Why leaseback matters to a first-time founder
Selling an asset releases cash without forcing the company to stop using it. The trade-off is a new recurring lease cost and the loss of future ownership benefits. Founders should compare the immediate liquidity with total rent, tax treatment, accounting effects and restrictions in the lease.
Examples of leaseback
A manufacturer owns equipment worth ₦300 million but needs working capital. It sells the equipment to a finance company for ₦280 million and leases it back for ₦4.5 million a month over six years. Production continues, while the company receives cash now and takes on a long-term payment commitment.
Common misunderstanding
This is not simply borrowing against an asset. Ownership transfers to the buyer, and the seller becomes a tenant or lessee. Whether the transaction counts as a sale for accounting purposes depends on the contract and applicable standards, so the balance-sheet result may differ from the commercial label.
When to use it
Consider it when the business owns valuable property or equipment, needs cash and can afford predictable lease payments. Compare it with a secured loan before proceeding. Avoid it when the asset is strategically irreplaceable, lease terms limit operations, or weak cash flow could make future rent difficult to meet.