How to Turn Equipment to Cash
If you’re looking for capital to use for investments and upgrades for your business, consider selling and leasing your equipment. By giving up ownership and leasing business equipment for your own use again, you can save a lot of capital for other opportunities. Here are some top reasons to try turning equipment to cash with sale-leasebacks.
A sale-leaseback basically refers to the selling of purchased equipment at fair market value to a finance company, and then leasing it out for your use. Instead of a big initial investment in your equipment, you’ll pay fixed payments over a lease term.
Fixed payments on leasing agreements make equipment financing flexible and convenient. Payment plans are usually scheduled monthly so that you can better plan for your budget and manage other expenses and investment opportunities. Even though you’re selling your equipment to utilize the flexibility of fixed payments, you can still decide to purchase it back at the end of your lease. Another great advantage for equipment leasing is that unlike traditional financing, there is no required down payment.
Preservation of Credit Lines
It’s a good idea to have business lines of credit to use for future borrowing needs. You’ll want to be prepared for any business expenses or new opportunities that arise, even if you don’t need the extra capital now. Leasing business equipment allows you to use your available credit lines for other purposes, and not necessarily for financing equipment use. There is also no need in a leasing agreement to pledge personal assets or real estate as collateral.
One of the greatest advantages for startups and growing businesses is the tax benefit on lease payments. You’re already saving money by leasing because it costs more upfront to purchase equipment, but you should also know that your payments are considered a tax-deductible business operating expense. This means that you’re able to use your equipment while also saving money
Use of Equipment
After you’ve sold and leased out your equipment, you probably won’t notice much difference on a day-to-day basis. You’re still able to use the equipment you need even though you give up ownership. The idea is that your method of payment is more beneficial for building capital. At the end of the lease term, you do have the option to reclaim ownership if you wish.
It’s important to consider all of the benefits and variables specific to your financial situation. Leasing business equipment as a way to make and save capital could be the answer for your growing business.