The phrase “leaseback,” which is short for “sale-and-leaseback,” refers to a financial transaction in which an asset is sold and subsequently leased back for an extended period of time; as a result, the asset is still usable but no longer belongs to the buyer.
In other words, a leaseback agreement allows the business that sells an item to lease the same asset back from the buyer.
Leaseback: Your equipment can get you capital.
Leaseback financing is a method of financing that makes sense for many businesses, has very little risk, and offers many great benefits. The equipment stays on the business’s property and is continued to be used to generate revenue. It can really hurt some businesses if they have to slow down operations for even a few days while they wait to obtain financing.
There is much flexibility when it comes to the usage of the capital generated from a sale and leaseback as well. This extra cash can be used for inventory, marketing, maintenance, etc. without any worries. Arguably the most important benefit of a leaseback is the potential massive tax benefit which can be up to 37% in tax savings over the course of a year.
If the transaction is set up as a true lease then the entire monthly payment for the equipment can be written off. If you were purchasing the product with other sources of financing then you could only write off the interest portion each month. The tax savings alone is enough to generate extra needed capital for your business.
Another big positive for businesses choosing to do a leaseback is that there is no need for large sums of collateral to secure the financing. The financing can be granted using the equipment itself as collateral.
Benefits of a leaseback
Balance Sheet Benefit
Having assets, on which you pay taxes, converted into contingent liabilities may also lower taxes
Conserve Lines of Credit
Your lease payments do not at all interfere with credit lines at your bank, allowing you to conserve these funds for other critical commercial business needs
Application is Fast and Easy
Generally, no extended paperwork to submit, only a one-page application, and there are no upfront application fees
Flexible Terms
Terms of 36, 48 and 60 Months are available to match your needs.
