Sale-Leaseback Equipment Loans
Sale-Leaseback equipment loans are a perfect way to infuse any business with cash leaving the line of credit for other needs as well as preserving the cash position. It is simple, a business in about any industry has a cash crunch, and they have $500,000 in equipment owned free and clear by the business. We would simply value the equipment, write a check to the owner and then lease or rent the equipment back to them for a 1,2 or 3-year term. Simple nothing changes in the business from an operational standpoint other than the influx of capital can change the trajectory of a business or allow them to take advantage of a growth opportunity.
Examples of Equipment Sale-leaseback arrangements:
Business Opportunity to Buy a Competitor:
A large food processing plant has an opportunity to acquire a smaller competitor that is closing their doors. They would love to make an offer but cash flow is tight, the company line of credit is not sufficient for this purpose so a short-term lease on $1M of their existing pieces of equipment gets them the liquidity to buy the competing business at 20 cents on the dollar and take over their customers and all assets, some of which they will be able to refurbish and use.
Manufacturing Contract Requiring an Upfront capital Expense:
A small manufacturing operation specializes in producing a product for the construction industry. A large order is received from a major home improvement retailer that is beyond the current production capabilities. The cash in the company needs to be preserved in order to hire and train new staff to meet the production needs. They have over $5,000,000 in current production related equipment and need approximately $650,000 to buy the additional equipment to add a 3rd shift for production. A sale-leaseback of a portion of the equipment turned out to be the perfect solution, transaction off the company books, balance sheet remained creditworthy which was a requirement of the large contract and nothing changed for a 2-year period other than we owned the equipment and rented it back to them for a short period.
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