From the Author

We often get this question with our new (and sometimes returning) clients. In the following article, we break down the structures of a PUT Financing Agreement, talk about their value to you (the client), and even give some real-life examples of how we use them to help our clients.

Introduction

PUT or “Payment upon Termination” refers to a periodic mechanism that reduces monthly payments and interest rates. At its core, it is a set payment that you finalize at the end of the term. On average, you can get the terms of 10%, 15%, or 20% on PUT financing.

Understand the Essence of PUT Financing 

Under the PUT financing agreement, the owner gets the newfound freedom to finance one or more projects with ease. Opting for PUT financing in our competitive world makes more sense because you want to ensure stable business operations at all times.

Besides, don’t think of PUT financing as a contingency plan for your business. In fact, it is crucial to understand that PUT financing can serve as a regular financing option to ensure the continuation of complex projects and as well as save money.

PUT Financing: How Does it Work?

When it comes to the PUT financing, it boils down to the amount of the project minus the PUT percentage. So, if your project costs $100,000 and you intend to select a 10% PUT (Payment upon Termination), then you will just need to pay $90,000 with monthly payments (i.e., 10,000 (10% of 100,000).

In fact, the math checks out for the PUT financing. For example, assume that the price of your project is $100,000 with monthly payments of $3,125. It means the calculation for the 10%, 15%, and 20% PUT on monthly payments will look like:

  • 10% PUT: $2,815/mo
  • 15% PUT: $2,650/mo
  • 20% PUT: $2,500/mo

What Makes the PUT Financing Structure So Ideal?

In layman’s terms, the PUT financing structure allows you to pay less each month and keep more cash in hand. PUT financing is a more practical choice for businesses that receive regular payments from their clients each month.

Business Equipment Profitability and PUT Financing

You make money by using your equipment! Just like most businesses, you want your equipment to perform exceptionally to ensure optimal business operations and ensure high profitability. With PUT financing in the picture, your business will get time to make money before you have to pay back the total cost of the equipment. 

The Flexibility of PUT Financing

Apart from the practicality and compatibility of PUT financing, it is a highly flexible option for businesses to mitigate various issues in complex situations. Of course, you can roll into a small or large PUT as per your business needs. You can resource the expertise of a reputable finance company to get a suitable PUT financing option that caters to your business needs.

Client Example

One of our clients is an IT Service Provider that serves a large portion of California was undergoing a $750k refresh on one of their data centers. This client wanted to avoid any kind of variable change in payments after another finance company did not inform them on their agreement properly.

Without incurring the equipment’s total cost, Blue Street Capital tailored a PUT rent-to-own program where they could have all of their new data center products on-site over 36 months. At the end of term, the client has a fixed payment of 10% total purchase price.

This structure allowed them to leverage their entire budget for renting, staffing and operations. This allowed them to expand while only incurring a portion of the equipment cost, and with the assurance that their final payment is fixed.

Wrap Up

PUT financing can help you save enough to purchase more urgent items for the business.  On the surface, the saved amount might not seem a lot on, say, $100,000. But the more PUT financing you opt for on other projects, the more you will be able to save over time. Therefore, it would be fair to state that a PUT financing agreement can help you position yourself better in the market and establish your business’s financial position with stability.

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