When businesses need short-term working capital and traditional loans are not in the picture, they often take advantage of leaseback financing. Leaseback financing helps business owners get the capital they need along with tax benefits and other benefits without placing unnecessary debt on the books.
How Leaseback Financing Works
Leaseback financing is a very unique funding solution designed for business owners who need short-term working capital but want to sidestep the high requirements and debt that come with traditional loans. Leaseback financing is available to businesses that own their equipment. The equipment is “sold” for short-term working capital. Businesses still retain the use of their equipment and simply “lease” it back from their financing partner until the balance is repaid. Businesses across all industries from retail stores to construction companies, manufacturing facilities, trucking fleets, medical practices, and more use leaseback financing. Leaseback agreements have longer terms and lower rates, so the financial agreement does not place a strain on cash flow. Payments are manageable, and leaseback financing offers a much more amenable alternative to traditional short-term loans. In layman’s terms, the equipment serves as collateral, and its equity value is the basis for the financing.
How Is Leaseback Financing Used?
Leaseback financing is discretionary financing, meaning it can be used for whatever the business might need. Some businesses use leaseback financing to smooth out uneven revenue cycles. Others use leaseback financing to take advantage of lucrative business opportunities with time-sensitive windows. Leaseback financing is not uncommon and saves businesses from loans that would otherwise take a long time to process and place debt on the books.
Unlocking the Equity Value of Your Equipment
Leaseback financing unlocks the equity value of owned equipment so business owners access cash from their assets. Equipment is evaluated based on its age, condition, specialized purpose, and other factors. Financial organizations that offer asset-based lending programs, such as leaseback financing, typically perform a much deeper analysis of equipment than traditional lending programs to provide businesses with the highest value possible.
When businesses sell their equipment and then lease it back from a financial partner, those assets are considered contingent liabilities for the term of the agreement. The monthly payments are tax-deductible under Section 179 of the IRS Tax Code. This frees up operational costs for businesses and allows owners to recoup leasing expenses. Note: The ceiling on the amount that can be claimed by businesses is subject to change, so consult the latest guidelines or talk with your CPA before making deductions.
Easy to Qualify
Leaseback financing is easy to access. Startups, businesses with low or damaged credit, and organizations of all sizes can usually qualify for leaseback financing. Since the financing is structured around the value of owned equipment instead of business credit ratings, getting short-term capital is much easier and involves little paperwork.
Talk to the Experts
Web Finance Direct offers accessible and convenient leaseback financing to businesses of all shapes and sizes. If you need short-term capital but are worried about turndowns due to credit ratings, or if you want to avoid taking on additional debt at high interest rates, contact the experts at Web Finance Direct today.