You lease equipment to a business and collect every month. We price the remaining payments, take the lease to competing funders and show the rate and the recourse terms on every offer.
What goes wrong when one funder prices your lease.
The same worksheet comes with every offer.
| Monthly lease payment | $2,000 |
|---|---|
| Payments left | 36 |
| Total still to be paid | $72,000 |
| Buyer’s discount rate | 12.0% |
| Purchase price | $60,215 |
| Discount from total | 16.4% |
| Our fee | built into the price |
| Sell non-recourse | Sell with recourse | Keep the lease | |
|---|---|---|---|
| Cash today | $58,518 | $61,982 | $0 |
| Payments still coming to you | None | None | 36 payments of $2,000 |
| Total you receive | $58,518 | $61,982 | $72,000 |
| Default risk stays with | The buyer | You | You |
Illustrative example: a 14% yearly discount rate without recourse and 10% with recourse, first payment one month away, residual not included. Totals assume the lessee keeps paying and are not adjusted for the value of money over time.
The signed lease agreementDelivery and acceptance certificateThe UCC filing and any guaranteesThe lessee's payment historyIf your business owns equipment and leases it to another business, you are the lessor and they are the lessee. Every month the lessee pays you. The remaining payments on that lease can be sold to a bank or funder for a lump sum today, a trade often called lease discounting. Equipment dealers, independent leasing companies and businesses that rent out their own machinery all do it, usually to free up cash for the next deal or to stop carrying one customer’s credit risk.
The buyer takes over the right to the payments, and normally a security interest in the equipment too. You get cash now; the buyer collects for the rest of the term.
This is the decision that matters most after price. In a non-recourse sale, the buyer takes the loss if the lessee stops paying. You walk away clean, apart from the usual promises that the lease is genuine and the equipment was delivered. In a recourse sale, you agree to buy back a defaulted lease or make up the shortfall. Because you keep the credit risk, the buyer accepts a lower rate and pays you more.
The options table above shows the trade: about $62,000 with recourse against about $58,500 without, on the same $72,000 of payments. The extra $3,500 is not free money. It is roughly what you are being paid to stay on the hook for a default. If the lessee is a weak credit, a recourse sale can leave you holding the very risk you meant to sell. Always confirm in writing which one you are signing.
A lease and a business note both carry monthly payments from a business, but leases are usually shorter, backed by the equipment and the lessee’s credit, and bought by a larger, more standardized pool of banks and funders. That tends to make leases easier to place. The pricing method is the same discounting used for notes, set out in how note buyers calculate a price, yield and discount. For the wider market, see our guide to selling equipment leases.
A lease with a year or more of on-time payments, a creditworthy lessee and clean paperwork is the easiest to sell. A brand-new lease can sell too, but expect the buyer to look harder at the lessee’s credit. Selling can change how you report lease income and depreciation, so speak to your accountant first.
Keeping the lease is sometimes the better call. If the payments are steady, the lessee is strong and you do not need the capital, you collect the full $72,000 instead of a discounted sum. If the only offers on the table are recourse deals on a shaky lessee, you may be better off holding the lease and its risk openly than selling it and keeping the risk anyway. Get more than one written offer that states the rate, the fees and the recourse terms, and compare them using our checklist on how to compare offers.
The lessor, the business that owns the equipment and leases it out. That includes equipment dealers, independent leasing companies and businesses that rent out machinery they own. The lessee, who makes the payments, cannot sell them.
In a non-recourse sale the buyer takes the loss if the lessee stops paying. In a recourse sale you agree to buy back a defaulted lease or cover the shortfall. Recourse pays more because you keep the risk.
The lease has to allow assignment, and the lessee is usually notified to pay the buyer directly. Most commercial leases permit this, but check yours before you start.
On a $1 buyout lease, the lessee keeps it. On a fair market value lease there is a residual, and the sale agreement should say whether you or the buyer keeps it. Buyers often leave it out or price it cautiously.
Yes, many lessors sell right after funding. Expect the buyer to look harder at the lessee's credit, since there is no payment record yet.