Sale Leaseback and Equipment Refinancing Amounts Available...
- $50,000 to $5,000,000
Various Equipment Types Considered From The Following Industries ...
There Are Primarily 3 Situations Where There Could be a Need For Sale Leaseback or Equipment Refinancing
The First and most common is refinancing a piece of equipment that was recently purchased for cash and is now being refinanced into a longer term loan or lease. For most lenders, this type of refinancing request is very common and as long as it happens within 6 months of purchase, it’s treated like an original purchase financing transaction most of the time.
Lenders will typically refinance most types of equipment that are purchased within 6 months of the refinancing request.
However, when the time since purchase exceeds 6 months, then the request falls into the category of refinancing existing equipment which is owned or leased. In both cases, the goal of recouping the cash for the business is the same.
But as time goes by, lenders start to view the purchased or leased item as used equipment, which can either completely eliminate the lender’s interest in the equipment item, or provide more stringent assessment criteria, which can lead to lower financing amounts and higher costs.
Increase Working Capital For Operating Or Debt Reduction
The second situation for equipment refinancing is to generate additional capital for the business on one or more pieces of equipment, that have been owned for one year or more. This can be for working capital, debt reduction, and capital re-investment in other assets. Most lenders will not consider these types of requests, and the few that do will typically be conservative with the financing amount and offer financing at higher rates.
When refinancing is requested to inject working capital into the business, the business is typically short of cash and in some amount of distress, or its in an expansion mode and is requires incremental working capital to expand sales and profits. Businesses that are under stress will typically be able to secure less leverage and higher rates than stable businesses planning for growth.
For equipment refinancing for cash flow or working capital purposes, the main equipment categories that are most often considered for equipment refinancing are construction, manufacturing, and some transportation, including items such as specialty trucks. All refinanced equipment must be in good condition and have a remaining useful life that far exceeds any proposed loan or lease term.
For a lease facility, the process is called Sale Leaseback whereby the business seeking equipment refinancing will sell their equipment to the finance company who in term will provide back an exclusive use lease agreement for the equipment being purchased. At the end of the lease term, the equipment related debt is typically paid in full, and the ownership of the equipment is returned to the business.
Equipment refinancing is much more challenging to secure because of the challenges lenders can have accurately assessing the condition of the equipment, the estimated remaining useful life, determining lien free status, and the businesses ability to repay the proposed debt in a timely fashion.
Using Equity In Equipment To Secure Additional Equipment
The third situation is when a business is looking to acquire equipment and wants to pledge equity in the equipment it owns or leases for additional security to reduce the down payment requirements for the acquisition. This can be an excellent strategy to reduce, and in many cases, completely eliminate the down payment requirement of the lender or leasing company.
Benefits of Working With an Equipment Sale Leaseback
And Refinancing Specialist
Its pretty safe to say that over 90% of lenders will not even consider equipment refinancing requests for equipment owned or leased for more than 6 months. The remaining group that will do these deals are typically very specific in terms of equipment they will look at, and the terms they will provide.
Lenders may also want you to pay for third party appraisals and require up to date accountant prepared financial statements before they will even fully consider an equipment refinancing request.
Needless to say, it can be difficult to find an equipment refinancing solution that is acceptable to you, in the time you need to secure it.
For equipment refinancing requests on equipment items that have been owned or leased for more than 6 months, it can be highly beneficial to first talk to a business financing specialist that can quickly assess your equipment refinancing options before you spend too much time and money searching for this on your own.
Months of time, and considerable amounts of money can be wasted on this process if you’re not focused in on lenders that can actually provide funding to you, and for rates and terms that you’re prepared to accept.