Sale and Leaseback

A sale and leaseback on a piece a equipment or other asset is an useful way of raising finance from an asset whilst still retaining the right to use to use it. 

Sale and leaseback deals are most commonly done for land and buildings but are now commonplace for heavy and expensive large pieces of equipment.

Advantages of sale and leaseback

• Access to cash tied up in assets already owned
• No downtime required or retraining on new equipment
• Cash raised can returned to shareholders
• Sale and leaseback deals have many tax advantages because lease costs can be offset against profits.
• Frees up capital
• Property and ownership risks are transferred to the buyer

 

Disdvantages of sale and leaseback

• The businesses outgoings increase on the profit and loss perspective
• Increased costs
• There may be capital gains tax implications. A sale followed by a leaseback in the form of a finance lease can result in a profit if the capital value attributed to the asset for the purposes of the lease is higher than the carrying value of the asset in the books of the vendor/lessee up to the time of sale.

 

Due to our accounting and operational experience we know the strengths and the pitfalls that sale and leaseback deals can bring. Our advice will establish whether it is the best course of action.