An equipment sale leaseback involves selling a business asset (equipment) for a monetary infusion. A new contract is then signed by which the seller leases back the equipment from the company that has purchased it. Throughout the lease period, the asset does not leave the seller's premises. Ownership over the asset is transferred to the seller on culmination of the lease term. Usually, almost all types of durable equipment (like IT equipment, copiers, machinery, telephone systems, cubicle stations, health club equipment and diagnostic equipment) are eligible for an equipment sale leaseback. However, beauty salon equipment and gaming equipment normally do not qualify for equipment sale leaseback transactions.

Here are some of the benefits of an equipment sale leaseback:

For businesses wishing to maintain their current bank credit line, it can help to reorganize troubled financials and fund growth.

No restrictions associated with how the cash is utilized.

Improves cash flow.

Offers distinctive tax or monetary benefits for businesses that haven't been able to use net operating loss with uses associated with federal income tax.

Does not appear on a company's balance sheet, therefore, enhances the company's overall credit position and debt-to-equity ratios.

Can also benefit businesses in an AMT (Alternative Minimum Tax) condition.

Several leases offer purchase options that can be put into effect at lease end. A purchase option allows you to utilize the asset now. You would have to make up your mind about whether you want to buy the asset only later.

It is evident that an equipment sale leaseback has many benefits. It is of utmost importance, though, that business proprietors always consult their Tax Attorney or CPA before making any tax related decisions founded on a sale lease-back transaction.

For more information, please contact Graphic Savings Group at 203.336.4034 or e-mail us at mail@graphicsavings.com.

Labels: equipment sale leaseback, equipment sale leaseback program, equipment-sale leaseback financing