What is An Equipment Sale Leaseback

capital equipment

What is Sale Lease Back Financing?

A sale leaseback is a financial transaction between a business owner who owns VALUABLE business equipment and a leasing company.  sale lease back financing The business owner uses the equipment as collateral for a working capital loan or to purchase more equipment.  The amount given thru an equipment sale leaseback is based on the auction value of the equipment.   This type of loan isn’t based on the business owners credit.

Why Do Businesses Need Equipment Sale Leaseback Financing

Equipment Sale leaseback financing is a form of secured business loans.   Many businesses use equipment sale leaseback financing when for whatever reason, be it a low credit score or current financial situation.  The banks are turning down their request for financing.   It allows business owners to use assets they already own to obtain new assets or much needed working capital.  Sale leaseback financing can be obtained fairly quickly too.  So its great for un-expected expenses.

Who Can Apply for an Equipment Sale Leaseback

All  types of businesses are eligible for sale leaseback financing. From brand new start up business to well established business.  Approval is based on the value of the equipment.  Not the time in business or current financial situation of the business.

What Are the Credit Requirements

Having a high credit score is not a requirement for approval.  You must have some form of credit, someone with no personal credit couldn’t get approved.  But past bankruptcies, low credit scores and recent collection or late payments are not a problem.

What Kind Of Equipment Can Be Used?

Generally, any equipment that can be sold for a good price and quickly at auction. Such as “yellow iron” (construction equipment)  industrial machinery, trucks, and heavy machinery. What most lenders will not lend against are very specialized equipment, office furniture, computers, and any type of collateral that basically won’t sell well at auction.  All equipment must be in working order.

When Can A Sale Leaseback NOT Be Used?

If you don’t own the equipment, you can’t use it in a sale leaseback.   If you own it, but used it as collateral on another loan, then it can not be used.  In most cases it can’t be used for a business acquisition EXCEPT if the prospective new owner is investing a significant amount toward the purchase price of the business.

What Is Needed To Apply For An Equipment Sale Leaseback

To apply you will need an equipment lease application, and a list of the equipment to be used as collateral.   The list must include the year, make and model of the equipment.  When you purchased it and if you purchased it new or used.   If you are using a sale leaseback as part of a business acquisition we will need the financials of the company you which to buy along with the above info.

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Lai is a credit specialist for Lease Funders, an equipment leasing company who specializes in business financing for small business, startup business and businesses with bad credit. Add Lai on:

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