A Machinery Sale Leaseback frees up cash in your business by selling equipment your company owns to a leasing firm. The financing partner then leases it back, and your equipment doesn’t move an inch through Machinery Sale Leaseback.
This type of financial arrangement can be a valuable tool for businesses that want to optimize their assets. But it’s important to evaluate key terms, potential operational impacts and long-term financial goals carefully.
Liquidity
Whether it’s unlocking trapped liquidity or funding growth, sale leaseback provides a creative financing alternative. Structured strategically, sale leasebacks offer accounting and tax benefits while preserving debt capacity.
An equipment leaseback transfer gives your business access to capital by temporarily selling your existing equipment to a leasing company and then immediately leasing it back. Unlike taking out a loan or line of credit, there is no change in ownership. The equipment does not leave the premises, and you continue to use it as usual.
Many agricultural businesses use a sale leaseback to fund facility upgrades, investment in new equipment and to get through the off season. A mid-sized manufacturing company used an SLB to buy new machinery to meet growing customer demand without diluting equity or increasing debt. A regional hospital sold its old imaging and diagnostic equipment through an SLB to upgrade its facilities, enhance patient care and increase operational efficiency. In these cases, and in countless others like them, sale leaseback offered a practical solution to a pressing need.
Tax Benefits
Many equipment financing companies have major restrictions around the type of equipment they’ll finance, based on valuations and condition. This leaves businesses with a significant portion of their assets unlocked.
An equipment sale leaseback allows you to monetize those assets without adding new debt to your balance sheet. This frees up working capital to fuel growth initiatives like expansion and inventory buffers while preserving creditworthiness with banks.
Additionally, lease payments are 100% tax deductible, similar to interest expense. These savings add up quickly, and when compared to alternative financing methods, sale leasebacks frequently win the day for reducing debt load and operational inefficiency.
Structured strategically, sale leasebacks also offer flexible control and re-purchase options at the end of the lease term. Your finance partner can help you lock in fair market value repurchase options and negotiate longer-term lease extensions at reasonable market rates that align with your operating reality. The right financing partner can also tailor these terms to preserve usage and ownership rights as you upgrade or replace your existing equipment.
Flexibility
When done right, sale leasebacks unlock trapped liquidity for growth without adding new debt. They can also help align long-term equipment investment objectives with operating strategies and financial goals. A specialized lease financing advisor can optimize key terms to match your operating reality.
An equipment sale-leaseback can unlock hidden value in aging assets, or even newer, underutilized assets that have lost significant market value. But the key is to approach the process strategically rather than tactically.
The company sells the asset to a leasing or finance company at its appraised value, then immediately leases it back for continued use. At the end of the lease term, the company can choose to buy the equipment back, renew the lease, or return it to the lender. This allows businesses to free up working capital for other initiatives, fund expansion, or cover emergency expenses. The process typically takes weeks to months to complete, depending on the size and value of the equipment.
Requirements
Many business owners assume a narrow range of equipment qualifies for sale leaseback arrangements. However, today’s financing marketplace accepts a broader array of equipment and specialized vehicles than most people realize. The equipment monetization market looks at full equipment histories and projected usage rather than just asset role to determine the best fit for the business.
An experienced equipment finance firm can make the process for obtaining sale leaseback funding as straightforward as possible. When no other liens are present, the process can often be completed in as little as three weeks.
For example, a biotech company that needs to raise capital and enhance financial flexibility could monetize existing lab equipment in the form of an equipment sale leaseback. This enables the company to unlock capital and eliminate burdensome bank debt while maintaining access to critical lab equipment for continued operations. At the end of the lease term, the company can either buy back the equipment, renew the lease, or return it to the financing firm.