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Raising cash through a sale-leaseback

A useful but infrequently used tool for raising cash for a small business is the sale-leaseback transaction. While public companies are more likely to use it, the device is also available to private companies that use real estate in their business.

The process is best-suited for businesses that carry their real estate on their books as an asset, and which have significant equity in the assets. These companies can generate working capital by selling the real estate and re-investing it in the business. Typical property types that are the subject of sale-leasebacks are warehouse and distribution facilities, office buildings and medical offices.

In such a transaction, the business sells the real estate to an investor, who simultaneously leases the space back to the business on a long-term basis. This allows the business to continue operations in the same facility while generating cash for the business. It also provides the investor with an instant tenant on a long-term basis   Read Full Article...