Sale and leaseback: releasing cash from equipment you already own

Plenty of Australian businesses are asset-rich and cash-poor at the same time. The excavator, the prime mover, the CNC machine or the packaging line is fully paid off and sitting on the balance sheet, while the bank account is stretched by a big contract, a tax bill or a growth opportunity. A sale and leaseback converts some of that locked-up value into cash without the equipment ever leaving site.

It’s a less familiar product than a standard loan, so this page walks through how it works, what kind of equipment qualifies and the questions to ask before you commit.

How does a sale and leaseback work?

The mechanics are straightforward:

1. Identify the asset. It needs to be something a financier is comfortable owning: mainstream machinery, vehicles, trucks, trailers or plant with a clear market.
2. Value it. The financier works out what the asset is worth now, often through an independent valuation, auction results or dealer pricing.
3. Clear the title. A PPSR search confirms who has an interest in the asset. Any existing finance is paid out at settlement.
4. Sell and lease back. Your business sells the asset to the financier, receives the funds, and signs a lease to keep using it.
5. Make lease payments. Regular payments over an agreed term, usually with a residual at the end.
6. End of term. Pay the residual and take the asset back into your ownership, refinance it, or upgrade.

The equipment keeps working throughout. Nobody turns up with a low-loader.

Who is it best suited to?

Sale and leaseback tends to fit a business that:

• owns valuable equipment outright or with only a small amount owing;
• needs working capital, a deposit for an acquisition or funds to clear expensive short-term debt;
• would rather not offer property as security;
• has the trading strength to carry a new lease payment.

It’s common in earthmoving, transport, manufacturing, agriculture and mining services, where equipment values are high and the market for used gear is well understood. The trucking business loans page and yellow goods finance cover those industries in more depth.

How does it compare with other ways to raise cash?

Option	Security	Ownership	Good for
Sale and leaseback	The equipment itself	Moves to the financier until the residual is paid	Releasing cash from owned machinery
Working capital loan	Often unsecured, sized on turnover	Unchanged	Short-term cash flow gaps
Property-secured business loan	Residential or commercial property	Unchanged	Larger amounts, $20k to $5m
Business debt refinance	Varies	Unchanged	Rolling several debts into one

Unsecured options for trading businesses typically run from $5k to $500k, sized on turnover and bank statements. If you’d prefer not to sell your equipment at all, the secured or unsecured check helps you work out which security makes sense.

What does the financier look at?

The asset. Age, hours or kilometres, condition, make and model, and how easily it would sell. A five-year-old excavator from a mainstream brand is a very different proposition from a one-off machine built for a single production line.

Title. The business needs to own the asset or be able to clear its finance at settlement. Serial numbers matter: the PPSR’s guidance explains that motor vehicles and similar serial-numbered goods should be registered against their serial number as well as against the business.

The business. Bank statements, BAS and a clear reason for the funds. Lenders want to see that the new lease payment fits comfortably within existing cash flow.

Existing debts. ATO debt and patchy credit are considered case by case. In fact, clearing a tax debt is one of the common reasons owners consider a sale and leaseback.

Have equipment you think could work? Start a short enquiry and we’ll tell you whether a sale and leaseback, a loan or something else suits it best.

What are the tax and GST questions?

Selling a business asset has consequences that deserve a conversation with your accountant before you sign:

• GST on the sale. A GST-registered business selling a business asset will generally need to account for GST on the sale price.
• GST on the lease. The ATO’s hire purchase and leasing guidance treats each lease payment as a separate purchase, so credits are generally claimed payment by payment. Buying the asset back at the end is a separate transaction.
• Income tax. Selling an asset for more or less than its written-down value can create a balancing adjustment, and depreciation stops once you no longer own it.

None of this makes a sale and leaseback a bad idea. It just means the cash you receive and the cash you keep aren’t always the same number.

What does it cost?

Sale and leaseback pricing is set on the asset and the business, not a published card. The main factors:

• Asset quality. Newer, more liquid equipment carries less risk.
• Amount released relative to value. Releasing a smaller share of the valuation reduces the financier’s exposure.
• Residual. A higher residual lowers payments but leaves more to pay at the end.
• Fees. Valuation, establishment, documentation and PPSR fees, plus any payout costs on existing finance.

Illustrative example

Illustrative example: A civil contractor owns three excavators and a tipper outright. It wins a council job that needs extra labour and materials well before the first progress payment. The machines are valued at $420k, and the contractor does a sale and leaseback that releases $250k, with a residual at the end of a four-year lease. The equipment keeps working on site, the job is funded, and the business has a clear path to own the machines again.

Common mistakes to avoid

• Releasing more than the business needs. Bigger isn’t better if the lease payment squeezes cash flow.
• Overlooking the tax effect. Get your accountant’s view on GST and any balancing adjustment first.
• Ignoring the residual. Know how you’ll pay it before the lease starts.
• Using it for an asset that’s about to be replaced. Leasing back a machine you’ll scrap next year rarely makes sense.

Want to find out what your equipment could unlock?

If you own machinery that’s earning its keep but the bank account is tight, it’s worth a quick conversation. The enquiry takes about 60 seconds and won’t trigger a credit check. Your information isn’t passed around a crowd of lenders; one real person looks at the equipment, your business and what the money’s for, then gives you a call. The clearer and more accurate your answers on the form, particularly about the assets you own and any finance still on them, the faster we can point you to the right option.

Find out what you could release →