Sale and leasebacks: sacrifice or a saviour?

The financial packages offered by the government to try to keep the economy afloat during the coronavirus pandemic, will provide much needed support for many businesses.

But for many, there is no support or the money will come too late to save them, with the Business Secretary acknowledging over the Easter that “more money needs to go out faster”.

Exploring alternative ideas to help businesses raise cash quickly, an old favourite from the commercial real estate world has re-surfaced – that of sale and leaseback. But what is it and how does it work?

The sale and leaseback

A sale and leaseback deal does very much what it says on the tin – if you own the property occupied by your dental surgery, you sell the property to another party and, as part of the transaction, you agree to take a lease of the property back immediately.

This approach can provide an alternative means of raising finance if you prefer to free up cash in the business rather than approach a bank for the money.