Your capital is your best friend when you’re a business owner, but even so, circumstances can get a little bit tough when business slows down and your cash flow dwindles. There are nearly unlimited ways to get a little extra cash for your business if you find yourself in need of short term support, but one of the best options you should consider is leaseback financing.
How it Works
If you’ve never looked into the option before, this capital-earning strategy might be a mystery to you. However, it’s a pretty simple arrangement. If you find yourself in need of cash, you can contact your lending company or bank about leaseback financing. In this arrangement, you’ll use assets you already own as collateral for a short-term loan, which will then be repaid according to set terms. Generally, you can expect to borrow up to half of the actual value of the equipment or assets you’re pledging, though this depends greatly on your credit at the time the deal is made. Repayments are also based around your credit score.
What Assets are Eligible?
The main requirement that the asset you’re looking to pledge must meet is value. The asset in question should be a large, valuable piece such as a truck or even a piece of real estate. While it’s possible to pledge an assortment of smaller tools and items that add up to a significant amount, it’s not advised to take this approach, as it’s harder to gain approval from the lender in question. Choosing an item with a ready market like construction vehicles and equipment is always advisable as well. As a rule of thumb, anything that can be repossessed can be used as collateral throughout this process.
The Benefits
These types of loans are simple to apply for and as long as you have the equipment or property to pledge as collateral, there’s a good chance that you’re going to get the money you’re asking for. This means that if you have limited funds or bad credit, there’s still a way for you to improve your cash flow for the time being. These arrangements tend to have lower repayment amounts and longer terms than traditional loans as well since banks have your collateral on hand to ensure you’ll be paying when your money’s due. Depending on how your arrangement is made, this loan can also be written off when tax time rolls around.
If you’re looking for a little cash to help your business through a tight spot, it may be time to speak to a professional about leaseback financing today.