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What is Sale and Leaseback Financing

Updated: Sep 1, 2023

Sale and leaseback is a financial strategy where a company sells a property or asset that it owns to a buyer and then leases the same property or asset back from the buyer for a specified period of time, usually with a predetermined rent. This strategy can provide a number of benefits for the business, including:

  1. Access to cash: By selling the property or asset, the business can unlock the cash value of the asset, which can be used to finance growth, pay off debt, or make other investments.

  2. Improved liquidity: By leasing the property or asset back, the business can improve its liquidity, as it will have access to cash that it can use for other purposes.

  3. Reduced risk: Sale and leaseback can help reduce the risk associated with owning an asset, such as maintenance and depreciation costs, and can also provide protection against fluctuations in the value of the asset.

  4. Tax benefits: Depending on the accounting and tax treatment, the sale and leaseback transaction may provide tax benefits to the business, such as tax deductions for lease payments.

  5. Flexibility: The business can negotiate the terms of the lease agreement with the buyer, which can provide flexibility in terms of the length of the lease and the rent payments.

Overall, sale and leaseback can be an attractive financing option for businesses that own assets with significant value but may require liquidity to fund growth, pay off debt, or make other investments. It allows the business to access cash while retaining the use of the asset, which can help improve its financial position and flexibility.



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