Leverage existing equipment value with a Sale Leaseback Equipment Financing option. This financing solution helps you unlock hidden capital and free up cash to grow your business.
Unlike loans, a Sale Leaseback Equipment Financing transfers ownership of the equipment to your financing partner and is treated as an operating lease. Your lease payments can also be fully tax-deductible.
Tax Benefits
Sale leaseback equipment financing is an efficient way for a business to infuse capital for expansion. A sale-leaseback can provide a quick injection of working capital to fund a new product line, buy out a partner or simply to get through a seasonal slump.
The process of a sale-leaseback starts with your business identifying the equipment it wants to pledge. The equipment is professionally appraised to determine its fair market value. Your lender then purchases the equipment and leases it back to you on a 1,2, or 3 year term.
This allows your business to monetize equipment with no disruption to operations. Additionally, the lease payments are typically classified as operating expenses – providing significant tax benefits. Consult with your accountant to understand the impact on your balance sheet and tax implications. In addition, a leaseback can include terms regarding equipment maintenance that you should plan to address accordingly. These details are critical to a successful transaction.
Liquidity
Sale Leaseback is a great way to quickly inject working capital without having to take on new debt. It begins by having your equipment professionally appraised to determine its fair market value. Then, you sell the asset to your financing partner, who then leases it back to you for a period of time (lease term). Your financing partner will work with you to design payment amounts and terms that align with your company’s short- and long-term goals.
You may need a cash infusion to take advantage of a growth opportunity, increase production capacity in a seasonal business, purchase another company or product line, or expand into new markets. A sale-leaseback unlocks trapped potential by turning the equipment on your balance sheet into a source of immediate cash flow and offers tax advantages over borrowing via term loans.
Flexibility
Running a small business requires tremendous resourcefulness, especially when it comes to funding your company. Whether your growth objectives require an upgrade in essential infrastructure or extra liquidity to cover seasonal fluctuations, sale leaseback equipment financing can provide transformative access to capital.
Working with a lender that specializes in this type of financing can help streamline the process, giving you the cash you need faster and providing flexibility for your future growth plans. They’ll conduct a thorough appraisal of your equipment, considering its type, age, condition, and current market demand to determine its fair value.
Then, they’ll immediately turn your ownership of the asset into cash proceeds. Unlike term loans, which often include financial covenants that force you to keep certain debt ratios, a sale leaseback leaves you with full flexibility on how to use the asset at the end of the term. This includes negotiating usage parameters compatible with your forecast needs, defining appropriate lease durations to match equipment lifecycles, and locking in flexible “bend points” for payment adjustments if your utilization changes.
Ownership
Sale Leasebacks convert trapped equity into liquid cash, allowing for growth acceleration without debt. They also unlock hidden unlocked fair sale value on specialized equipment, machinery and vehicles with lower book values. It’s important to have these assets professionally appraised for a realistic valuation before approaching an Equipment Finance company for sale leaseback financing.
The key is to have an experienced Advisor help you develop a strategic plan for sale leasebacks that maximizes value and eliminates cost. This includes mapping 2-3-year equipment investment timelines, analyzing working capital models and capital return timetables, and quantifying liquidity gaps sale leasebacks can bridge. It’s also key to right-size lease durations to align with equipment lifecycles and operating forecasts.
A common misperception is that leasebacks are expensive, but this often fails to account for tax savings, accounting benefits and preserved debt capacity. It is also crucial to work with a lender that understands small business and can tailor sale leaseback terms around operations and growth forecasts.