Equipment loans are borrowings undertaken to buy a specific piece of equipment. Equipment loans are among the most cost-effective financing vehicles. One potential downside is the amount the company must front since most equipment financing lenders will require the company to provide a down payment at around 20%.
Non-conventional real estate lenders, sometimes known as hard money lenders, will advance against certain types of real estate, but the difference with these lenders is that they look at the valuation differently. While we are all familiar with the “market value” of a property, that value assumes that there is a reasonable period to market and sell the property. Hard money lenders value the property based on what it will sell for in a short period of time; maybe as short as three (3) to six (6) months and they subsequently only advance 50% to 60% of that valuation. If the loan cannot be repaid, a quick foreclosure and sale follows to recover the loan. For certain situations where a borrower is asset rich but cash poor, it fills a gap.
Equipment and Real Estate FinancingEquipment financing is the use of a loan or lease to obtain hard assets such as production machinery, rolling stock, or computer and office equipment
Sales leaseback or sales and leaseback is another option as possible way to generate capital. This type of transaction is where the business or its shareholder is the owner of the real estate property where the business operates and owner sells the real estate to a buyer, and the business simultaneously enters into a long-term lease arrangement with the new owner.