Using Leaseback Financing For Short Term Capital

In your business, there may be moments that you need capital quickly for a short term, such as to pay for supplies or to pay employees. There are a number of things you can do in this situation, one of which is using leaseback financing. Here is some more information on this type of financing and how you can use it for your business.


You may be wondering what leaseback is and how it works. It is a method of turning your owned equipment into short-term capital instead of taking out bank loans. You are provided with the capital based on a number of factors, such as how new the equipment is, the condition of the equipment and how unique the equipment is. Obviously, you will get more capital if your equipment is newer, in better condition and more unique.


One thing to consider is that this option is not free of debt. It requires “selling” equipment to your finance company and then leasing it back through monthly installments. This gives you the ability to continue using your equipment even though you technically sold it to someone else. However, on paper there is no debt, so it preserves your business’s credit ratings.


The payments for your lease are also calculated using a number of factors. This is the type of equipment, the amount borrowed and your business’s credit score. As usual, the lower your credit ratings the higher your monthly installments will be. However, with this type of financing, the arrangements usually favor the business owner.


One of the benefits of using leaseback financing is the effect it has on taxes. All leased equipment can be used for tax deductions, up to a maximum of $500,000, according to the IRS. This can help you get an annual return in addition to the capital earned by the financing.


It is important to find the right kind of lender to create a partnership with this kind of financing. You want to choose a lender that has your best interests at heart as well as their own, and you want to make sure your lender is familiar with how this type of financing works and what kind of equipment you are using.


If you think that leaseback financing is the right option for your business but aren’t sure where to start, you can contact your financial advisor for more information and for assistance finding the right kind of lender to work with you. Don’t hesitate to look into it today.




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