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Asset Based Loan

Leaseback – Why Equipment types are not mixed

On a leaseback, different equipment types cannot be mixed together for several reasons.

If the equipment is of the same type, in the event of a default, the equipment can typically be marketed through one industry venue, rather than through two or three very different industry venues and locations, avoiding a significant expense.
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Different types of leaseback equipment will also have different secondary and wholesale markets, some of which will be more robust than others.    Some types of equipment will be harder to  liquidate due simply being a higher dollar amounts.

Another factor that causes difficulty in selling equipment is if the equipment is fixed on the building.   Examples such as this are large warehouse cranes that are fixed onto the property.   Regardless if the equipment was new or if it was a leaseback at the outset,  it may be cost prohibitive to remove, transport, and re-sell such equipment.

For these reasons, it is common practice in a leaseback to use equipment of the same type.

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