A sale and leaseback is an arrangement in which the company that sells an asset can lease back that same asset from the purchaser. It is a simple financial transaction which allows a person to lease an asset back to themselves after selling it.
Under the transaction, the asset previously owned by the seller is sold to a lender and is leased back to the owner for a long term.
A company usually enters a leaseback for accounting or taxation purposes, as you can transfer the asset to the holding company, but you would still be able to use it.
This transaction allows the leaser to use the asset but not own it. You can also sell the asset for a cash influx and then it can be leased back to you.
The most common users of sale-leasebacks are builders, vehicle/fleet management or companies with high-cost fixed assets.
You must also show that you have a suitable trading history and a healthy balance sheet will get a better capital sum from an investor.
Any future appreciation in the value of the property is no longer available to the seller. The company can no longer enjoy the value of the property as part of any sale of the business.
The cost of a sale and leaseback can range between 2%-20% APR. Determining where you would fall within this range is difficult, as so many variables make up the total cost of the facility. The variables include depreciation, size of the facility, credit, and lenders. Depreciation profile of the asset, this is a key factor that lender will consider when working out interest rates and APR as they will be holding the asset for a period. There are a number of lenders that facilitate sale and leaseback a few worth noting are Nucleus, Bibby, and close brothers. Another factor is business credit and personal credit. As every financial product credit history plays a big part in determining what cost the facility will cost you.
In summary, it is difficult to put an exact figure on its “cost” as there are so many variables that determine it.
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