(PRWEB UK) 12 November 2012
CASH flow problems can break a small business.
But vans could provide a much-needed cash injection – so long as one owns them, or finances them using hire purchase (HP) or finance lease.
It’s called sale and leaseback and Business Car Manager explains how it works. It’s worth considering because, in these challenging times, access to cash is limited and expensive. Many have tried getting a bank loan with little success..
On top of that, small businesses are being hit hard by late payers.
Research published by Bacs Payment Schemes on 28 September 2012 reports that average late payment debt for a small or medium-sized enterprise (SME) is now £36,000.
Bacs – the company behind Direct Debit and Bacs Direct Credit – also reports that more than one-third of SMEs said late payment debts of just £20,000 would be enough to put them out of business. Cash flow is being stretched to its limits.
But sale and leaseback can help.
Essentially, it lets the user turn their vans into cash yet they can keep using them as they normally do. This is because they can sell their van, or vans, to a leasing or fleet management company and they lease them straight back to the van owner on a contract hire deal.
How a sale and leaseback works
•The owner sells their vans to a leasing company
•The money is transferred to their business
•The leasing company then leases their vans back to them
The vans remain in their hands at all times – it’s an on-paper transaction – so there’s no disruption to their operations. They get an agreed price for the vans, often based on the market value or write-down value, and they pay a set monthly rental to keep using them for an agreed period, with a mileage limit. They can pay for the lease company to handle all the maintenance, too, if they want.
A big advantage is the cash sum, which users can use to expand their business or improve cash flow. But there are other benefits. It can be cheaper than a bank loan. It lets them remove fixed assets (vans) from their balance sheet. It gives them a fixed monthly payment for simple budgeting.
They don’t have the hassle of disposing of the vans when it’s time for them to leave their fleet. They also remove the risk of falling secondhand values. The leasing company handles disposal – subject to fair wear and tear conditions - and they take the hit if used van prices plummet.
Little wonder that sale and leaseback deals have been on the up since the financial crisis first bit in 2008.
But sale and leaseback is not suitable for every business – and one should never use it as a do-or-die attempt to prop up a failing business.
To qualify for a sale and leaseback deal, users must already own the van or be buying it on finance. If the van is too old, they won’t be able to do a sale and leaseback – nearing its fifth birthday is a common cut-off point.
And, as ever, deal only with members of the BVRLA, they shop around and balance cash offers against rental payments, deal terms and service provision.
Finally, drivers should consider getting an expert fleet management specialist to handle all aspects of the deal for them. A good specialist will save them time and money.
Companies they should deal with for a sale and leaseback
Users should maks sure they are members of the BVRLA – the British Vehicle Rental and Leasing Association. They can download a list of members from their website.
Read more about the BVRLA on the sister BCM site: BVRLA publishes member directory
Van owners should Be warned!
•Leasing companies know what to look for to make sure a business is suitable for a sale and leaseback. There’s a difference between a good business requiring a cash injection and a business that’s going south that needs cash to temporarily extend its life.
•Users should make sure they understand the implications of using contract hire – there will be return conditions at the end of the lease period. They need to fully understand what these are – they should discuss it with the leasing company. They don’t need expensive refurbishment costs at the end of a lease period.
For more information, visit Business Vans at http://www.businessvans.co.uk/