Understanding an Equipment Sale-Leaseback Transaction

In the fast-paced world of business finance, agility is key to staying ahead. One financial strategy gaining traction is the equipment sale-leaseback, a creative solution that transforms idle assets into liquidity without disrupting operations.

What is an Equipment Sale-Leaseback?

An equipment sale-leaseback is a transaction where a company sells its equipment to a buyer and then leases it back. This seemingly simple transaction allows businesses to access cash locked in their existing assets without sacrificing the use of that equipment. It’s a practical choice for companies needing immediate capital to fuel growth, manage debts, or stabilize cash flow.

In a sale-leaseback, the equipment doesn’t leave your premises—it remains on-site, serving your business as it always has. The transaction’s essence lies in ownership transfer, not physical relocation. This arrangement enables companies to maintain operational continuity while gaining liquid assets. For many, it’s a lifeline, particularly when traditional financing options are costly or inaccessible.

How Does a Sale-Leaseback Transaction Work?

At its core, a sale-leaseback transaction involves three key steps.

• First, the company identifies its eligible equipment and finds a willing buyer—often a commercial financing company. The buyer assesses the equipment’s value, focusing on its market and liquidation potential. Once both parties agree on a price, the sale is completed, transferring ownership to the buyer.
• Next, the former owner, now the lessee, enters into a lease agreement with the buyer. This document specifies the lease term, payment schedule, and conditions for equipment use. The company continues to operate the equipment as usual, while making regular lease payments. This arrangement provides much-needed liquidity without operational disruptions.
• Finally, at the lease’s end, the company can opt to renew the lease, purchase the equipment back, or return it to the finance company. Each option has its merits, offering businesses the flexibility to respond to changing circumstances. A successful sale-leaseback hinges on clear, mutually beneficial terms that align with the company’s financial goals and operational needs.

3 Benefits of Equipment Sale-Leasebacks

1. Immediate Cash Injection

A key benefit of an equipment sale-leaseback is the ability to quickly convert non-liquid assets into working capital. By selling equipment, companies can fund initiatives like expansion, reduce debt, or cover emergency expenses. This boosts financial flexibility, enabling companies to seize new opportunities or navigate tough times.

2. Continued Use of Essential Equipment

Companies retain access to critical equipment without disruption. There’s no need to purchase new machinery, avoiding downtime or operational delays. This ensures business continuity while leveraging the financial advantages of the sale-leaseback, particularly for firms with custom or specialized equipment that is vital to daily operations.

 3. Improved Balance Sheet and Debt Reduction

Sale-leasebacks can strengthen a company’s balance sheet by lowering debt service obligations. The cash influx allows businesses to pay off high-interest loans, enhancing financial health and creditworthiness. This restructuring can also optimize a company’s capital structure, making it more appealing to investors and lenders.

When is a Sale-Leaseback Right for Your Business?

A sale-leaseback is particularly useful when a business needs cash but faces high borrowing costs or limited access to traditional loans. Companies with valuable equipment assets can tap into their inherent worth, unlocking capital that might otherwise remain dormant. This strategy is also advantageous when optimizing capital structure is a priority, providing a pathway to reallocate resources more strategically.

Businesses experiencing growth spurts or seasonal fluctuations may also benefit from sale-leasebacks. The additional liquidity can help manage increased demand, invest in new projects, or cover temporary cash shortfalls. Before proceeding, it’s crucial to assess your company’s financial landscape, ensuring that the transaction aligns with your broader business objectives.

How 36^th Street Capital Can Support Your Business

36^th Street Capital is dedicated to providing tailored equipment financing solutions that empower businesses to thrive. Our expertise spans both non-investment and investment-grade middle-market companies, ensuring diverse and adaptable support for your unique needs.

By prioritizing an understanding of your company’s goals, we craft financing solutions that align with them, whether you’re looking to finance new equipment or monetize existing assets. With a wide array of financing products and a team of specialists, we are ready to support your business’s growth and financial health. Partner with us to unlock the potential of your equipment assets and pave the way for long-term success.

Your Equipment Financing Partner: How 36th Street Capital Supports Your Business

When it comes to securing the necessary funds for mission-critical equipment, having a trustworthy equipment financing partner in your corner is essential. 36th Street Capital stands as a leader in the field, offering middle-market companies across the credit spectrum the capital solutions they need to thrive. With a focus on speed, reliability, and integrity, we’ve earned our place as the preferred non-bank lender in equipment financing. Let’s explore how we can support your business and deliver unparalleled service.

1. Gold Standard in Equipment Financing

36th Street Capital is not just any financing partner; we set the gold standard in the industry. As one of the first alternatives to traditional banks, we have pioneered best practices that have since become benchmarks in equipment financing. Our dedication to excellence keeps us at the forefront, ensuring that our clients receive top-tier service and solutions.

2. Streamlined Process for Quick Approvals

One of the standout features of 36th Street Capital is our streamlined process. We understand that time is of the essence for businesses. Our efficient and straightforward procedures ensure quick approvals and funding. This means you can acquire the equipment you need without the delays often associated with traditional financing methods.

3. Relationship-Focused Approach

At 36th Street Capital, we believe that business is built on relationships. We prioritize building long-term partnerships with our clients, understanding that your success is intrinsically linked to ours. Our team is committed to helping you achieve your business goals, providing ongoing support and tailored solutions.

4. Reliable Execution

Timing is critical in the world of business finance. Our timely credit decisions and customer-friendly closing process guarantee that you get the capital you need when you need it. We work diligently to provide certainty of closing and funding, offering peace of mind throughout the equipment financing process.

5. Ease of Doing Business

Transparency and efficiency are at the heart of our operations. We aim to make the financing process as seamless and hassle-free as possible. From the initial application to the final funding, our dedicated team is there to ensure a smooth experience, minimizing any potential obstacles.

Partner with 36th Street Capital for Equipment Financing

Ready to take the next step? Discover how 36th Street Capital’s equipment financing options can help your business achieve its goals by contacting us today.

How to Maximize Liquidity with Equipment Financing: A Step-by-Step Guide 

In today’s competitive business landscape, maintaining adequate liquidity is crucial for the sustainability and growth of your company. One effective strategy to achieve this is by leveraging equipment financing. Whether you need to finance new equipment or monetize your existing assets, understanding how to maximize liquidity with equipment financing can help you optimize cash flow, reduce risk, and free up capital for other critical investments.

Understanding Liquidity and Its Importance

Liquidity refers to the ease with which your business can meet its short-term obligations without raising external capital. It’s a key indicator of your company’s financial health and resilience. High liquidity allows you to seize opportunities quickly, manage unforeseen expenses, and maintain operational efficiency. However, acquiring new equipment or upgrading existing assets can strain your cash reserves, which is where equipment financing comes in.

What is Equipment Financing?

Equipment financing involves borrowing funds to purchase or lease equipment for your business. Instead of paying the full cost upfront, you make regular payments over time, which helps preserve your working capital. This type of financing is particularly beneficial for businesses that rely heavily on expensive machinery, technology, or vehicles to operate.

Step-by-Step Guide to Maximizing Liquidity with Equipment Financing

1. Assess Your Equipment Needs

Start by evaluating the equipment that is essential for your business operations. Determine whether purchasing, leasing, or upgrading existing equipment will provide the most value. This assessment should align with your long-term business goals and cash flow projections.

2. Understand the Different Financing Options

There are several equipment financing options available, including loans, leases, and sale-leasebacks. Each option has its own advantages and impact on liquidity:

• Full Payout Lease: Borrowing funds to own the equipment outright, with the equipment serving as collateral.
• Fair Market Value Leases: Renting equipment for a specified period, offering lower monthly payments and the flexibility to upgrade equipment at the end of the lease term.
• Sale-Leasebacks: Selling your existing equipment to a financing company and leasing it back, which frees up capital while retaining access to the equipment.

3. Calculate the Cost of Financing

Consider the total cost of financing, including payments, fees, and potential tax benefits. Compare these costs with the projected revenue the new equipment will generate to ensure that the financing option will enhance your liquidity rather than diminish it.

4. Choose the Right Financing Partner

Selecting a reliable and experienced financing partner is crucial to maximizing liquidity. Look for a partner who understands your industry and can offer flexible terms tailored to your specific needs. A partner like 36^th Street Capital, known for our expertise in providing customized financing solutions, can be instrumental in this process.

Maximize Liquidity with 36^th Street Capital

Maximizing liquidity with equipment financing is a strategic approach that can enhance your business’s financial flexibility and operational efficiency. By assessing your equipment needs, understanding your financing options, and partnering with a trusted provider like 36th Street Capital, you can ensure that your business remains agile and ready to capitalize on growth opportunities.

At 36th Street Capital, our experienced team of equipment finance professionals is committed to helping middle-market companies navigate the complexities of financing across the entire credit spectrum. We understand that each business is unique, which is why we take a personalized approach to develop financing solutions that align with your specific goals. By taking the time to understand your needs, we ensure that our solutions not only meet your immediate requirements but also support your long-term growth strategy.

If you’re ready to explore how equipment financing can benefit your business, contact 36th Street Capital today. We’re here to help you unlock the full potential of your business with the right financing solutions.

Why Certainty of Execution in Equipment Financing is Vital

In today’s competitive business environment, the ability to secure financing for essential equipment can make or break a company’s growth trajectory. Instead of using capital reserves, companies can finance equipment purchases, which frees up cash flow and allows businesses to invest in other areas. Equally important is finding the right partner that will deliver on its commitments and offer certainty of execution.

There are various types of equipment financing, including loans, leases, and lines of credit. With over 150+ years of combined experience, 36th Street Capital can partner with you and explain each type of financing to help determine which option best fits your needs. We work with both non-investment and investment-grade companies and hold our reputation for reliability and integrity in high regard. Too often, lenders promise one thing at the start and then fail to deliver. At 36th Street Capital, we take the time to understand your needs upfront and work to make sure we have alignment so we can deliver on our promises. We differentiate ourselves by providing consistency and transparency from proposal through funding. Our timely credit decisions and efficient documentation and funding processes provide for certainty of execution and delivery throughout the financing process.

If you’d like to explore 36th Street Capital’s equipment financing options as it relates to your business, contact us today!