Quick answer
Sale and leaseback finance lets a business sell equipment or vehicles it already owns to a financier and lease them straight back. The business gets a cash injection and keeps using the asset, paying lease payments instead. Ownright Custom Finance can look at sale and leaseback options Australia-wide.
Key points
- Turns owned equipment into working capital without stopping operations
- You keep using the asset while paying lease payments
- Useful for tax debts, growth, stock or cash flow squeezes
- Tax, GST and accounting effects need your accountant's input
- Suits
- Businesses owning plant, vehicles or equipment outright or with equity
- Security
- The asset sold and leased back
- Ownership
- Lender owns during the lease; end options agreed upfront
- Australia-wide
- Yes
What is sale and leaseback finance?
Sale and leaseback is a transaction in which a business sells an asset it owns to a financier and immediately leases it back. The business receives cash from the sale, keeps using the asset day to day, and pays regular lease payments. It is a way of turning equity locked in equipment into working capital, without parking the machines or selling them for good.
Many owners have a yard, shed or workshop full of valuable gear that is fully paid off or close to it, while the bank account runs thin. Sale and leaseback is aimed squarely at that gap.
When does it make sense?
- Cash is tight but the equipment is paid for
- A growth opportunity needs funding, such as a big contract or a second site
- A tax debt or other liability needs clearing quickly (see business loans to clear ATO debt)
- Seasonal cash flow gaps keep recurring
- You want to rebalance debt without touching property
It is less suited to a business where the freed cash has no clear purpose, because the lease payments continue regardless.
How does a sale and leaseback work?
- You list the assets you want to include, with details and proof of ownership.
- The financier inspects or assesses them and offers a purchase figure.
- Any existing finance on the assets is paid out from the proceeds.
- Title passes to the financier and the lease starts.
- You keep operating and pay lease payments for the term.
- At the end, you buy back, extend or return the assets, depending on the agreement.
Sale and leaseback compared with a loan against the same assets
| Point | Sale and leaseback | Secured loan over the assets |
|---|---|---|
| Who owns the assets | Financier during the lease | You |
| How cash is raised | Sale proceeds | Loan advance |
| Ongoing payments | Lease payments | Loan repayments |
| End of term | Buy back, extend or return | Own free of security once repaid |
A chattel mortgage or other secured facility may be worth comparing when the aim is simply to raise cash against equipment you own.
What do financiers look at?
The assets. Age, make, condition, hours or kilometres, serial numbers and the strength of the second-hand market. Mainstream trucks, excavators and machinery with a deep resale market are easier than specialist plant.
Ownership and existing security. They check that the business owns the assets and that nothing is encumbered, usually through a search of the Personal Property Securities Register.
The business. Trading history, financials, ATO position and the ability to carry the lease payments. See the guide on loan serviceability.
Purpose. Financiers like to understand what the cash is for, since a clear plan reduces the risk.
What about tax, GST and accounting?
A sale and leaseback can have tax, GST and accounting effects, including treatment of any gain or loss on sale and how lease payments are deducted. These depend heavily on your structure and records, so involve your accountant before agreeing anything. Our job is to find and arrange the finance; theirs is to confirm how it fits your books.
How Ownright approaches sale and leaseback
Trevor Scott and the team like a problem that other brokers hesitate over. When a business has plenty of equipment but a cash squeeze, we look at all the routes: a leaseback, a secured loan against the same assets, a working capital loan or a cash flow loan. We then explain the trade-offs in plain English so you can choose with open eyes.
We act Australia-wide, and if the asset is unusual we look at what financiers are available that understand it. The asset finance hub lists related options.
An illustration
Illustrative scenario only. A civil contractor owns two excavators and a truck outright but has just won a large job requiring upfront materials. A broker could look at a sale and leaseback on one excavator, arrange for the funds to arrive before the job starts, and set lease terms with a buy-back option once the job is paid.
Mistakes to avoid
- Selling more assets than you need to
- Ignoring the buy-back terms
- Skipping advice on GST and tax
- Using the cash with no repayment plan
- Overlooking how the lease payments will sit against future cash flow
Documents to have ready
- Asset list with serial numbers, VINs and photos
- Proof of ownership or payout letters for existing finance
- Recent financial statements and BAS
- Photo ID and entity details
Our guide on getting loan ready and the document checklist are good starting points, and if your credit needs a polish, see how to improve your credit score.
What kind of cash can be released?
The amount depends on what the financier thinks the assets are worth, how much is already owed against them and how the lease is structured. We do not quote figures, because every asset list is different. Well-maintained mainstream equipment with a strong resale market tends to be valued more confidently than specialist gear. Sometimes selling only part of the fleet is enough to meet the need, which keeps lease payments lower.
What are the alternatives?
A sale and leaseback is one tool among several. Depending on your goal, a secured loan against the same equipment, a refinance of existing asset finance, an invoice facility or a property-backed loan might fit better. Our pages on invoice finance and secured business loans cover two of those. The best answer often comes from comparing the cash raised, the ongoing payments and the end-of-term position side by side.
Can the ATO position affect a leaseback?
It can, since financiers look at the health of the business. A manageable tax debt may be workable, particularly if the funds are used to clear it, while unmanaged arrears can make lenders cautious. If tax is the pressure point, our guide on getting an ATO account statement is a useful first step.
Want to unlock the cash in your equipment?
Sounds like you’re looking for sale and leaseback finance to free up money tied in your plant. We’re the lending experts in turning owned assets into working capital, so click the button below and see if you qualify.
How it works, step by step
- 1
Step 1
Send a list of the assets, with ages, serial numbers and any current finance.
- 2
Step 2
We work out what the assets may be worth to a financier and what you need the cash for.
- 3
Step 3
We approach financiers who handle that asset class and negotiate the structure.
- 4
Step 4
You sign, receive the funds and keep operating with the leased assets.
Frequently asked questions
What assets can be used for a sale and leaseback?
Commonly, vehicles, trucks, earthmoving gear, manufacturing machinery, farm equipment and other identifiable plant with a resale market. Assets that are older, heavily customised or hard to value are tougher. Send us the make, model, year and condition and we will tell you whether it looks workable.
Can I do a sale and leaseback on equipment that still has finance?
Often, if there is equity in it. The existing finance is generally paid out from the sale proceeds, and the balance comes to you. The financier will check for registered security and may want a payout figure. We help organise the sequence so everything settles cleanly.
Do I keep using the equipment during the lease?
Yes, that is the point. The equipment stays in your workshop, yard or farm and keeps earning, while the financier owns it. You are responsible for insuring and maintaining it, and the lease sets out the conditions. Check the end-of-term options before you sign.
Will I get the asset back at the end?
It depends on the contract. Many leasebacks include an option to buy the asset back at an agreed figure, extend or return it. Make sure you understand the buy-back price and whether it is fixed or based on market value, since this affects whether you can realistically keep the asset.
Is sale and leaseback a good idea if I am in financial difficulty?
It can relieve pressure by releasing cash, but it also swaps an asset you own for ongoing lease payments. It works best when the freed cash is used to fix or grow the business. Talk to your accountant, and talk to us about whether a different approach, such as refinancing, would suit better.
How is GST handled on a sale and leaseback?
The sale of a business asset may carry GST consequences, and lease payments usually do too. The result depends on your registration, the asset and how the transaction is documented. We are not tax advisers, so involve your accountant before signing so the treatment is clear from the start.