Equipment Sale Leaseback Financing is a funding option for life sciences companies that leverages the value of your lab assets to provide you with a capital infusion without increasing your line of credit. The equipment is sold to a financing firm (the Lessor) who then leases it back for a fixed term.

Obtaining Working Capital

In many cases, leveraging your existing equipment to turn it into liquid cash is a valuable working capital solution. This is especially true for life sciences and biotech companies whose expensive analytical instrumentation remains a keystone of their business model.

The process starts with a comprehensive appraisal of the equipment to establish its fair market value, followed by negotiating and finalizing a financing structure with your lessor. Once the transaction is complete, you immediately receive a lump sum of capital to meet your funding needs and retain the asset for use in your operations.

Lease terms are optimized to align with your equipment lifecycle and operating strategies, so you can keep the flexibility to buy back the equipment, renew it, or return it at the end of the lease term without operational disruptions. Working with a knowledgeable, independent leasing finance partner is key to crafting a sale leaseback arrangement that aligns with your strategic goals.

Leveraging Existing Assets

Companies seeking to unlock the value in equipment with minimal resale or auction value can benefit from sale leaseback financing. The process is typically simpler, and faster, than traditional loan application processes. It can be a great way to access working capital to support a growth spurt, manage seasonal fluctuations, and more. However, it is critical that businesses carefully evaluate their current financial landscape and long-term goals prior to pursuing this type of financing.

A qualified financing partner will conduct an appraisal to determine the equipment’s fair market value, then work with a business to finalize a leasing structure, tenor and interest rate. By doing this, companies can transform “dead equity” tied up in depreciating assets into cash while continuing to use the equipment that is vital for their operations. A key advantage is that the transaction can be completed more quickly than a traditional loan, even for those with less-than-perfect credit or startups. Lease payments may also be tax deductible in some jurisdictions.

Boosting Cash Flow

Sale leaseback financing enables you to tap into the value of equipment you already own. In a sale-leaseback, a financing company buys your equipment for its fair market value and then leases it back to you for a 1,2, or 3-year term. This provides a rapid cash infusion without changing operations. You can continue to use the equipment you need, preserve credit lines, and potentially reap tax benefits such as depreciation sidestepping.

When you work with a reputable equipment finance partner, you can shape the terms of the sale-leaseback to your advantage, such as negotiating negotiated usage parameters compatible with forecast needs over the lease term and incorporating flexible options for payment adjustments when utilization changes materially up or down. Sale-leasebacks also help you manage working capital and liquidity constraints so you can invest in growth. When structured strategically, food equipment leaseback programs provide a critical boost to your operating and growth horizons.

Keeping Control

Whether it’s to fund a growth strategy, purchase another company, or get the equipment they need to do their work, sale leaseback financing can help companies keep control of their costs. These arrangements typically have lower payments and longer terms than most other ways a business can obtain capital. Moreover, the lease payments can be classified as operating costs rather than debt.

However, it’s important to carefully consider all the potential risks and pitfalls of an equipment sale leaseback before entering this type of agreement. Some of the key issues to evaluate include: equipment value, financial health, market conditions, future equipment needs, and tax implications. Also, it’s critical to seek professional advice and ensure lease terms align with the company’s overall business strategy. Another important consideration is ensuring that the company maintains and manages the equipment properly to preserve its value and lifespan. It’s also a good idea to plan ahead for the end of the lease term and decide if they want to buy the equipment back, renew the lease, or return it to the leasing company.