Equipment Sale Leaseback Financing is a powerful financing structure. When executed strategically, Equipment Sale Leaseback Financing agreements monetize trapped working capital to fuel growth priorities without reducing debt capacity.

Contrary to popular belief, most small businesses and even those with typical loan disqualifiers like bad credit are viable candidates for this unique financing structure. It’s critical to understand the key elements of a well-optimized transaction.

Credit

A sale leaseback is a financing transaction that involves selling equipment you currently own to a finance firm, who in turn will lease it back to your business for an agreed upon period of time. The result is a streamlined process that allows you to infuse your company with needed capital and keep cash in the bank.

Unlike traditional loans, sale leasebacks are highly flexible and can be structured to meet a wide range of goals. From working capital optimization to product development and growth acceleration, the unlocked liquidity sale leasebacks provide can be pivotal to your overall strategic plan.

Independent finance companies can offer more competitive sale leaseback terms than banks and are often able to create unique solutions to meet the specific needs of your company. This is due to the lack of heavy regulations imposed on them and their ability to customize a solution for each client based on its credit, finance, and collateral review.

Collateral

With sale leaseback financing, the equipment you currently own is sold for fair market value to your financing partner and leased back. This allows you to unlock trapped capital in non-earning assets and leverage your existing equipment to fuel growth without taking on debt.

This financing solution can be an effective way to raise working capital or retire existing debt, but it’s critical to evaluate whether a sale leaseback is right for your business. Some critics claim that sale leasebacks are cost prohibitive, but this is untrue if you compare them with other types of financing, such as debt or equity. In addition, many sale leaseback transactions provide flexibility that can include negotiated usage parameters compatible with your forecast needs and a flexible option to repurchase the asset at end of term. This provides pivotal funding flexibility for growth strategies.

Taxes

A common misperception warns that sale leasebacks lose your control over the equipment, as it transfers title to the leasing company. While leasing companies do have their own set of standards regarding valuations, condition and titles, a skilled leasing advisor can craft terms that fit your operational needs without relinquishing any control over the equipment.

Additionally, a sale leaseback can offer a more tax-efficient alternative to a term loan, especially for companies in the Alternative Minimum Tax bracket. This is because lease payments are considered operating expenses rather than interest, reducing the overall cost of the transaction.

If crafted strategically, sale-leasebacks can provide a non-dilutive source of capital while allowing you to reallocate working capital towards other priorities, enabling strategic growth. The right financing partner can help you identify and leverage your most valuable equipment assets, unlocking trapped liquidity and accelerating growth. They can also optimize your capital structure, bolstering financial health and creditworthiness. This is achieved by lowering debt service obligations and reducing capital investment requirements.

Early Buyout Options

One of the fastest ways to raise cash and retire debt is with an equipment sale leaseback. Essentially, you sell a piece of equipment your business owns free and clear to a financing company that then immediately leases it back to you over an agreed rental term. Unlike other finance products, the equipment never leaves your premises, and you can continue using it as normal.

Oftentimes, the leasing company will provide an early buyout option so you can take title back before the end of your lease term. This can be very valuable in situations like a potential acquisition.

When structured strategically, sales leasebacks unlock trapped liquidity for growth without new debt or loss of control. The key is working with an independent finance partner experienced in sale leaseback structuring. They will be able to help you shape optimal payment amounts, financing rates, and lease terms aligned with operational forecasts. Whether you’re looking to monetize medical, laboratory, manufacturing, or other specialized equipment, well-structured sale leasebacks can be an effective capital solutions strategy.