The 4 Most Important Points in Understanding Your Options in Equipment Financing

Equipment Term Loans vs. Purchase Leasebacks:

The 4 Most Important Points in Understanding Your Options in Equipment Financing

There are many financing options in the industrial marketplace and it's important to get a clear understanding of some of the benefits to financing equipment through equipment term loans versus a purchase leaseback. Understanding the differences in costs and legal structure between these two financing options is paramount.

1. Retention of Ownership - The major difference between them is ownership and who has the rights to depreciate the machinery. While both financing options allow for uninterrupted use of the machinery, only a term loan allows for retention of ownership of the assets by the borrower. With a term loan, because the borrower retains ownership, they also retain the right to the depreciation of the machinery over the duration of the financing.

2. P&L - With a term loan the interest portion of the repayment is expensed, whereas with a purchase leaseback the entire payment hits the P&L. 

3. New Acquisitions - Acquiring new assets or selling surplus is often easier within the legal terms of a term loan. Even when the ultimate goal is to unlock equity in order to purchase additional assets, the value of those additional assets can be included in the terms of the term loan from the start. Purchase leasebacks don't always have that level of flexibility.

4. Liquidation of Assets - While not always pleasant to discuss, the reality is that should a borrower fail to stay current, regardless of the type of financing, the equipment needs to be liquidated. With a term loan, any funds received above what the lender is owed, are either provided to the borrower or other secured lenders. With an equipment purchase leaseback, the lender receives all the funds from the liquidation.

Overall, while both may have their benefits, on paper, the fiscal health of a company in turnaround with a term loan may be looked upon more favorably by traditional lenders. 

For more information visit: www.loebtermsolutions.com.

Currently working with clients who have financing needs - even south of the border? Contact Jim Newman today at (773) 496-5720 or jimn@loebtermsolutions.com.

We finance all types of businesses because we know asset values! How can we help you provide the maximum funding amounts to your clients??

Learn More About Loeb Term Solutions ›

Loeb Term Solutions Provides a Term Loan on Equipment Valued at over $1.2 Million to a Northeastern Contract Packager

Loeb Term Solutions recently provided an equipment term loan to a Pennsylvania-based contract packaging facility specializing in private label and specially crafted fine foods. The client was in need of additional working capital in order to expand their operations and purchase additional machinery. Loeb Term Solutions provided a term loan on the equipment valued at over $1.2 Million.

For more information on equipment term loans from Loeb Term Solutions visit www.loebtermsolutions.com. 

Loeb Term Solutions Announces the Graduation to a Traditional Commercial Bank Loan of a Midwest Metalworking Borrower

Loeb Term Solutions is pleased to announce the graduation of a Midwest metalworking facility after having provided an equipment term loan back in 2014. The company, a manufacturer of compressor housings and custom components for turbochargers, emission systems, valves and transmissions, sought equipment financing to leverage working capital in order to purchase the company after the owner passed away suddenly. 

After less than two years working with LTS, the company has grown substantially and is now able to qualify for traditional financing with a commercial bank. 

Since 2010, Loeb Term Solutions has provided funding on over $200 million dollars’ worth of industrial machinery. The company’s asset-based lending division offers specialty financing for the industrial marketplace with funding amounts ranging from $300,000 to $20,000,000. 

Loeb Term Solutions is an affiliate of Loeb, a fifth generation provider of reliable equipment and related services to the industrial marketplace. For more information on equipment term loans from Loeb Term Solutions visit www.loebtermsolutions.com.