Sale & Leaseback: How It Works, Rates & Who It Suits

Key highlights

• Turn owned equipment or vehicles into working capital
• Keep using the same assets throughout the lease term
• Injects cash without taking on conventional new debt
• Well suited to businesses that are asset-rich but cash-tight
• Lease repayments spread over an agreed, manageable term

What sale and leaseback is

Sale and leaseback is an arrangement where your business sells an asset it already owns outright, such as machinery, equipment or a vehicle, to a financier, then immediately leases it back for continued use. You receive the sale proceeds as a cash lump sum, and in return you make regular lease payments to use the asset as before. Nothing changes operationally: the equipment stays in your workshop or the vehicle stays on the road, and your team keeps working as normal. What changes is your balance sheet, as capital that was locked up in the asset is released into cash you can put to work. It is a way to extract value from what you own without selling up or slowing down.

How it works step by step

The financier first assesses the asset's value, usually favouring items that are still in good condition and have useful life remaining. They agree a purchase price and buy the asset from your business, paying you the proceeds. At the same time, a lease is put in place setting out the regular payments and the term over which you will use the asset. You continue operating exactly as you did before, simply paying to lease rather than owning outright. At the end of the term, depending on the structure, you may have the option to buy the asset back or refresh the arrangement. Because the asset provides the security, the funding is grounded in real value rather than unsecured risk.

Who sale and leaseback suits

This arrangement suits businesses that are asset-rich but cash-tight, sitting on valuable owned equipment or vehicles while needing funds for growth, working capital or another purpose. It is common among manufacturers, transport operators, construction firms and trades that own significant plant and machinery. It suits businesses wanting to release capital without taking on a conventional loan, or those restructuring their finances to improve cash flow. It can also help fund an expansion, smooth a seasonal dip, or provide a buffer during a period of change. It is less suited to assets that are near the end of their working life or worth little, since the amount released depends on the value the financier places on them.

Benefits and considerations

The clear benefit is liquidity: you convert an illiquid asset into cash while keeping full use of it, which can be far more productive than leaving value tied up in owned plant. It can improve cash flow, fund growth, or provide working capital without disrupting operations. On the other side, you no longer own the asset outright during the lease and you take on regular payments, so the value released needs to be worth more to the business than the ongoing cost. There are also potential tax and accounting implications, since lease payments and ownership treatment differ from owning outright, and these should be confirmed with your accountant. Weighing the cash freed up against the lease cost is the key judgement.

Eligibility, amounts and rates

Lenders assess the asset first, looking at its type, age, condition and resale value, alongside your business's trading position. You will generally need an active ABN and clear ownership of the asset being sold. Because the funding is asset-backed, the amount released is tied to the value of what you own, and multiple assets can sometimes be combined. Funding is available from around $5,000 up to $5 million, indicative and subject to the assets and your profile. Rates start from around 7.49% p.a. for stronger secured facilities, with older assets or weaker credit priced higher depending on term and profile. Lease terms typically run from a short period up to five years. Enquiring is a soft credit check that will not affect your credit score.

Why compare lenders

Financiers value assets differently and structure leasebacks in various ways, from the price they will pay for the asset to the lease term, end-of-term options and pricing. The difference in how two lenders value the same equipment, and what they charge to lease it back, can be considerable. Overdrive compares a panel of 80+ banks and non-bank lenders on one application, matching your assets with financiers who understand their value and offer sensible terms. We manage the valuation and paperwork, explain the structure and its implications, and present genuine offers so you release the most sensible amount of capital on terms that keep the arrangement worthwhile. For the tax and accounting side, we will suggest you check with your accountant.

Which assets qualify

Not every asset is suitable for a sale and leaseback, so it helps to know what financiers look for. The strongest candidates are assets you own outright, that hold clear resale value, and that still have useful working life ahead of them, such as well-maintained machinery, plant, commercial vehicles and specialist equipment. Newer, widely used and easily valued assets tend to release the most capital on the keenest terms, while very old, highly specialised or low-value items may release little or not qualify. Multiple assets can sometimes be combined to unlock a more meaningful sum. Understanding the likely value before you proceed avoids disappointment, and a broker who knows how different financiers value equipment can quickly tell you whether your assets are good candidates and roughly what they might release.

If your business owns valuable equipment or vehicles but needs cash, sale and leaseback can release that capital while you keep using the very assets that keep you trading. Speak with Overdrive for an obligation-free quote and we will compare a panel of 80+ banks and non-bank lenders to value your assets and structure the lease on sensible terms. There is no obligation to proceed, and enquiring is only a soft credit check, so your credit score is unaffected. We manage the valuation and paperwork and explain the structure clearly. Confirm the tax and accounting treatment of the arrangement with your accountant before you commit.