Sell & Leaseback Your Owned Equipment For Immediate Working Capital
An Equipment Sale & Leaseback is a type of transaction where a company sells its owned business equipment to a leasing company in exchange for immediate funding. Then, the company leases the equipment back from the leasing company so it can continue using the equipment in the business while re-paying for the equipment in installments over an extended period and with flexible buyout terms.
Because a sale leaseback is fully collateralized by the equipment, the amount of the loan will be based on the equipment value and is not as dependent on the credit score of the owner although a higher credit score will result in better leasing rates & terms. Because the equipment serves as collateral for the funding, there are typically lower rates and better terms associated with an equipment sale leaseback than with most any type of business loan. However, this also means that if you default on the lease, the equipment will be repossessed - something that would not happen with a Revenue Based Loan.
To initiate a sale leaseback of equipment, the business must own the equipment outright and the equipment must be free of any liens or very close to being paid off. The equipment also must have a resale/auction value, be worth the effort to repossess in case of default on the lease (so high-value assets are most suited!), and the same equipment cannot be collateralized in more than one sale leaseback agreement. Typically, about 50% of the auction value of the equipment is made available in funding.
When the lease in a sale leaseback transaction reaches the end of term, the business has several options. If the business wishes to continue using the equipment, it can work with the leasing company to negotiate a renewal of the lease. If the business no longer needs the equipment, the business can simply return the asset to the leasing company with no further obligation. An early buyout option would allow the business to re-purchase the equipment at a pre-determined fixed price before the end of the lease term.
Quick Funding, Lower Rates & Better Terms, Tax & Financial Advantages, and Flexible Buyout Options
There are several very nice benefits associated with an Equipment Sale & Leaseback including:
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