Side by side
| Criterion | Commercial mortgage | Sale and leaseback |
|---|
| Ownership | Retained by the business | Transfers to the buyer |
| Cash released | Typically up to sixty to seventy per cent of value | Up to one hundred per cent of value |
| Ongoing cost | Loan repayments of capital and interest | Lease rentals, indefinitely |
| Balance sheet impact | Asset and debt both recorded | Asset removed, lease liability recorded instead |
| Future flexibility | Can sell or refinance the property later | No further access to the property's capital value |
| Best suited to | Businesses wanting to retain the asset long term | Businesses prioritising maximum cash release now |
How much cash each releases
A commercial mortgage typically releases a proportion of the property's value, leaving equity in the building and the business as the legal owner throughout. This preserves future flexibility, since the property can later be sold, remortgaged or used as security for further borrowing.
Sale and leaseback releases the full market value in one transaction, since the property is sold outright, with the business immediately entering a lease to remain in occupation. This can unlock significantly more capital than a mortgage but permanently removes the asset and its future value from the business.
Long-term cost comparison
Mortgage repayments reduce the outstanding balance over time, eventually leaving the business debt free and owning the property outright. Lease rentals under a sale and leaseback continue indefinitely with no equity building up, and are typically subject to periodic reviews that can increase the cost over the years.
Deciding which route to take
If retaining the property's long-term value matters and you only need a portion of its equity, a commercial mortgage is usually the better structure. If you need to release the maximum possible cash now, for expansion, debt reduction or another opportunity, and are comfortable no longer owning the building, sale and leaseback can make sense.
The short answer
Use a commercial mortgage to release partial value while keeping ownership, and sale and leaseback when maximising cash today outweighs the long-term benefit of owning the property.
Questions
Can I buy the property back after a sale and leaseback?
Some agreements include a repurchase option, but this is not standard and would need to be negotiated and agreed at the outset.
Is sale and leaseback only for large companies?
No, it is used by businesses of varying sizes owning commercial property, though the economics work best on properties with meaningful market value.
Does a commercial mortgage require a large deposit?
Lenders typically expect a deposit or existing equity of around thirty to forty per cent, though this varies by lender and property type.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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