An equipment sale-leaseback is a financial transaction where a company sells its owned equipment to a leasing company and then immediately leases it back. In this arrangement, the company essentially becomes the lessee, gaining immediate access to cash by selling its equipment while retaining the right to use the equipment through a lease agreement.

This strategic financial maneuver provides businesses with a valuable liquidity injection without compromising their ability to use the essential equipment required for operations. The company that originally owned the equipment benefits from a cash infusion, which can be used for various purposes such as debt reduction, expansion, or working capital.

The leaseback component allows the business to continue using the equipment, often under a predetermined lease term with regular lease payments. This approach is particularly beneficial for companies that need capital for growth or other financial needs but want to maintain operational continuity without the burden of ownership. Overall, equipment sale-leaseback transactions offer a flexible and efficient way for businesses to unlock capital tied up in their assets, optimize cash flow, and maintain the use of critical equipment necessary for day-to-day operations.

You can lease back most large pieces of equipment and heavy machinery.
An equipment sale-leaseback is a finance tool to sell your equipment to a lender. After that, you can use the cash proceeds for your business. You lease back the equipment over an agreed period. Moreover, you can reclaim ownership at the end of the lease.
In conclusion, an equipment leaseback is a great tool. It allows you to inject cash flow into your business. Meanwhile, you can keep your equipment operational. To sum it up, you get cash while keeping your equipment.

Leaseback Offer in 2 days or less:

Provide your funding request, asset list, and desired terms. After that, you will receive an offer within 2 business days.
Furthermore, equipment leaseback programs are based solely on your assets’ value. No credit requirements or credit checks.
Use the button below to request an offer. Next, we will reply with an offer.

Step 1 – Equipment List

First, hit the “Request an Offer” button. You will
provide a list of equipment. In addition, you can also upload an equipment
list. After that, your info will be sent to our lenders. Only basic contact
info is required for the offer.

Next, after your equipment list is received, the
underwriting team will review equipment values. Meanwhile, if they have any
questions you will receive a request for more information. To summarize,
underwriters email requests as needed.

After the lender completes a review, you will receive an
offer in your email inbox. Your offer will arrive in as little as 2 business
days. After that, you can move forward with your offer. However, most offers
contain an approval window. You must take advantage of the offer. Otherwise, it
will expire. Next, you would have to submit a new request.

How does an Equipment sale-leaseback work?

An equipment sale-leaseback is when a company that currently
owns equipment or machinery required for essential use decides to sell the
asset to an investor, in exchange for a rental fee to cover certain expenses.
It is a simple financial transaction where you enter into a lease agreement
where you pay. period. The current owner of the equipment is the lessee and the
investor is the lessor.

I’m often asked to explain how equipment sale back works, so
I decided to break it down into the usual steps in the process…

Step 1 – Discover:

  • Let’s talk. Get to know each other and build relationships. During your initial conversation, you may ask questions such as:
  • What are the company’s short-term and long-term financing goals/needs?
  • What is the company’s current and historical financial position?
  • Do you need a short-term (bridging loan) or long-term rental agreement?
  • When did you acquire the asset? What did you pay for the asset?
  • Do you have a lien on the device or machine? Do you have any burden?
  • Do you prefer off-balance sheet financing (operating lease) or debt financing (capital lease)?

Step 2 – Offer Agreement:

Once we have jointly decided which sale/leaseback solution
is best for your business, we will prepare an offer setting out the general
terms of the transaction. Once the offer is accepted by both parties, the due
diligence process begins.

Step 3 – Equipment Valuation:

An independent third-party valuation is commissioned on your
behalf to determine Fair Market Value (FMV), Fair Liquidation Value (OLV), and
liquidation; Pay the appraised value upfront. Asset value (FLV) value. Once
completed, you will receive a copy of your report. The
evaluation process typically takes 3-5 days depending on the number of
locations and assets.

What are the prepayment criteria? This depends on several
factors. Fair market value may apply if your company is bankable and the equipment was purchased within the

last few months. For most other companies, Forced
Liquidation Value (FLV) is the standard.

Step 4 – Closing Documents:

The investor who made the offer to you will complete the
closing documents and send them to you for legal review and signature. Loans
typically close on the same day, the original signed documents are returned to
the investor.

Depending on the speed of your migration, the entire process
can be completed in as little as 10 days to 3 weeks.

When to use an Equipment sale-leaseback?

An Equipment Sale-Leaseback is a financial strategy employed
by businesses when they wish to unlock the capital tied up in their owned
equipment or machinery. This arrangement involves selling existing equipment to
a leasing company and then leasing it back for regular use. This approach
proves beneficial in various scenarios:

1. Immediate Capital

Injection: When a company needs a quick infusion of cash,
opting for a sale-leaseback allows them to convert the value of owned equipment
into working capital. This newfound liquidity can be used for various purposes,
such as expansion, debt reduction, or operational improvements.

2. Asset Optimization:

Companies may choose a sale leaseback to optimize their asset portfolio. By
freeing up funds tied to equipment ownership, they can redirect resources to
more critical areas of their business or invest in newer, more advanced
equipment to enhance productivity.

3. Off-Balance Sheet

Financing: Since the leased equipment is no longer owned, it
can be kept off the balance sheet, positively impacting financial ratios. This
can be advantageous for maintaining a favorable debt-to-equity ratio and
improving the company’s overall financial health.

4. Tax Advantages:

Lease payments may be deductible as operating expenses, providing potential tax
benefits. This can result in a more tax-efficient structure compared to the
ownership of equipment.

5. Mitigating Depreciation Risks:

Equipment values tend to depreciate over time. By opting for a sale-leaseback,
businesses can transfer the risks associated with equipment depreciation to the
leasing company, allowing them to stay technologically current without the
burden of asset depreciation.

6. Flexibility in Financing

Sale-leaseback arrangements offer flexibility in structuring lease terms. This
allows companies to tailor the agreement to their specific financial needs,
choosing lease durations, payment schedules, and end-of-lease options that
align with their business strategy.

In conclusion, an Equipment Sale-Leaseback is a versatile
a financial tool that can provide businesses with immediate liquidity,
flexibility, and strategic advantages, making it a valuable option in certain financial
contexts. However, its appropriateness depends on the specific circumstances
and goals of the company involved.

Advantages of Equipment sale-leaseback:

Unlock financial flexibility and optimize your business
operations with the advantages of equipment sale-leaseback. This strategic
financial maneuver allows you to sell your existing equipment and then lease it
back, providing an immediate infusion of capital. Enjoy improved cash flow,
maintain access to essential machinery, and gain tax benefits. By leveraging
the equity in your equipment, you can enhance liquidity, support expansion
initiatives, and adapt to changing business needs. Explore the myriad benefits
of equipment sale-leaseback to propel your company toward sustained growth and
financial resilience.

Disadvantages of an Equipment sale-leaseback:

Equipment sale-leaseback arrangements, while offering
certain advantages, also come with notable disadvantages that businesses should
carefully consider:

1. Long-Term Cost:

While leaseback transactions provide immediate capital through the sale of
equipment, the long-term costs may surpass the initial gains. Over the lease
period, businesses may end up paying more than the original value of the
equipment through lease payments and interest.

2. Ownership Surrender:

In a sale-leaseback, equipment ownership is transferred to the lessor.
This means the lessee loses control over the asset and may have to adhere to
strict usage and maintenance conditions imposed by the lessor.

3. Depreciation Challenges:

For accounting purposes, leased equipment is usually treated differently than
owned assets. Businesses may find it challenging to claim depreciation benefits
on the equipment, potentially affecting their overall financial picture and tax
considerations.

4. Restrictions and:

Obligations: Leaseback agreements often come with restrictive
clauses and obligations, such as maintaining the equipment in a specified condition,
limitations on modifications, and penalties for non-compliance. These
restrictions can limit the lessee’s flexibility in managing and adapting the
equipment to changing business needs.

5. Market Fluctuations:

The value of the equipment in the open market can fluctuate over time. If the
market value decreases significantly during the lease term, the business may
find itself paying more for the equipment than it is currently worth.

6. End-of-Term Issues:

At the end of the lease term, businesses may face challenges in determining the
the best course of action. They may have to decide whether to renew the lease,
purchase the equipment at a predetermined price (which may not reflect its
current market value), or enter into a new lease for upgraded equipment.

Careful consideration of these disadvantages is crucial for
businesses contemplating equipment sale-leaseback arrangements to ensure that
the short-term benefits align with their long-term financial and operational
goals.

Main Benefits of Equipment Sale-Leaseback
Agreements

Unlock financial flexibility and operational efficiency with
Equipment Sale-Leaseback Agreements. This strategic financial maneuver empowers
businesses by allowing them to sell existing equipment assets and then lease
them back, providing an immediate infusion of capital. Enjoy enhanced
liquidity, improved cash flow, and the ability to invest in core business
operations. Gain the advantage of staying technologically competitive with
upgraded equipment while preserving working capital. Explore the main benefits
of Equipment Sale-Leaseback Agreements and elevate your business to new heights
of financial agility and operational resilience.

What assets do I Need for an Equipment Sale
leaseback?

When considering an equipment sale leaseback, it’s crucial
to assemble the necessary assets to facilitate a successful transaction. Begin
by preparing a comprehensive list of the equipment you intend to lease back,
including detailed specifications and current appraisals. Financial records,
such as balance sheets and income statements, will be essential to showcase the
value and performance of the assets. Additionally, provide documentation on the
equipment’s maintenance history and any relevant warranties. A clear
understanding of your business’s financial health and the equipment’s condition
will strengthen your position in negotiating favorable terms for the sale-leaseback arrangement. Ensure you have these key assets ready to unlock the
full potential of this financial strategy for your business.