What is an Equipment Sale Leaseback and How Does it work?
Equipment sale and leaseback refers to a funding transaction that involves a business selling its machinery and equipment to a financing firm (Lessor) without any interruption of business operations, the business (who initially owned the equipment) leases (rents) back the equipment from the new owner for an agreed duration. The business (lessee) will continue its normal daily operations with equipment without any interruption as a lessee and not as the owner.
The Equipment sale leaseback offers businesses that wish to increase their working capital, increase liquidity, and boost their financial statement position, an advantageous option. For businesses seeking a flexible platform to restructure their financial profile, taking advantage of your current asset's equity is a way to obtain capital for expansion or restructuring
Sales leaseback funding steps:
- A Business owner sells his equipment to a finance firm, named The Lessor.
- He (the Lessor), in turn, offers to lease the same equipment to you the Lessee, at an agreed periodic payment (Rent). The agreed percentage payment will be based on an initial assessment of the business credit, finance and collateral.
- The deal is closed, ownership is transferred to the Lessor, but the lessee still maintains possession of the assets for his business operations, but at a periodic rental fee
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