This is where the owner of a business sells business equipment to a leasing firm that offers a leaseback program to obtain cash. The leasing firm buys the equipment from the business owner and leases it back in exchange for a monthly "lease" or rental fee. Through this arrangement, a business can obtain a cash advance and continue using the equipment at the same time.
Why would a business owner want to sell the equipment which was purchased for the business operations? Sometimes, cash in-flow is not sufficient to cover for all business expenses. There might also be seasons when additional working capital is needed. When this happens, a business owner can turn to an equipment leasing company and apply for a sale leaseback. Indeed, it is a viable solution to the challenge of business financing.
What are the advantages of equipment sale leaseback?
Acquiring an equipment sale leaseback can be advantageous for a business. For instance, funds can be made available without having to apply for a traditional business loan. Typically, the process of getting a business loan can take months to complete.
If you're looking for a short term financing option, then you may consider a sale leaseback. This is also a flexible form of business financing since the money can be used for various purposes such as purchasing raw materials, hiring more workers, paying bills, improving the office space, etc.
Do you have equipment which are only used occasionally? If yes, the money you used to purchase these equipment are obviously tied-up and not very productive at all. In this case, selling them for a leaseback will enable you to obtain cash and use it as working capital instead of just letting the equipment grow old without much benefit. Remember that the equipment will still remain within your premises so you can still use it at any time you need.
Another advantage of borrowing funds through a sale leaseback is that you can save your business credit line for emergencies or more important projects. Freeing your credit line also protects your business credit score from dropping.
What types of equipment qualifies for a leaseback?
The exact types of equipment which can be proposed for a sale leaseback may depend on the leasing company. Some firms will only equipment with a high value which can be sold to auction easily. These leasing firms will usually not accept equipment of a low market value such as computers, printers, and other office equipment. Be sure to check the leasing company's policy first before submitting your sale leaseback application.
How long will the process take?
Approval usually takes no longer than 72 hours. Once the equipment have been personally inspected by the representative of the leasing firm and passed evaluation, the process can be completed within 10 to 15 business days.
Who can apply for equipment sale leaseback?
Established businesses or business older than 2 years old can easily apply for a sale leaseback regardless of credit rating, since the loan is secured by the property. On the other hand, new or start-up businesses must have good credit rating in order to be approved.
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