Selling Charged-Off Equipment Leases and Loans: Why It’s a No-Brainer for Your Business
In the equipment finance world, charged off debt, including leases and loans, can be a pain on the books. These accounts represent lost revenue, operational inefficiency and a distraction from what matters most: funding new profitable deals. But selling charged off equipment leases and loans to a specialized buyer can turn those liabilities into assets. Here’s why selling yours makes sense for your business.
Introduction to Charged-Off Equipment Leases and Loans
Charged-off equipment leases and loans are a common occurrence in the equipment leasing industry. When a lessee fails to make lease payments, the leasing company may charge off the account, which means they consider the debt uncollectible and write it off as a loss. However, this doesn’t mean the leasing company can’t recover any of the debt. In fact, selling charged-off equipment leases and loans can be a lucrative way for leasing companies to recoup some of their losses and improve their cash flow. By partnering with specialized debt buyers, leasing companies can turn these non-performing assets into immediate cash, freeing up resources to focus on more profitable ventures.
What is a Charged-Off Equipment Lease?
A charged-off equipment lease is a lease agreement that has been deemed uncollectible by the leasing company. This typically occurs when the lessee has failed to make lease payments for an extended period, and the leasing company has exhausted all avenues of collection. Charged-off equipment leases can be sold to third-party debt buyers, who then attempt to collect the debt from the lessee. This process allows the leasing company to recover a portion of the lost revenue and redirect their efforts towards managing performing accounts and securing new business opportunities.
Get Value Back from Non-Performing Assets
When leases and loans are charged off, many organizations write them off as gone forever, but debt sales allow you to get some of that value back. Selling those accounts to debt buyers allows you to get some of that value back. The accounts may not fit your business model anymore but they have value to companies that specialize in debt recovery. They have the expertise and resources to get the most recovery so you can free up funds that would otherwise be stuck.
Free Up for Core Business
Charged off accounts require time, personnel and operational bandwidth. By outsourcing recovery to a collection agency, your team can focus on more strategic activities like originating new leases or managing performing accounts. By selling those accounts your team can focus on more strategic activities like originating new leases or managing performing accounts. Outsourcing recovery to a third party buyer eliminates the operational burden so your business can focus on what it does best.
Reduce Compliance Risk
Recovering on charged off leases and loans comes with compliance risk especially in today’s highly regulated world. By selling those accounts to reputable collection agencies, you can transfer the compliance to a company with a proven track record of handling debt recovery legally. This reduces the risk of lawsuits or regulatory violations and ensures the accounts are handled professionally.
Better Financial Reporting
Holding onto charged-off accounts can mess up your financial statements. By selling them, you’ll remove those liabilities from your books and get cleaner financial reporting and a more accurate view of your company’s health. Investors, lenders, and other stakeholders will love the transparency and better balance sheet.
Get Cash Now
Selling charged off debt gets you cash immediately. Instead of waiting months or years to recover small amounts in drips and drabs, you can get cash upfront by selling the portfolio. Now you can reinvest those proceeds into more profitable opportunities.
Access to a Liquid Market
The secondary market for debt sales, including charged-off equipment leases and loans, is active. By working with the right buyer you can get a competitive price for your portfolio. Experienced buyers often specialize in equipment finance accounts and understand the intricacies of those obligations and will give you a fair value.
Focus on Growth
Holding onto charged off debt ties up capital and attention that could be better spent on growth initiatives. Selling your charged off leases and loans lets you refocus on what matters most: building a portfolio of high quality performing assets. It also positions your business to better weather market changes by keeping your operations lean and focused.
Understanding Equipment Leasing
Equipment leasing is a popular financing option for businesses that need to acquire equipment but don’t have the upfront costs to purchase it outright. With equipment leasing, the business (lessee) rents the equipment from the leasing company (lessor) for a specified period, usually several years. The lessee makes regular lease payments, which can be tax-deductible as a business expense. At the end of the lease term, the lessee may have the option to purchase the equipment at a predetermined price or return it to the lessor. This arrangement allows businesses to conserve capital, manage cash flow more effectively, and stay up-to-date with the latest equipment without the burden of ownership.
The Process of Selling Charged-Off Equipment Leases and Loans
Selling charged-off equipment leases and loans involves several steps. First, the leasing company must determine the value of the charged-off account, taking into account the original lease agreement, the lessee’s creditworthiness, and the current market value of the equipment. Next, the leasing company must find a reputable debt buying partner who specializes in purchasing charged-off equipment leases and loans. The debt buying partner will assess the value of the account and make an offer to purchase it. If the leasing company accepts the offer, the debt buying partner will take ownership of the account and attempt to collect the debt from the lessee. The leasing company will receive a lump sum payment from the debt buying partner, which can help improve their cash flow and reduce their losses. This process not only provides immediate financial relief but also allows the leasing company to focus on more strategic initiatives.
Selling Charged Off Accounts?
If you’re selling your charged off debt, including equipment leases and loans, consider this:
- Choose a Reputable Buyer: Work with a buyer who has a proven track record, equipment finance expertise and compliance commitment.
- Know Your Portfolio Value: Make sure you understand what impacts the value of your charged off accounts: age of accounts, debtor info and past collection efforts.
- Negotiate: Work with the buyer to get terms that fit your financial and operational goals. This may include upfront payment or ongoing reporting.
Bottom Line
Selling charged-off equipment leases and loans through debt sales is a tactical decision that gets you cash, reduces operational burden, and reduces compliance risk. By working with a trusted buyer, you’ll turn liabilities into assets and free up your business to focus on growth and profitability.
Ready to see how selling your charged-off accounts can help your business? Start the conversation today. Turn your charged-off accounts into a smart move.
FAQ on Selling Charged Off Equipment Leases and Loans
How does an equipment lease work?
A equipment leasing agreement is a contractual agreement in which the owner of the equipment allows the lessee to use the equipment for a specified time in exchange. Collection agencies often play a crucial role in attempting to recover these debts before they are sold to specialized buyers. Leasing can include automobiles, machinery, and other materials.
What is a good equipment lease rate?
The equipment leasing prices in 2024 will vary depending on various variables and can vary from: Excellent credit 3-6% on larger loans, 7-9% on loan amounts less than $100,000. A minimum score of 10-50% based on leasing type and loan size. Charged-off equipment leases can negatively impact a company's financial statements, making it essential to find ways to recover some of the lost revenue.
Is NPA 90 days or 180 days?
Non-performing loans are defined as credit with "past due" interest on principal over the last 90 days.
Can charge-off be reversed?
Are there any charges against the infringements? There are a number of reasons why charges should be dropped. This could potentially be accomplished in the case of paying the creditor a settlement in the name of cancelling the chargeback.