff that fills the galaxy and affects gravitational influence..? We don’t’ think so, so let’s dig in.

As an owner of unencumbered ( no liens ) equipment the business owner and financial manager in Canada has the option to consider a sale lease back transaction which is generally used to enhance cash flow and working capital . From a fundamental understanding point it couldn’t be simpler. You in effect sell an asset, or assets back to a finance firm who then creates a lease around the transaction. You owned the equipment, you sold that ownership, and on final payment under the sale leaseback… you guessed it, the assets are yours again.

More often than not you have not simply sold the assets to a third party because the assets we’re talking about are used in the operation and growth of our business. Those assets might be shop floor equipment, technology, rolling stock, i.e. trucks, etc.

Where do things get interesting then in that whole scenario? It’s simply that the transaction has financial, tax, and accounting issues that make or break the ultimate success of the transaction.

We always are talking to clients about the fact there are only essentially two types of lease transactions in Canada, capital ‘ lease to own ‘, and ‘operating’ lease to use. In theory you could probably have an operating lease sale leaseback, but we see that rarely. So typically in this type of financing it’s a capital lease.

While we mentioned that in the majority of all transactions we see the main purpose or goal is to enhance working capital and cash flow larger more sophisticated companies sometimes use the sale leaseback as a finance or accounting ‘ trick ‘ for their own internal or external purposes.

There is one area of this method of cash flow financing that owners/managers sometimes forget. It’s the whole thought process and requirements imposed by your lender on the value of the equipment. While sophisticated and specialized finance firms might have the means to establish the financeable value of the transaction they might also insist by policy or requirement that an appraisal be done on the asset or assets to be financed.

If that’s the case two important things must be kept in mind. Owners tend to focus on the current ‘ fair market value ‘ of the asset, and they feel they want financing on that value. Lenders, being the pessimists they are (!) focus on liquidation value, i.e. what they can sell the asset for if there’s a problem – with you! It’s as if they want to be repaid in full! Keep those appraisal/valuation issues in mind.

At the end of the day the best way to probably describe this whole process is that its one additional method of increasing cash flow and helping you to grow your business. Just kidding, but to hell with pride of ownership… it’s all about cash flow! Seek out and speak to a trusted credible and experienced Canadian business financing advisor with a strong track record to assist you with your sale lease back option needs

Author: Stan Prokop – founder of 7 Park Avenue Financial

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – has completed in excess of 90 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :

7 Park Avenue Financial = Sale Leaseback Financing


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 3024171
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