How does sale and leaseback improve cash flow?


For many businesses, sale and leaseback can offer a fantastic opportunity to improve cash flow and release the capital needed to reinvest in the business, without disrupting daily routines.

The past year has thrown up challenges for businesses that they are unlikely to have faced before, and with the effects of the pandemic ongoing and Brexit around the corner, this disruption is set to continue.

During lockdown and the following months, UK businesses have seen a huge amount of financial support from the government, but many will now be thinking ahead and considering how they will maintain their cash flow when this support ends.

One option that could provide this cash boost to many businesses is sale and leaseback.

A sale and leaseback agreement allows business to sell their existing property to a third party but continue to lease the space for their daily business use.

There are many advantages to this type of finance, but for many businesses the positive effect on cash flow will be the driving factor behind seeking it at this time.

No matter what stage a business is at or what the current economic situation looks like, having a supply of cash is essential to staying healthy. That explains why in difficult times many businesses may prioritise cash flow over asset ownership.

For businesses that own the commercial property they occupy, a large amount of potential capital is tied up in the building, and sale and leaseback allows the business to release this capital by selling the building.

Rather than a straightforward property sale however, sale and leaseback involves contracts being drawn up beforehand which enters the current owner and the new owner into a lease agreement for a set period of time, meaning the original business doesnt have to vacate the working property.  

A large amount of cash can be released through sale and leaseback, as the only limit for businesses is the value of the property, and there are no restrictions on what the funding raised is used for, which there may be with some other forms of finance. Businesses also don’t need to worry about interest or complex repayment terms such as with loans, which may be better for cash flow in the long term.

Here are some of the other reasons why sale and leaseback could be worth considering as part of the solution to any cash flow troubles you may be experiencing.

Negotiate the deal you want

One reason you may choose the path of a sale and leaseback agreement over a bank loan is that it can be a more cost-effective way to raise the capital you need. Applying for traditional bank loans can be a fairly onerous process in some cases, and any discussions may be led by the lender.

With a sale and leaseback agreement, you are in a unique position as both the seller and the leaser, and this can help you to negotiate a deal that meets your needs.

Reinvest capital where it is needed

The changes we have seen this year may have made some businesses take stock of the commercial property they own, how it benefits their business and whether other needs are more pressing than owning an office, workshop, warehouse etc.

However, for many businesses eliminating the need for commercial space completely is not an option, and this is where Sale and Leaseback can help businesses who need to retain a physical location but feel the capital tied up in property could be put to better use elsewhere.

Minimise disruption

With all the changes businesses have had to make this year, uprooting their staff and entire company to a new location is probably the last thing on many of their minds.

This is why Sale and Leaseback is a great option if you do need to release the capital tied up in property, as it allows you to do so without making any changes to the space you work in.

Could sale and leaseback be the right funding option for your business? We can help you find suitable funders and facilities that will support your cash flow going forward. Just call us on 0800 9774833 or enquire about sale and leaseback here.



Some of the funders we work with

  • Metro Bank SME Finance
  • Lloyds Bank Commercial Finance
  • Clear Factor
  • Investec
  • ABN AMRO Commercial Finance
  • Nationwide Finance
  • Accelerated Payments
  • InvoCap
  • Kriya
  • 4Syte
  • Leumi ABL
  • PNC Business Credit
  • Regency Factors
  • Royal Bank of Scotland
  • Cynergy Business Finance
  • Time Finance
  • Davenham Asset Finance
  • MaxCap
  • Santander Corporate & Commercial
  • Partnership Invoice Finance
  • Blazehill Capital
  • Giant
  • Tradeplus24
  • Optimum Finance
  • Ultimate Finance Group
  • Skipton Business Finance
  • Pulse Cashflow Finance
  • Sonovate
  • Woodsford Tradebridge
  • Aldermore Invoice Finance
  • Merchant Money
  • eCapital Commercial Finance
  • Team Factors
  • Peak Cashflow
  • Castlebridge
  • Barclays
  • Davenham Trade Finance
  • Close Brothers Invoice Finance
  • IGF Invoice Finance
  • Haydock Finance Ltd
  • Roma Finance
  • Praetura Invoice Finance
  • Berkeley Trade Finance Ltd

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We are a credit broker and not a lender and offer credit facilities from a panel of lenders