Sales and Leaseback

Summary

As the name suggests sale and lease back refers to the agreement that allows you to release equity in an asset while still being able to use that asset.  Say you need a cash injection for business expansion and growth into a new market.  Rather than take on the added burden of additional debt you could raise cash from your asset and lease it back from the company you sold it to. 

This type of arrangement can be used with buildings and specialist equipment.  For premises sale and lease back can offer a very profitable company significant tax advantages.  For example they could sell their asset to another company in their group and the lease payments would then become an allowable tax deduction.

For specialist equipment it is also possible to have the asset valued and sold to a finance company for that value.  You will then be able to pay off any outstanding finance with the cash injection and lease the equipment back from the lender.

On a personal basis, this type of finance is also becoming increasingly popular in the property market especially for those approaching retirement without dependants who want to liquidise the cash in their property without having to move home.

Ideal for…

Businesses that have significant value tied up in assets such as machinery or property but need to access those funds in the form of liquid cash.  It is also useful for a successful businesses seeking sensible ways to manage their tax liability.

Security Requirements

Nothing is required as the asset is sold to generate cash. You must own the asset in question and repay any outstanding debt from sale and lease back cash generated.
 
Advantages

  • Allows you to gain access to money tied up in valuable business assets.
  • You can still use the asset even though you no longer own it.
  • Tax advantages through new monthly payments.

Disadvantages

  • You lose the asset thereby weakening your Balance Sheet.
  • There may be better ways to gain access to the funds either by refinancing or by securing a loan using that asset as collateral.

Key UK Providers

§ Specialist Lenders.