Asset Based Loan

Leaseback – Remarketing Equipment

In a leaseback transaction, in the event of a default by a customer, the degree of difficulty in re-marketing the equipment depends upon several factors.

The secondary market of the leaseback is a factor.   As previously mentioned, construction equipment and vehicles, most specifically tractors, will often have amongst the largest secondary market.
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The wholesale value of the equipment.    Construction equipment and vehicles will as well have the highest wholesale value, or liquidation value of most types of equipment.

The transportability of the equipment.    In this aspect,  heavier equipment, though often more valuable, will be much more costly to transport simply due to it’s size and weight.

The location of equipment is another factor.    The farther away, or more remote the equipment is to the wholesale venue, the more costly it will be to transport.

Is the equipment affixed to the property?   The more affixed the equipment is to the property,  the less likely it will be picked up, transported, and liquidated.  In some cases, the lender will simply take a write off on the transaction as it will not be worth the effort and expense.

The number of pieces of equipment.   If the collateral that comprises a leaseback is made up of 10 or 20 items, keeping track of, and the ensuing record keeping, such as Model #’s, Serial #’s, will be more labor and time intensive.

Is the collateral in more than 1 location?    If the collateral in the leaseback is in more than 1 location,  or even several locations, this will create significantly higher expenses when the equipment is picked up.

Is the collateral on another business’s premises, & will it require a landlord waiver to remove it?   This can be major issue, especially in businesses such as vending.    In this example, if a large vending company has 100 vending machines located in the school cafeterias, bowling alleys, and libraries of a city of a large city, they cannot just go onto these premises and pick up the machines.   They will have to receive permission to do so by the landlord or administration.   This can be a very time consuming and bureaucratic process.