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Utilizing the Leaseback Option for My Business in Kenya

Utilizing the Leaseback Option for My Business in Kenya

In the bustling market of Kenya, I’ve been always on the lookout for innovative financial strategies that can support and bolster the growth of my business. One such strategy that I’ve come to appreciate is the leaseback option, or what’s commonly termed as a sale-leaseback. I’d like to share my insights on when and why this could be a game-changer, especially when compared to traditional borrowing.

When Did I Consider a Leaseback for My Business?

  • Immediate Cash Flow Needs: There were times when my business faced cash crunches, and selling an asset, like my business property, provided instant liquidity. The best part? I continued to use the asset by leasing it back.
  • Seeking Tax Advantages: After discussing with my local tax consultant, I realized there might be deductible expenses associated with leasing assets, which could be beneficial for my business’s tax situation.
  • Unlocking Asset Value: Real estate in Kenya has its ups and downs. By selling when the market was favorable, I capitalized on its current value but still maintained its utility through a leaseback.
  • Managing My Business’s Financial Appearance: A leaseback allowed me to present a more appealing financial statement, as certain assets and liabilities might not be reflected.

Why I Chose Leaseback Over Borrowing Money:

  • Immediate Cash Flow Needs: The terms of the leaseback agreements I entered into were crafted to suit both parties, allowing me a lot of room to maneuver.
  • Avoiding Total Loss: With loans, there’s always a fear of losing the collateral in case of a default. With a leaseback, I already cashed in on the asset’s value.
  • Potentially Favorable Rates: My business, considering its standing and creditworthiness, sometimes fetched better rates through leasebacks compared to conventional loans.
  • Keeping Other Credit Options Open: By using leaseback, I ensured other credit avenues remained available for various business needs.

Different Angles I Considered:

  • Business Strategy: Using the capital from the leaseback, I reinvested in opportunities that I believe have higher returns, without taking on more debt.
  • Risk Distribution: By selling the asset, I reduced the direct risks associated with its ownership, while the buyer took on the long-term risks and rewards.
  • Financial Forecasting: My lease payments were structured in a way that resonated with my business’s revenue, aiding in smoother cash flow management.

In my journey, I’ve found the leaseback option to be an instrumental tool in my financial arsenal. However, it’s paramount to consider the unique needs and context of each business. I always advise fellow business owners to engage with financial and legal experts familiar with Kenya’s landscape before making such a significant decision.