Leaseback Meaning: Definition, Examples, and Translations
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leaseback
[liːs.bæk ]
Definition
financial transaction
Leaseback is a financial transaction in which one sells an asset and leases it back from the buyer. This arrangement allows the seller to remain in possession of the asset while freeing up capital for other uses. It is commonly used in real estate, where property owners can sell their property to gain liquidity. Leasebacks can also provide tax advantages, as lease payments may be deducted as business expenses. This arrangement is often utilized by businesses to leverage their capital and improve cash flow.
Synonyms
sale-leaseback, sell-and-leaseback.
Examples of usage
- The company engaged in a leaseback of its headquarters to optimize cash flow.
- Investors often seek leaseback agreements to ensure steady income.
- The leaseback allowed the firm to reinvest the proceeds in growth opportunities.
Translations
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Origin of 'leaseback'
The term 'leaseback' is derived from the combination of 'lease' and 'back,' indicating the return of the asset to the original owner after the sale. The concept emerged in the mid-20th century as businesses sought innovative methods to manage their finances. The leaseback arrangement became particularly popular in real estate transactions, especially during the economic shifts of the 1980s. As companies faced challenges in accessing capital, leasebacks provided a solution, allowing them to liquidate assets while retaining operational control. Over time, the practice has evolved, and today it encompasses a wide range of assets beyond real estate, including machinery, vehicles, and equipment. This financial strategy is often employed by corporations aiming to balance their asset management with cash flow needs.