The equipment sale leaseback process requires careful consideration, professional advice, and open communication. It includes a thorough assessment of the equipment’s value, financial reporting impacts, and potential cash flow benefits.This financing option offers several benefits, including raising capital, deploying capital to other business functions, and operational continuity. Learn about the best practices for successfully navigating an Equipment Sale and Leaseback.

Converting Non-Liquid Assets into Working Capital

Equipment sale leaseback allows companies to unlock the trapped value of idle assets. It’s a simple financing structure that transfers temporary ownership of the asset to an equipment finance firm, which then leases it back to the operating company. During the lease term, the operating company continues to use the equipment without disruption.

Unlike bank or term loans, lease payments are 100% tax deductible and preserve debt capacity. Despite the common myths that sale leasebacks are costly, the right transaction with the right financial partner can be the ideal solution to meet your cash flow needs.

Having the right amount of working capital helps you maintain flexibility to manage expenses, react quickly to business disruptions and make the most of growth opportunities. To see if you qualify for an equipment sale leaseback, submit our quick application. Our expert team will review your application and seek approval for the best equipment financing option for your unique needs.

Boosting Financial Flexibility

Unlike equipment financing, sale leasebacks do not result in new debt and preserve business ownership. Moreover, lease payments can be fully deductible as a business expense. Consequently, a specialized lease financing advisor can tailor key terms around operating forecasts to align interests over longer capital investment horizons.

Despite the common myths, most companies’ assets qualify for sale leasebacks. Generally, any equipment that retains value and is essential to operations qualifies. These assets range from vehicles to machinery and technology.

To qualify, businesses must facilitate the leasing company’s underwriting process with documentation including financial statements, credit history, bank statements, and equipment details. Lenders also typically require a first lien position on the equipment and sufficient equity to cover the appraised valuation. However, companies that are proactive in preparing for these requirements often accelerate the approval and funding process. This can help them maximize growth opportunities and avoid lost revenue from delayed investments. This is especially true when working with a firm that has experience lending to small businesses.

Retaining Access to Critical Equipment

Whether it’s the heavy machinery in factories, the vehicles in fleets or specialized equipment essential to your company’s operations, you know that your equipment is more than just “equipment.” It represents years of investment and hard work. Often, it can’t be replaced easily or quickly, especially if the equipment is old and has little or no resale value.

In addition to boosting financial flexibility, an equipment sale leaseback arrangement allows companies to retain access to their critical assets without interruption. Once the equipment is sold, a new leasing agreement is put in place that specifies a term, payment schedule and conditions for use.

Experienced lease financing firms offer flexible sale leaseback structures that are tailored to specific equipment and operational needs. Identifying the best fit, and working with knowledgeable advisors to understand financial implications, can help a business maximize its strategic benefits.

Managing Cash Flow

Managing cash flow is critical to staying nimble, keeping up with expenses, and capturing opportunities as they emerge. Equipment sale and leaseback can help to improve cash flow through immediate capital infusions, reduced interest payments, financial reporting benefits, and tax optimization.

Depending on the terms of the sale and leaseback arrangement, you may retain physical possession of equipment while allowing the buyer to have operational access. The buyer also typically obtains legal title concurrent with commencement of the lease term. Depending on the structure, you may have options at the end of the lease term to buy back the equipment, extend the lease, or return it.

Despite the common misconception that only a limited group of assets qualify for sale and leaseback, the financing marketplace today accepts much more specialized machinery than you might expect. In fact, many companies find that monetizing their existing assets through this financing arrangement helps them boost productivity without disrupting production or increasing inventories.