Sale and leaseback: turn what you own into cash and keep using it

Some businesses are asset-rich and cash-poor. Years of buying vehicles, machines and plant mean the balance sheet looks solid, but the bank account doesn’t. Selling those assets would cripple operations. A sale and leaseback tries to have it both ways: raise cash from the asset, and keep using it.

What is a sale and leaseback?

You sell an asset that you own outright to a funder. In the same transaction, you lease it straight back. The funder pays you a lump sum for the asset; you pay lease instalments for the continued use.

business.gov.au draws the basic line between leasing and owning: when you lease, the leasing company owns the item and you pay to use it, whereas buying leaves you the owner. A leaseback combines the two: you start as owner, finish the first step as seller, and become a lessee.

What do funders look at?

• The asset. Type, age, condition and resale market. Common, well-maintained, well-documented items are easier.
• Clear title. The Personal Property Securities Register (PPSR) shows whether anyone claims a security interest; the funder will search it, and any existing finance has to be dealt with.
• Valuation. The funder decides what the asset would fetch, often by inspection or independent assessment.
• Your ability to pay the instalments. Even with strong assets, the lease instalments have to be affordable from cash flow.
• Your need for the asset. An asset critical to earning is treated more carefully than one that’s occasionally used.

How does it compare with other routes?

	Sale and leaseback	Refinance (borrow against the asset)	Selling outright
You get	Cash now	Cash now	Cash now
You keep using it?	Yes	Yes	No
Who owns it afterwards?	The funder	You	The buyer
Ongoing payments	Lease instalments	Loan repayments	None
Risk	May cost more than the cash raised	Debt secured on the asset	Loss of capability

Illustrative example only. A fabrication workshop owns two press brakes and a laser cutter outright. A big customer is slow to pay, and the workshop needs to buy steel for a larger job. Leasing back one of the press brakes releases cash without stopping production.

What do you need to hand over?

1. Proof of ownership for each asset: invoices, registration papers or purchase records.
2. Asset details: make, model, serial numbers or VINs, hours or kilometres.
3. Maintenance and service records.
4. Details of any finance currently secured on the asset.
5. Your usual business details, ID and bank statements.

You can tell us what you own and what you need before you commit to a structure, and a specialist will say whether a leaseback or a refinance looks like the better fit.

What are the trade-offs?

You lose ownership. The asset sits on the funder’s books, so you can’t sell it, modify it or use it as security elsewhere without consent.

Total cost can exceed the cash raised. Over time, instalments may add up to more than the sale proceeds. Our guide to total cost in dollars shows how to test this.

Tax treatment changes. The ATO’s $20,000 instant asset write-off, for example, applies to the income year an asset is first used or installed ready for use. How a leaseback interacts with deductions is a question for your accountant.

End-of-lease terms matter. Residual payments, purchase options and return conditions can change the economics.

Not every asset suits. Specialised, very old or heavily modified items are harder.

How does the cash you receive compare with the asset’s value?

Funders do not usually pay full market value, because they need room for resale costs and risk. The amount you receive therefore sits below what you might get selling the asset on the open market. If you already have finance on the asset, that is paid out of the proceeds first, and the remainder is what reaches you. Ask for a clear breakdown showing the sale price, the amount paid to any existing lender, fees, and the net cash.

This is one reason to compare a leaseback with simply borrowing against the asset. If the net cash is small after settling existing finance, the exercise may not be worth the loss of ownership.

What does the lease period look like?

Terms vary, but the principle is the same as any lease: you pay regular instalments for a set period, keep the asset in good order, insure it, and have defined options at the end. Those options might include buying the asset back, extending the lease or returning it. Understand the buy-back price in advance, because it decides whether the leaseback was a bridge or a permanent step. If you intend to own the asset again one day, make sure the contract says how.

When is it the wrong tool?

• If you need cash only briefly, a line of credit or short property-secured loan may cost less.
• If you’d like to keep ownership, borrow against the asset rather than selling it.
• If the asset is already heavily financed, there may be little cash left after paying out the existing debt.
• If the asset is critical and hard to replace, think carefully about giving up ownership.

Could a leaseback work for you?

If you own valuable equipment outright and need working capital, it’s worth a conversation. The enquiry is a minute long and carries no credit check, your details aren’t circulated to a pile of lenders, and a real person reads the answers and calls you. Describe the assets and any finance on them accurately and the match will be right first time. See if you qualify.