Sale & lease back

Sale & lease back is a special form of leasing in which the leasing company does not buy the leasing asset from a third party supplier, but from the lessee in order to lease it back to him in return. The leasing company becomes the legal and economic owner of the asset, which seamlessly remains in the possession of the lessee. 

In this way, assets that have already been purchased can be financed - in terms of effect, it is a retroactive financing option with which tied-up capital can be released and fresh liquidity generated.

Under commercial law, the leasing-typical "off balance" effect occurs; a disposal of the asset from the fixed assets is booked, possibly with realisation of profit (if necessary, disclosure of hidden reserves) and the addition of liquidity. 

In the case of valuable, readily marketable assets (no custom-made or self-produced items), sale and lease back can even be structured purely on an asset basis - irrespective of the creditworthiness of the seller and lessee.

LeasingPilot note Sale & lease back is a form of financing with numerous advantages, but it is still viewed with suspicion in Germany and is seen by many as a signal of a lack of liquidity. Contractually, in addition to the leasing contract, only a supplementary agreement sale & lease back and a purchase contract need to be concluded, although in practice the handling sometimes has its pitfalls.

Distinction from technical sale & lease back: 

Sometimes a sale & lease back has to be carried out for purely technical reasons, even for assets acquired shortly before, e.g. because they have already been delivered and paid for or because it would be too cumbersome to place an order with a large number of suppliers. Since in this case the focus is not on liquidity procurement, it is referred to as a technical sale and lease back.