Being in business is fraught at the best of times. At the moment, rising costs and financial challenges are making things all the more onerous.  This short post outlines one option that may work for some Businesses to help them through these uncertain times.  

Jeffries Property Buyers can assist with options for Businesses to take greater control of their finances tied up in what is probably their biggest asset. One way to achieve this is through a Sale and Leaseback deal.

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What is a Sale and Leaseback?

Per Wikipedia, it is a “financial transaction in which one sells an asset and leases it back for the long term; therefore, one continues to be able to use the asset but no longer owns it”

A fuller explanation could be that:

1.      Business A sells their property to Business B

2.      Business B (acting as a Landlord) then rents the business to Business A

The net effect is that Business A continues with their business as before but now with a cash injection but a long-term rent commitment.

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ADVANTAGES

A substantial cash inflow without the need of the occupier to lose use of the building they occupy.

It avoids common costs associated with conventional debt financing for property transactions such as valuation, brokerage etc.

The cash can be realised far quicker than through a conventional property sale.

Rental payments are tax-deductible.

If there is debt secured against the asset, it will be removed from the balance sheet and improve the business’s debt to equity ratios.

If required you would be able to include an Option to Repurchase

Length of lease as required by you.

With Jeffries Property Buyers you gain a trusted landlord with 39yrs + experience, discrete and flexible.

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DISADVANTAGES

At the end of a lease term the rent would be renegotiated based on the current market.

Need permissions for any major alterations / modifications to the property.

The rental payments will become a fixed cost in the businesses cash-flow.

The benefit of any future increase in the property value is no longer to the benefit of the seller.

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So, that’s a brief overview. For some businesses a sale and leaseback may be the right option to help them move forward with their business. For an informed view, call Ron for a chat.

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