What Is a Lease Buyback and How Can It Help Your Small Business?

Many small businesses rely on large, expensive pieces of equipment to operate. In particular, construction companies need some heavy machinery to get steady business, but those items can cost quite a bit upfront. A small business may not have the revenue flow yet to justify too many large purchases, but that is where a lease buyback comes into play.

What Is It?

This type of program essentially requires you to leverage the overall value of a piece of equipment you own. You sell this machinery to a leasing company, and then that company is going to lease the items directly back to you. This means that you are still allowed to use the equipment, but you have freed up some cash to use on other purchases. Whether you are interested in buying more machinery, a larger warehouse or anything else you want, this type of financing is an excellent way to go about doing that.

How Does It Benefit You?

There are numerous advantages to a lease buyback. First, it increases cash flow. A steady flow of cash is essential for any business so that it can make any necessary purchases as they arise. Ordinarily, a lot of money would be tied up in a single piece of equipment, and you could not do anything with it. However, with this program, you have cash and equipment. You are essentially eating your cake and having it, too.

Additionally, the leasing company normally takes on the responsibility of maintaining and repairing the machinery. If you own an item outright, then you have to repair it when it starts breaking down. However, since you are leasing the equipment, the company leasing it to you takes on that responsibility, so you can save additional money that way.

Another huge benefit to a lease buyback is that it helps you out when tax season comes around. When you own equipment, you can write off the initial purchase and then the depreciation value. However, when you are leasing items, you can write off your lease payments from one month to the next. You may want to talk with your accountant to see what extra tax benefits you can acquire.

A limited amount of cash coming into a business can be a real death knell for most organizations. You need your equipment, but you also need to have money readily available. You can get both of those by seeing what lease buyback opportunities are offered near you.


Leave a Reply