Why is this something I should implement..?
- It preserves existing cash - taking out a big wad of money for a down payment on equipment or land can cause real damage to a farming company's bottom line. Going down the sale & leaseback road allows you to have the best of both worlds - keeping the cash in your business and having the latest agricultural equipment.
- It frees up cash that would otherwise be tied up in your company equipment - yes, granted, you have much money invested in your kit, but it's frankly useless because it's all tied up. Use a sale & leaseback to get that cash back on the field and working for you.
- The responsibility of maintenance and repairs becomes the leasing company’s responsibility - sale & leaseback deals usually mean the leasing company will take ownership of any repairs or maintenance that the equipment might need to undergo during its life.
- Allow yourself to upgrade your equipment - once your agreement with the leasing company ends, they will likely offer you the chance to upgrade the equipment, replacing the outdated stuff, which, in the world of agriculture, can be pretty lucrative due to the pace of innovation currently going on.
- Improve your balance sheet… instantly - usually, any equipment is considered a fixed asset on a balance sheet. However, when the equipment is sold and leased back, this removes the equipment from the fixed asset section and is treated as an expense instead.
- Save on that pesky tax bill - lease payments can be treated as a business expense written off each year. This is miles better than deducting the depreciation and equipment maintenance expenses… a significant advantage for SMEs.
Don't be afraid of not having enough cash in your agriculture business to grow. There are several options, including sale & leaseback, which can help you free up money to spend on technology that will advance the growth of your farm. It's a tried and tested method designed to help you grow your farming business.
Need some more convincing? Give us a call; we’ll be happy to answer any questions you have about future agricultural investments.
