When a business is considering a leaseback, what percent of the value of the computer equipment will the loan typically be for?
In a leaseback transaction, the owner of equipment sells the asset for cash and leases it back, obtaining working capital. When the transaction involves computer equipment, the percentage obtained against the asset will typically be lower than for other equipment. The percentage will vary depending upon other factors such as time in business, business credit, personal credit and the amount of the request.
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The percentage loaned against the asset in a leaseback will range from 20% to 80%. Computer equipment depreciates in value very quickly. After only 1 year, the equipment may often be worth only 75% of the original value, sometimes less. This is a significant drop.
While the technology is almost always important in a leaseback, the technology needs of other types of equipment will usually not be as great. This includes restaurant equipment, construction equipment, machinery, and vehicles.
The quick drop in value has consequences that do not happen as severely with other types of assets in a leaseback. Because the value drops so much so quickly, if any party is forced to sell the equipment after 1 or 2 years, the market for selling this equipment becomes difficult because the technology updates so rapidly.
Since technology requirements are such a significant part of the reason updated computer equipment is purchased, buyers of computer equipment, especially businesses, may not be motivated by the price difference. A higher priority for businesses will often be the technology that allows their business to function as efficiently as possible. Businesses need to offer their customers the best service. Businesses also need to be up to date against their competition and preferably, have an advantage over their competition.
Due to this, in a leaseback loan transaction, they will likely be offered a low percentage against this type of equipment due to the difficulty and lower return in the event the equipment has to be sold.
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