Published on July 12th, 2022 | by David Jackson0
4 Benefits of a Sale-Leaseback
As a business owner, you should always be looking for opportunities to expand and improve your business. A sale leaseback can be one of the best choices that you make to do just that. It’s an opportunity for your business to unlock all sorts of benefits. Here are some of the advantages that come with selling your business real estate to an investor and leasing it back.
Money to Reinvest
As the party selling your real estate, you will receive the money from the sale. You can use this money to put directly back into your business, while also reaping the benefits of continuing to operate where you are.
Having more cash in hand to invest into your business is advantageous for obvious reasons. So, if there are changes and improvements you’ve been wanting to see in your business but you don’t have the cash flow for it, then a sale-leaseback may just be the perfect choice for you.
Control of Lease Terms
One of the most common misconceptions about a leaseback is that a business will lose power over the terms and control of its business. However, your business has more power than a traditional lease. In a sale-leaseback scenario, you can create a lease that continues to give you total control over the property and how it’s operated. Under this type of lease, the business will pay operating expenses.
Better Balance Sheet
When you opt for a sale-leaseback, your fixed real estate asset is replaced with the cash you earned from the sale. The cash is classified as a long-term non-liquid asset removing your mortgage from your debts. as such, you have an improved balance sheet since your real estate is removed. This means you can improve the overall financial health of your business and improve your chances of being approved for loans in the future.
Greater Opportunity For Growth
One of the biggest reasons why businesses opt for a sale-leaseback is to focus on company growth. With the cash of the sale, you can increase your inventory, continue to pay your suppliers and staff, and ultimately focus on the overall growth of your company.
These are just a few of the advantages of opting for a sale-leaseback. However, it’s important to keep in mind that they don’t come without their risks. Despite all of these benefits, you should also familiarize yourself with many of the disadvantages. For example, it comes with certain tax liabilities and certain forfeits of control. Not to mention that you will be giving up the opportunity to gain future gains from property appreciation. For this reason, it’s always important to consider a sale-leaseback when the market is in a good place rather than at rock bottom.