How Construction Companies Use Sale Leaseback Financing

For construction companies, having access to working capital is a necessity. Working capital helps construction companies purchase materials, make payroll, and keep projects moving forward. However, every once in a while situations arise where the need for extra short-term capital is crucial to overcome cash flow issues, get projects back on track, or to take advantage of growth opportunities. In these cases, construction companies turn to sale leaseback financing.

Short-Term Financing

Sale leaseback financing provides short-term capital by unlocking the equity value of equipment owned by a construction company. The equipment is assessed for make, model, age, wear, and purpose, and financing is structured around those metrics. The equipment is then sold to the lender in exchange for capital, and leased back with manageable monthly installments over a period outlined in the agreement. What sets sale leaseback apart from other forms of financing is that construction companies are not fully divesting of their equipment. They still retain use of everything in order to complete jobs for their clients.

Why Construction Companies Use Leaseback Financing

Constructions companies use sale leaseback financing for a wide range of purposes. In the construction industry, revenue cycles are sometimes uneven, and an injection of short-term capital can smooth things out to ensure overhead costs are covered. Additionally, if there is an overrun or a sudden need for extra materials to keep a project on track, using leaseback financing can provide the funding necessary without the long delays of traditional lending channels. Sale leaseback financing can also be used for advertising or growth projects to tap into new markets, or anything else your construction company needs.

Tax Benefits for Construction Companies

Because sale leaseback financing has a leasing component, there are tax benefits offered to construction companies that utilize this program. Leasing payments can be listed as deductions when filing taxes. As of this writing, deductions on leased equipment have a cap of around $500,000 but this is subject to change over the next few years. Construction company owners should consult with their accountants or tax professionals to get the latest information and deduction guidelines.

Growth Lending Group offers sale leaseback financing, as well as a wide range of working capital solutions for construction companies. Contact our offices today to get started.

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