Sale-and-Leaseback — definition
Financing transaction in which a company sells an asset it owns, such as equipment or a facility, and simultaneously leases it back to continue using it operationally.
Sale-and-leaseback transactions release capital tied up in owned assets, converting it into cash while allowing uninterrupted operational use through a lease. They are commonly used to improve liquidity, fund new investment or restructure a balance sheet without disrupting production.
Why it matters to industrial buyers
This structure allows companies to unlock capital from existing assets for reinvestment or debt reduction while retaining operational continuity, which matters when liquidity is constrained.
Key reference points
Common assets
Sale-and-leaseback is commonly applied to real estate, but is also used for major production equipment and specialised machinery.
Commonly confused with
Finance lease
Sale-and-leaseback begins with the company owning the asset outright and selling it; a standard finance lease involves acquiring use of an asset never owned by the lessee.
How it is used in practice
A manufacturer completes a sale-and-leaseback of its distribution centre to fund a new processing line without new borrowing.
Frequently asked questions
Does sale-and-leaseback increase debt?
It typically does not add conventional debt, though the lease obligation is commonly recognised as a liability under current accounting standards.
Why would a company choose this over a loan?
It can offer different tax, balance-sheet or liquidity outcomes compared with borrowing against the asset, depending on individual circumstances.
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Related terms
Finance Lease
Lease structure that transfers substantially all the risks and rewards of ownership of an asset to the lessee, typically over a term approximating the asset's useful life.
Operating Lease
Lease arrangement under which the lessor retains substantially the risks and rewards of ownership, typically covering a period shorter than the asset's full useful life.
Working Capital Facility
Short-term financing arrangement, often revolving, that provides a company with funds to cover day-to-day operating expenses such as inventory, payroll and receivables.
Capital Allocation
Process by which an organisation decides how to distribute available capital among competing investment opportunities, including new projects, maintenance and expansion.
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Reference content only. Global B2B Group is independent of equipment manufacturers and financing institutions; definitions are provided for education and do not constitute engineering, financial or legal advice.