What is a Lease Buyback?

If you want to invest in your business so that you can expand quickly, buy new equipment and more, it’s important that you understand how useful the lease buyback system can be. Since you already have so much property and equipment on hand, why not take advantage of it and use it to get immediate, liquid finances?

Essentially, you sell your equipment to a leasing company and then immediately lease it from them. This gives you almost the entire value of your equipment in cash, which you can use to invest in even more equipment or anything that you need to help your business grow.

Aside from just being practical and easy, this form of financing has other, hidden advantages. First, it subtly preserves your existing capital. Although you’re technically selling your equipment, because you still have the rights to use it, you’re not really losing anything for this quick and handy cash infusion. Another benefit of lease buyback is that it gives you additional tax savings. Since in most instances you can treat lease payments as business expenses, you can then write those off of your taxes each year. Although you can typically deduct depreciation and maintenance costs, lease payments tend to be greater, so you’re making and saving more money with this method than if you were to just hold on to your equipment and not sell it to a leasing company.

A huge benefit to this special form of financing is that you are no longer responsible for the maintenance of your equipment. Leasing companies are always responsible for upkeep costs, and if you’re lucky, they’ll even upgrade your equipment to the most current model when your lease is up for renewal. In this case, you are saving even more money by choosing lease buyback for quick financing.

Finally, using lease buyback to turn your static equipment into liquid funding helps improve your business’ balance sheet. When you sell your equipment, you move it from fixed assets to current liabilities, which increases your business’ ratio of current assets to current liabilities. This is a solid indicator of your business’ ability to deal with short term debt, and can help you apply for credit or loans in the future.

With so many benefits to this creative form of financing, there’s nothing to lose. Let your equipment do even more work for you by not giving it up entirely but turning it into fast, liquid cash so that you can invest in capital for growth.