Equipment Financing: Why You Should Consider a Lease Buyback
In any business, there is value in more than just the cash that the business produces. The profit and earnings of the business are what keep it going, but there is also value in the assets of the business. Any equipment that the business has purchased to help it function and be efficient holds value. At times, a business may want to upgrade the assets it has or purchase more. Rather than using the cash the business has produced and risk the stability of the company, a lease buy back can be used for equipment financing instead.
What is a Lease Buyback?
When it comes time to expand or update a business, more equipment is often needed. To finance these purchases, a business owner can enter a lease buy back agreement instead of dipping into savings. A lease buy back is a form of equipment financing in which an owner sells a piece of equipment they already own to a leasing company and then lease the same piece that was just sold. This gives the business the necessary cash to purchase any new equipment that is needed.
How Does it Benefit the Business?
There are multiple benefits to doing a lease buy back. For one thing, if new equipment were to be purchased using a bank loan or financed through a retailer, a down payment would most likely be required. Without a lease buy back, the down payment funds would have to come from the savings of the business which could hurt the stability of the company.
Another benefit is that the equipment that is sold to the leasing company is no longer owned by the business. This means that any repairs the equipment might need are now the responsibility of the leasing company and not the business. This saves the business money on both maintenance and repairs.
At the end of a leasing agreement, there may be an option to upgrade to a newer model. Instead of owning an outdated computer or vehicle, a lease agreement allows a business to use newer models without having to purchase them.
Using the assets that are already available to a business can help it avoid using savings for a down payment, having to take out a bank loan or open a new line of credit. Lease buy back as a form of equipment financing can allow business to stay profitable while still getting the new equipment that is needed to be successful.