Also called: Leaseback, Equity in plant
Sale and leaseback
A sale and leaseback is a transaction where a business sells an asset it owns to a financier and immediately leases or finances it back, releasing the sale proceeds as cash while continuing to use the asset.
What is a sale and leaseback?
A sale and leaseback is a transaction where a business sells an asset it owns to a financier and immediately leases or finances it back, releasing the sale proceeds as cash while continuing to use the asset.
Example
A contractor sells two owned trucks valued at $220,000 to a financier and leases them back over 48 months, freeing $220,000 of working capital.
Why it matters
It converts owned equipment into cash without disrupting operations, but it also converts an owned asset into a monthly commitment.