Sale and Leaseback

Sale and leaseback is a process where a company raises cash by selling assets while retaining the use of the assets in return for regular agreed payments.  The most high profile sale and leaseback situations tend to be where larger companies sell property assets such as retail stores or large office buildings and then lease these back and continue using them.

People generally associate sale and leaseback transactions with larger companies but they are actually commonplace transactions for small to medium sized businesses as well.  The main requirement is that the assets involved are capital assets with a reasonable useful lifespan remaining which will make them viable for a lease agreement.

To staff and customers little appears to have changed but to the company which performs the sale and lease back this process generates significant sums of cash.  This cash could then be invested in other equipment required by the business or even to pay down other debt.  Alternatively it can be used to support the working capital requirements of the business when alternative sources of funding are constrained, such as during the current economic environment when bank funding is generally very tight.

In general the benefits of sale & leaseback are regarded as:

  • Instant cash injection for your business
  • Worthwhile tax savings
  • Easier budgeting and strategic planning
  • Reduced administration costs

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