PE/VC leaning on equipment leases

Private equity and venture capital firms are pushing more equipment purchases into leases and asset-backed loans instead of writing bigger equity checks. (equipmentleases.com) The pitch is simple: a portfolio company gets the machine, server rack, lab tool or vehicle now, but keeps sponsor cash free for acquisitions, hiring or runway. Several lenders now market these products directly as “non-dilutive” capital for venture-backed and sponsor-backed companies. (equipmentleases.com) (fsinnovationpartners.com) That demand is landing in a large market. The Equipment Leasing and Finance Foundation said the equipment finance industry reached an estimated $1.34 trillion in 2023, and 82% of end users used some form of financing for equipment and software purchases. (leasefoundation.org) Industry data show the flow is still rising. The Equipment Leasing and Finance Association said January 2026 new business volumes hit the highest dollar amount in the CapEx Finance Index’s two-decade history, with manufacturers a major driver. (elfaonline.org) A lease is increasingly being sold as a way to match the payment schedule to the asset’s working life. Lenders and brokers say they are structuring terms around resale value, useful life and the cash flow the equipment is expected to generate. (switchboardfinance.com.au) (equipmentleases.com) That matters in a deal market still short on easy liquidity. Bain said in February 2026 that private equity dealmaking had improved, but fundraising was still dragging and liquidity problems persisted outside the biggest transactions. (bain.com) The tax angle is real, but it depends on structure. The Internal Revenue Service says a true lease generally lets a business deduct payments as rent, while a conditional sale or financed purchase can qualify for depreciation and Section 179 if the business is treated as the tax owner. (irs.gov 1) (irs.gov 2) For tax years beginning in 2026, the Internal Revenue Service says the maximum Section 179 deduction is $2.56 million, with the benefit phasing down after $4.09 million of qualifying property is placed in service. That gives sponsors another reason to finance equipment rather than tie up cash upfront. (irs.gov) The accounting case is narrower than it used to be. Under Financial Accounting Standards Board Topic 842, most leases now show up on the balance sheet, which means leasing no longer keeps most obligations entirely off-book for companies reporting under United States generally accepted accounting principles. (fasb.org) (kpmg.com) So the shift is less about hiding debt than choosing which capital pays for hard assets. In a tighter fundraising market, sponsors are treating equipment finance as a separate pool of money that can fund growth without asking the cap table to do all the work. (equipmentleases.com) (bain.com)