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In a sale-leaseback (or sale and leaseback), a business offers its business realty to a financier for cash and at the same time participates in a long-term lease with the brand-new residential or commercial property owner. In doing so, the company extracts 100% of the residential or commercial property's worth and transforms an otherwise illiquid property into working capital, while keeping complete functional control of the facility. This is a terrific capital tool for companies not in the company of owning realty, as their genuine estate properties represent a substantial cash value that could be redeployed into higher-earning segments of their company to support development.

What Are the Benefits?

Sale-leasebacks are an attractive capital raising tool for numerous companies and use an option to traditional bank funding. Whether a company is wanting to invest in R&D, expand into a brand-new market, fund an M&A deal, or simply de-lever, sale-leasebacks work as a tactical capital allotment tool to fund both internal and external growth in all market conditions.

Key Benefits Include:

- Immediate access to capital to reinvest in core service operations and growth efforts with higher equity returns.

• 100% market price awareness of otherwise illiquid properties compared to financial obligation options.
• Alternative capital source when traditional financing is unavailable or limited.
• Ability to retain operational control of property with no disturbance to day-to-day operations.
• Potential to acquire a long-term partner with the capital to fund future expansions, building restorations, energy retrofits and more.
  
  Who Qualifies for a Sale-Leaseback?
  
  There are numerous elements that determine whether a sale-leaseback is the best fit for a company. To be eligible, companies need to meet the following requirements:
  
  Own Their Real Estate
  
  The first and most obvious requirement for qualification is that the business owns its real estate or have an alternative to buy any existing leased area. Manufacturing centers, home offices, retail locations, and other kinds of realty can be potential prospects for a sale-leaseback. Unlocking the worth of these locations and redeploying that capital into higher yielding parts of business is a key chauffeur for business pursuing sale-leasebacks.
  
  Want to Commit to Operating in the Space
  
  While the term of the lease in a sale-leaseback can differ, a lot of investors will want a dedication from a future tenant to inhabit the area for a 10+ year term. Assets important to a business's operations are typically excellent prospects for a sale-leaseback due to the fact that a business is willing to sign a long-term lease for those areas. This makes it a more appealing investment for sale-leaseback financiers as they have more security that the tenant will remain in the facility for the long term.
  
  Have a Strong Credit Profile
  
  Companies do not need to be investment-grade quality to pursue a sale-leaseback. However, some credit rating is usually so the sale-leaseback investor understands that the organization can make rental payments throughout the lease. Sub-investment-grade services are still eligible as long as they have a strong performance history of revenue and cashflow from which to evaluate their credit reliability