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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Sale and leaseback

What is a sale and leaseback, and how does a lender read one?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A sale and leaseback is a business selling an asset it owns, usually property or major equipment, to an investor or financier and leasing it back at once, so it keeps using the asset and receives cash now. The cash can repay debt or fund growth, but the business has swapped an owned asset for a long rent obligation, and the bank loses that asset as security. Depending on the reporting framework, the accounts may or may not show the lease as a liability, so a lender usually counts the rent among fixed charges and treats the lease as borrowing when it reads leverage.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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