Sale Leaseback Equipment Financing is a fast and flexible solution for business owners in need of capital. Often, this financing option is much more affordable than traditional loans and allows businesses to shape terms such as payments, terms and durations with their finance partner.

The main qualifications for sale leasebacks are that the equipment be owned free and clear (or very close to it), be in good condition, and have resale value. Learn more about the benefits of this strategic financing solution below:

Tax-Friendly

A sale-leaseback is a form of capital equipment financing that allows you to sell your existing machinery for fair market value to a finance lender and then lease it back from them. Your monthly lease payments can be a tax-deductible operating cost.

Depending on how the structure of your sale-leaseback is designed, you may be able to claim Section 179 benefits and bonus depreciation, which can significantly decrease your business’s taxable income. In most cases, your leasing partner will be able to make this transaction very tax-friendly by allowing you to write off the entire lease payment as a deductible interest expense.

Additionally, a sale-leaseback is typically easier to qualify for than most traditional methods of financing equipment. This is because it doesn’t require you to have perfect credit or a lengthy business history. Many clients with unfavorable items on their credit report, open tax liens and previous bankruptcies are approved for sale-leaseback equipment financing.

Leverage Your Equity

Sale leaseback equipment financing allows you to leverage the equity in your existing assets for cash. You sell your equipment at fair market value to a finance company, they lease it back to you for an agreed upon term. You can then use the funds for your business needs and reclaim ownership at the end of the lease.

It’s important to work with an independent leasing broker who specializes in this type of financing to optimize the terms for your particular operation. You’ll also need to consult with your accountant to understand any tax implications.

Generally, any equipment that can be sold and used for operational purposes will qualify for this form of financing. This can include heavy machinery, titled vehicles, construction vehicles, and other large items. It’s probably not suitable for collections of smaller equipment or an entire office furniture collection. The equipment must be fairly new and functional for it to be a good fit.

Less Risk for Your Financing Partner

Sale Leasebacks can be more flexible than traditional financing options. Your finance partner can design the structure to align with your near-term operating needs and long-term growth objectives. The right advisor can also help you compare this funding technique to other financing alternatives.

Misconceptions abound about equipment sale leasebacks. For example, some people assume that only a limited group of assets qualify for this financing approach. While individual leasing companies may have their own definition of qualifying assets, this type of financing is widely available.

The leasing company acquires the existing asset upfront for its fair market value and leases it back to you. This transfer of temporary ownership boosts cash flow while preserving your usage of the equipment. Depending on your accounting standards, lease payments can be fully tax deductible. The resulting benefit to your balance sheet can also improve financial ratios and enhance credit ratings. This financing solution can also be used to avoid costly capital expenditures.

Quick Approval

Whether your business needs cash for growth, to address a cash flow issue or to seize time-sensitive opportunities, sale leaseback equipment financing can provide pivotal funding flexibility. Contrary to popular myths, even businesses with erratic cash flows and/or bad credit can still qualify for sale leaseback financing.

The underwriting process is generally faster compared to traditional loans or lines of credit because you are providing an asset upfront and your equipment is likely already in use at your company. The transaction also takes less risk for your financing partner because you’re not bringing them an un-secured loan or line of credit that may have potential default risk.

Independent leasing companies that specialize in sale leaseback programs tend to be more flexible with their criteria and can close on a deal quickly, often within a few weeks. They can offer more creative financing structures too as they don’t have the same restrictions imposed upon them by banks.