Whether you need to unlock trapped value in aging lab equipment or increase cash flow to fund a strategic project, an Machinery Sale Leaseback can be a quick and easy way to monetize assets. And unlike traditional loans, you can retain access to your critical equipment with a lease term tailored around operating forecasts.
Increased Cash Flow
Boosting cash flow is often the reason companies seek out sale leaseback financing. By selling equipment to a leasing company and then immediately entering into an operating lease, a company can free up capital for expansion without having to take out a costly loan.
In addition, the lease payments typically are deductible as operational expenses. This can help improve tax efficiency and enhance the financial flexibility of a business.
Whether you need to expand into a new market, acquire a partner, manage seasonal fluctuations in your operation or are facing an unexpected opportunity, a machinery sale leaseback can help you optimize cash flow and fund growth without increasing debt. Contact 36th Street Capital to learn more about this unique and innovative financing solution and to discuss your specific business needs and goals. We will provide a quick assessment of the equipment in your portfolio and identify the best financing option to move forward. Upon approval, we can typically close quickly.
Convert Non-Liquid Assets into Working Capital
As companies seek to maximize growth, having working capital available for initiatives like accelerating accounts receivable collection and new product development becomes even more critical. In a sale leaseback transaction, businesses can monetize existing assets to improve liquidity while maintaining access to critical equipment that supports core operations.
Unlike traditional loans, the lease payments of sale leaseback financing are 100% tax deductible. Breaking down the myths surrounding sale leaseback financing helps decision makers better evaluate if this financing strategy is right for their needs.
To qualify for a sale leaseback, a company must identify specialized equipment with unlocked fair market value and approach an equipment finance lender. Typically, the process starts with an appraisal to assess the equipment’s current value. Then, the seller and finance lender will negotiate a sales price to transfer title of the equipment in exchange for an operating lease or debt financing agreement. Compared to term loans, sale leasebacks do not come with financial covenants, making it easier for companies to leverage these assets as working capital without the burden of repayment terms.
Maintain Access to Critical Equipment
The machinery in your warehouse, the commercial vehicles your team uses and the heavy equipment that supports your processes are more than just assets on a balance sheet. They represent your investment, years of hard work and the foundation of your business. By unlocking the capital trapped in these assets through sale leaseback, you can keep your current operations running smoothly and seize time-sensitive opportunities without the need for new financing.
Specialized sale leaseback finance providers can help you create a custom solution that’s aligned with your goals and financial projections. This includes defining lease terms that ensure payments are fair market value, establishing repurchase or renewal options and determining appropriate lengths of lease duration for your operating profile. By avoiding the need for new funding and allowing you to bypass depreciation, an equipment sale-leaseback can be transformative for your business. It can also allow you to upgrade technology more frequently, boosting operational efficiency and keeping you competitive.
Maximize Tax Benefits
The equipment that’s in your warehouse, the commercial vehicles in your fleet and the heavy machinery in your factories represents more than just assets on a balance sheet. They’re the result of your company’s investment, years of hard work and the foundation of your business.
An equipment sale leaseback allows you to unlock the value of that equipment and leverage it for the benefit of your business. In a sale-leaseback arrangement, you sell your existing equipment to a financing company for fair market value who then leases it back to you at an agreed upon rate.
This off-balance sheet funding option allows you to convert a depreciating asset into cash that improves your company’s financial ratios while also providing potential tax benefits. Depending on jurisdiction and accounting standards, full lease payments may be deductible as operational expenses. Moreover, flexible leasing terms allow you to right-size your lease duration to align capital costs with projected equipment useful lifes and investment horizons.