Sale and leaseback: how to free up cash from equipment you own

Plenty of businesses are asset-rich and cash-tight at the same time. The yard is full of machines you own outright, but the bank balance is doing the worrying. Sale and leaseback is the structure that turns that owned equipment back into working capital, without you losing the use of it.

This guide explains how sale and leaseback works, when it makes sense, and the catches to watch. It is general information, and the tax and accounting side needs your accountant, so treat this as a starting point rather than advice.

What sale and leaseback is

Sale and leaseback is a way to release cash from an asset your business already owns. You sell the equipment to a financier, usually at fair market value supported by a valuation, receive a lump sum, and immediately lease it back. You keep using the asset exactly as before and repay through lease or finance payments, typically over three to five years.

It sits under the broader heading of equipment refinance, which can also mean refinancing an existing finance contract onto better terms or to release equity. The common thread is the same: putting the value tied up in your assets back to work.

How much you can raise depends on the asset and the lender, often somewhere around half to most of the equipment's current value. Standard, resale-strong machinery raises more than niche or heavily worn gear.

When it makes sense

Sale and leaseback is a working-capital tool, so it shines when you have genuine value sitting in owned assets and a good use for cash. Common situations:

• Funding growth. You have won a bigger contract and need cash to staff up or buy materials before the invoices land.
• Bridging a cash-flow gap. Seasonal businesses or those with long payment terms can smooth the lumps.
• Mobilising for a new job. Upfront costs on a new project before progress payments start.
• Consolidating dearer debt. Replacing higher-cost finance with a fixed, asset-secured facility.

It tends to suit asset-backed businesses with equipment that holds genuine resale value. If the gear is old, niche, or worth little second-hand, there is not much to lend against and the structure makes less sense.

The pros and the catches

The upside: fast access to working capital, you keep using the asset the whole time, and a fixed rate and term make budgeting easy. It converts dead equity into cash you can put to work, often more cheaply than unsecured business lending because the asset secures the deal.

The catches to weigh up:

• You no longer own the asset during the term, unless the structure includes a path back to ownership at the end.
• The total cost includes finance charges, so you are paying to access your own equity. It is only worth it if the cash does more for you than the cost.
• There can be tax and accounting consequences on the sale, including a possible capital gain or balancing adjustment. This is the part that genuinely needs your accountant before you proceed.
• It only works if the assets have real resale value to lend against.

How a typical deal runs

1. You identify the owned equipment you want to refinance.
2. The financier values it, usually at fair market value.
3. You sell it to the financier and receive the lump sum.
4. You lease it back and keep using it, repaying over an agreed term.
5. At the end you deal with the residual or, in some structures, regain ownership.

Because the structure can be built as a lease or along chattel mortgage lines, the tax treatment varies. That choice interacts with your finance structure and your accounting, so it is worth lining up the broker and accountant on the same call.

This is general information only and not financial, credit, or tax advice. Sale and leaseback has specific tax and accounting consequences that depend on your situation. Consider your own circumstances and speak to your accountant. All finance is subject to lender assessment and approval.

This article is general information only and not financial, credit, or tax advice. Ventas Asset Lending is a finance broker, not a lender. Approvals are subject to lender assessment. Consider your own circumstances and speak to a qualified professional, including your accountant for any tax questions.