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Business Equipment Leaseback Loans

Guest post by: Zeeman Haus

Article Overview: These are the devil to explain sometimes, but since I love trying to simplify odd concepts, this should be fun. Business equipment leaseback loans are a definite “creative fund raising” option and not recommended for the everyday individual. Indeed, these loans can get a bit complicated and a lot of research is needed before embarking on one. Generally how business equipment leaseback loans work is that the borrower’s equipment is acquired by a vendor with a bill-of-sale, and then the borrower then leases it back. The borrower is paid cash/yield for their equipment by the lender. The transaction is structured as an equipment lease. Multiple subsequent consecutive leases may be available if the transaction qualifies. It depends on the strength and weakness of the applicant, company, and the amount and value of the equipment.

Business Equipment Leaseback Loans



These are the devil to explain sometimes, but since I love trying to simplify odd concepts, this should be fun. Business equipment leaseback loans are a definite “creative fund raising” option and not recommended for the everyday individual. Indeed, these loans can get a bit complicated and a lot of research is needed before embarking on one.

Generally how business equipment leaseback loans work is that the borrower’s equipment is acquired by a vendor with a bill-of-sale, andthenthe borrower then leases it back. The borrower is paid cash/yield for their equipment by the lender. The transaction is structured as an equipment lease. Multiple subsequent consecutive leases may be available if the transaction qualifies. It depends on the strength and weakness of the applicant, company, and the amount and value of the equipment. Your credit score factors in as well.

You would think that since you are providing equity that your credit score would not matter, unfortunately for some, it matters a lot. The lender does not want to spend a lot of time marketing and reselling the equipment that just purchased off the buyer and will no doubt have to look at that as a last ditch way to recoup any losses they might have incurred.

One of the downfalls of business equipment leaseback loans would definitely have to be the fact that the borrow most often will not get fair market value for their equipment in exchange for the loan/lease option. This is simply because the lender needs to assure that should they need to resale the equipment, they can do so in an efficient manner without losing their initial investment.

Often with these deals, the borrower will have the opportunity to buy back the equipment at the end of the lease as opposed to renewing the lease at the end of the contracted time allotment. Depending on the deal that was struck, the borrower could be looking at the same price they were paid for the equipment up to fair market value of the equipment. Depending on the type and value of the equipment, the borrower may opt to buy new equipment altogether. This is an option, but probably not a good one as this doesn’t exactly endear one to the lender who now has to resell the equipment. Either way, at the end of the lease the borrower is free to do what they want, as is the lender.

Business equipment leaseback loans are a great way to generate some cash in a quick way and though they still require a decent credit rating, the requirements are not as stringent as they would be for a signature loan or bank loan with equity. In this way business equipment leaseback loans are a viable option to a cash flow issue any business might be facing. The downside is that you no longer own the equipment and your quarterly or month to month overhead just went up a little. Even for a business with a plan, this option is riskier than some, but it is an option, and if played out right, a good one that could benefit both the lender and the borrower.

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Article Tags: applicant company, borrowers, business equipment, creative fund, leaseback, loans
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