Leaseback Financing: Working Capital Without Debt
There are times when businesses need short-term capital, but traditional loans are not the ideal solution. Whether the need for capital is to cover existing financial obligations, making payroll, acting on a time-sensitive opportunity, or anything else, debt-based loans aren’t always the answer. More businesses are taking advantage of the benefits of leaseback financing to cover their needs for short-term capital.
How Leaseback Financing Really Works
Leaseback financing is a fast and efficient way to get access to working capital without taking on debt. Equipment is sold to a private lender in exchange for working capital. After that, the equipment is then leased back from the lender, and the payments go towards the balance owed. Businesses do not lose any access to their equipment, and can continue day to day operations. Since this is a simple sale and leasing agreement, there is no need to place any debt on the books, and business credit ratings are preserved.
The Hidden Value Of Equipment
All equipment has an intrinsic value which is used to figure out the amount of funds available through leaseback financing. The guidelines used are fairly simple. Newer equipment will usually be valued higher than older pieces, but condition is weighted heavily. An older piece of equipment in excellent condition may actually have a higher value than a newer piece that is well-worn. Intended use also plays a heavy roll. Highly specialized equipment can fetch a higher value than commonplace pieces. This is important when IT, construction, and medical businesses are looking for leaseback financing. It should also be noted that almost any type of equipment is considered. Vehicles, earth movers, diagnostic equipment, manufacturing machinery, server banks, and much more can be leveraged for working capital while still retaining their use.
Leaseback financing opens the doors to tax advantages for businesses. When equipment is sold and then leased back, the payments fall under itemized deductions. In essence, all payments made on leased equipment can be deducted when filing taxes, up to a limit of $500,000. Businesses that use leaseback financing recoup the money they pay to zero out the balance, and in some cases, see a return. In the long run, this means leaseback financing ends up costing nothing, so long as businesses take advantage of tax deductions.
Speritas Capital Partners provides leaseback financing to businesses spanning all industries throughout the Untied States. Contact our offices today to learn more about working capital options for your business.