Sale leaseback

The sale leaseback is a form of business financing in which a company sells its real estate for cash and then simultaneously signs a long term lease with the buyer. This enables businesses to realize 100 percent of their true market value in real estate and then re-use that capital in other areas.

There are benefits to doing this type of financial option. The business credit established through this sale offers immediate access to capital that would have otherwise been illiquid assets. Businesses maintain operational control of the facility and increased borrowing capacity because the sale shows on the balance sheets. The owner is also able to focus more on the operations of the business rather than having to deal with real estate. In times of tough credit options, it makes sense for many small business owners to use funds for the company's core activities rather than having these same funds tied up in commercial real estate.

The sale leaseback can be an innovative form of financing for companies in the middle of mergers, or who might be looking to acquire additional facilities, or the construction of new facilities. Sale leaseback is one of the best assets you have when searching for lending to expand your business.

The new investor receives an advantage by gaining fair return on the investment in the form of rent during the term of the lease and ownership of a new asset that is already occupied by a reliable and long term client.

When considering a sale leaseback option, it is best to consult with a qualified commercial real estate broker, your attorney and an accountant. You must be ready to give up control over your business to the buyer. Since you are selling the property and then leasing it back from them, they will have some type of control over your business until you have been able to buy back the property.

As credit continues to be tight and traditional financing sources are still hesitant to stretch their lending arms, both small and big businesses have to find more creative options for capital funding. Converting real estate assets to cash is a technique used by many large corporations that have land or buildings that are not essential to their operations.

Whatever business credit options make sense for your business, make sure as an owner you take time to consult experts and those people who will be most affected by your decisions before jumping on board with some of the more non-conventional financing options.

The Small Business Administration is a great resource to use for business plans, counseling needs and even financing for established small businesses.This may be an option for your business and they can certainly help you research what other funding is available before you decide on any one source. The SBA provides great lending options you can also consider when you need to expand your business without selling off your real estate and other business assets. A small line of credit or a personal loan may be your best option when you need money to expand your business.

Sale leaseback is a great option if you need money and you cannot gain the approval for a loan. When dealing with sale leaseback you need to watch out for the buyer. They may give you a lease that has an expensive interest rate and it doesn't provide the company with the best financing option possible. Be careful about the buyer you are working with and research at least 3-4 different buyers that will provide you with the leaseback option that is favorable to your business.