Using a Lease Buyback to Finance Your Equipment
If you need to buy some new equipment for your business but don’t have the extra money saved, there’s an easy way to use your existing equipment to pay for your new equipment. This method is typically referred to as lease buyback, and you simply sell some of your current equipment to a lender, lease it back from them and use the extra money that have to buy new equipment. In addition to having the fantastic benefit of getting you new equipment very quickly, there are extra capital or financial benefits that you can enjoy. Unless you are worried that you won’t be able to afford to lease your existing equipment, use this technique to give your business a much needed boost.
One of the first benefits that you get when buying new equipment through lease buyback is that you don’t have to put down a hefty down payment before you start leasing your equipment. If you were to try to get a more traditional loan through a bank or other lending institution, they would typically require you to make a large down payment before you can get the loan, and most of the time if you’re considering leasing your equipment, you don’t have the money that would be required of you by banks for their down payments.
Since the leasing company will gain ownership of your vehicles, that means that you’re not responsible for repairing and maintaining them. This is a huge benefit, especially for young small businesses, since maintenance and repair on expensive equipment typically makes up a huge portion of their expenditures. Even if something breaks or fails, the leasing company will be responsible for any repairs.
Also, although you don’t actually own the equipment you give to the lease buyback company, you might be able to enjoy a free upgrade in the future. Most big leasing companies upgrade their equipment on a regular basis, so although you don’t own the equipment, you get easy access to the newest and most effective equipment.
The last major benefit to choosing lease buyback instead of other typical loan methods is that opening a line of credit can be risky, especially for a smaller, younger business. Leasing doesn’t effect your credit report, and you typically put up far less of your business as collateral when leasing than when getting a loan or line of credit from a bank. Depending on how small your business is, you might have to put all of it up for collateral for a line of credit, but if you lease, only the equipment you sell is held as collateral.