How Does Sale and Leaseback Work?

Key highlights

• Sell the asset, take the cash, then lease it back and keep using it
• Valuation, purchase, lease agreement and repayments form the process
• Released funds can support cash flow, growth, wages or tax bills
• Compare leaseback against other funding on one application
• Ask your accountant how the repayments and any tax effects apply

The process from start to finish

The mechanics of sale and leaseback follow a clear sequence. You identify an asset your business owns outright and approach a financier, who assesses its market value, age and condition. If the numbers work, the financier agrees a purchase price and buys the asset from you, paying an agreed lump sum. Ownership passes to the financier, and you sign a lease or rental agreement to keep using the equipment for regular repayments over a set term. Throughout, the asset stays in your workshop, yard or fleet, doing its job. At the end of the term, options depend on the specific agreement. The advance amount and terms are indicative and subject to lender criteria, so expect variation between financiers assessing the same equipment.

How the asset is valued

Valuation sits at the heart of the arrangement, because it drives how much cash you can release. Lenders look at the equipment's current market value, its age, hours or usage, condition, maintenance history and remaining useful life. Well-maintained, in-demand plant generally supports a stronger advance than aged or highly specialised gear. Some financiers use their own assessors, while others accept independent valuations. Because appetite and valuation methods differ, one lender may see more value in your asset than another, which directly affects the offer. This is a key reason comparing the market helps. A realistic view of your asset's worth also helps you judge whether the cash released justifies the repayment commitment you are taking on across the lease term.

The lease agreement and repayments

Once the sale completes, the lease agreement governs the rest. It sets the repayment amount, the term, your maintenance and insurance obligations, and any end-of-term options. Repayments are usually regular and fixed, which makes budgeting predictable, though structures vary between lenders. Terms commonly run from a few months up to five years depending on the asset and arrangement. It is important to read the agreement carefully, since conditions around early termination, servicing and end-of-term arrangements can differ significantly and affect the true cost. Comparing several agreements side by side, rather than accepting the first, helps you understand the total commitment. The goal is an arrangement whose repayments your cash flow can comfortably absorb while the released capital works elsewhere in the business.

Where the released capital goes

The cash you unlock is unrestricted working capital, so you direct it wherever it delivers most value. Businesses commonly use it to bridge seasonal dips, cover wages during a lean stretch, buy inventory ahead of a busy season, fund a fit-out or expansion, take on a larger contract, or clear a pressing supplier or tax bill. Because the money is not tied to a particular purpose, you keep full control. That flexibility is a large part of the appeal for owners who have equity in equipment but need liquidity. Whether the arrangement makes sense depends on the return you expect from deploying the cash against the cost of the lease, so it is worth mapping that out before committing your business.

What you need to qualify

To arrange a sale and leaseback, lenders generally want an active Australian ABN, clear evidence you own the asset outright, and a current valuation. Most look for a minimum trading history, often around six to twelve months, and consistent turnover that comfortably supports the repayments. Low-doc pathways may accept bank statements or BAS instead of full financials for some applicants. Your credit profile, existing commitments and the equipment type all influence the offer and the amount. Because each financier applies its own criteria, the same application can attract different outcomes across the market. Everything here is indicative and subject to lender assessment, so treat it as a guide to what to expect rather than a fixed rule for your business.

Timeframes and costs to expect

Speed depends on the asset and the lender. For eligible applicants, some facilities offer same-day pre-approval with funds potentially within 24 to 48 hours, though arrangements needing a formal valuation can take a little longer. Indicatively, business funding ranges from around $5,000 up to $5 million across the products we compare, with terms from a few months to five years. Pricing spans a wide band: rates start from around 7.49% p.a. for stronger secured facilities, with unsecured and short-term products higher depending on turnover, term, security and profile. All figures are indicative and subject to lender criteria and assessment. Comparing offers on cost, term and conditions gives you the clearest sense of the real commitment involved.

Understanding how sale and leaseback works is the first step; the next is seeing what it could do for your business. Overdrive Business Loans compares more than 80 banks and non-bank lenders on a single application, so you can weigh leaseback against unsecured, secured and line-of-credit funding and choose with clarity. Simon Kendrick will talk you through each step and the numbers, with an obligation-free quote and only a soft credit check to begin, so your score is unaffected. For eligible applicants, funding may be arranged within 24 to 48 hours. Get in touch for a straightforward conversation, and check with your accountant about how any leaseback would fit your tax position.