The Option Of Sale And Leaseback
The option of sale and leaseback over equipment or other assets is a very advantageous method of fetching funds from them while it still remains under your rights to use them.
The deals of sale and leaseback are common for buildings or lands but recently, it is also a common deal for expensive, heavy and big pieces of equipment.
Advantages Of Opting For Sale And Leaseback
- You get access to tied up cash from the assets that are already owned
- You do not need to retraining for new equipment
- Zero downtime
- The raised funds can be returned to your shareholders
- Such deals come with tax benefits as the costs of leases can be an offset against profit
- It help freeing up the capital
- The risk of ownership and property is transferred to the buyers
Disadvantages Of Opting For Sale And Leaseback
- The outgoings of the business increases over the profit and loss perspectives
- Elevated costs
- There might be some capital gains and tax implications. A sale that is followed by leaseback as in the form of finance lease may turn as a profit in case the capital value credited to the asset for lease is larger than the original carrying value of same asset in the vendor book or lessee up to the time of sale.
Because of our intense operational and accounting experience, we are familiar with all the pitfalls and strengths of sale and leaseback deal can be associated with. Our helpful advice can assist you to establish if it is one of the best and most suitable action for you and your business.