How sale and rent back works?
A sale and rent back transfers ownership of an asset to the lessor and establishes a regular payment structure to use the asset. The transfer of ownership provides a cash injection for the business and establishes payments over the agreement period.
A sale and rent back can be structured using a rental, operating lease or finance lease.
Benefits of sale and rent back?
Sale and rent back agreements provide the following benefits for companies:
- Smooth cash flow by agreeing to set payments over a specified period
- Incorporate servicing and disposal costs into their agreed cash outlays
What happens at the end of the agreement?
At the end of the agreement, businesses have three options:
- return the equipment;
- upgrade the equipment; or
- extend the agreement.