Extended capital-markets CFO
A sale-leaseback exchanges asset ownership for proceeds and continued use under a lease. A secured loan keeps ownership with the borrower but grants lender rights. Evaluate the net liquidity, total obligations and control each structure leaves you with. Neither is automatically better for credit metrics or business flexibility.
Start with the same assets and objective
A property proposal and an equipment proposal can look similar while covering different collateral. Define the asset perimeter and the intended use of funds. Then compare what each structure can actually release after existing claims are cleared. Do not compare a gross sale price with a loan amount net of costs.
Make retained ownership visible
A borrowing case may leave the company owning the asset after repayment. A sale-leaseback may require return, renewal or purchase. Those outcomes have value and risk. Include reasonable end-of-period value assumptions and show sensitivity to them, rather than treating the terminal year as if nothing remains.
Market reference: ELFA: lease and loan comparison.
Check constraints beyond the new contract
Existing debt may restrict asset disposals, secured borrowing or sale-leaseback transactions. Read those terms before describing either route as available. Identify required lender, landlord, board or other approvals. The legal process can determine timing even when a financing provider is interested.
Do not use accounting as a substitute for economics
The accounting treatment of a sale and leaseback is a separate technical assessment. The company still faces contractual payments. Have the finance team and auditors evaluate proposed terms, then compare after-tax economics and credit agreement effects on a consistent basis.
Market reference: FASB: Leases, Topic 842.
Illustrative example, not a client result
The decision in practice
A company wants to fund an acquisition using an existing operating asset. If a sale-leaseback provides more cash but prevents relocation needed by the integration plan, a smaller secured loan may be more useful. The recommendation should reflect the acquisition plan, not just the financing amount.
What to prepare
- Defined asset perimeter and ownership records
- Existing restrictions, liens and payoff amounts
- Two complete term proposals and the business plan they must support
For an initial conversation, a summary is enough. Share private materials only through an agreed channel.
Common questions
Can the same asset support both transactions?
Not independently without addressing competing rights. Existing financing and security interests must be disclosed and resolved.
Does a sale-leaseback avoid debt covenants?
Not necessarily. Credit agreements may explicitly address leases, asset sales and sale-leasebacks. Review the actual definitions and restrictions.
Sources and further reading
Our decision framework is CFO Signals analysis. External references describe market practices and products, not an endorsement, partnership or available offer. Terms and eligibility require confirmation for your transaction.