While proper equipment is necessary for every business to function, you may find that your business is heavy on equipment but light on operating capital. If your business has significant funds tied up in equipment, especially equipment that is unused or aging, a lease buyback is an efficient way to convert these depreciating assets into cash.
Companies can convert their physical assets into liquid assets by selling equipment to a leasing company for the value of the equipment. That same equipment can then be leased back to your company. This allows your business to continue to use necessary equipment while offering an immediate cash infusion.
As this is a sale, not a loan, the funds can be used as necessary, without the restrictions that can be associated with small business loans and the fees associated with alternative financing options like merchant cash advances and invoice factoring.
Using a lease buyback can help your business retain cash-on-hand while providing additional funds to cover operating expenses, unexpected financial obligations, and take advantage of growth opportunities that arise on short notice.
Lease buybacks also eliminate the costs of repairs and maintenance on your equipment. Once you have sold your equipment to the leasing company, the responsibility falls into their hands and are covered by your monthly lease payments. Your leasing company will also offer opportunities to lease upgraded equipment when the terms of your current lease expire. This can provide an excellent opportunity to update your equipment stock without the cost of purchasing new items.
Additionally, lease buybacks may provide tax savings. Lease payments can be written off as business expenses, which has a significant financial advantage over deducting maintenance expenses and depreciation.
For forward-thinking businesses with an eye towards growth, lease buyback agreements are an excellent opportunity to fund expansion goals, increase staffing levels, and modernize aging equipment. By taking advantage of these financing solutions, you can increase available opportunities while keeping your business stable, profitable, and flexible.