What Is Sale and Leaseback?

Key highlights

• A simple definition: sell an owned asset, then lease it back for cash
• You keep using the equipment while freeing up trapped capital
• Often used for cash flow, growth, tax bills or supplier payments
• Compare leaseback against other funding on a single application
• Speak with your accountant about repayment and any tax treatment

The definition in plain English

Sale and leaseback is best understood as two linked steps. First, you sell a piece of equipment your business owns outright to a financier for an agreed price. Second, that financier immediately leases the same equipment back to you, so you continue to use it while making regular repayments over a set term. The net effect is that you have converted an owned asset into a lump sum of cash without losing the use of it. It differs from a standard loan because the funding is tied directly to a specific asset you already hold. The amount you can raise depends on the asset's market value, age and condition, and on the lender's assessment. As always, figures are indicative and subject to lender criteria.

How the arrangement is structured

In a typical structure, the financier values the asset, agrees a purchase price and pays you that amount. Ownership transfers to the financier, and you sign a lease or rental agreement covering the repayment amount, term and any end-of-term options. Throughout the lease you operate the equipment normally, keeping it maintained and insured as the agreement requires. Depending on the arrangement, you may have options at the end of the term, which vary between lenders. Because the mechanics and conditions differ across financiers, two offers on the same asset can look quite different in cost and flexibility. Reading the terms closely matters, and comparing several offers helps you understand what you are really agreeing to before committing your business to a multi-year arrangement.

What businesses use the released cash for

The appeal of sale and leaseback is the flexibility of the cash it releases. Businesses commonly use the funds to steady cash flow through a quiet period, cover wages, buy stock ahead of demand, fund a fit-out or refurbishment, take on a larger contract, or meet a pressing supplier or tax obligation. Because the money is unrestricted working capital, you decide where it does the most good. This makes it attractive to owners who have real value in their plant but need liquidity rather than more equipment. Whether it is worthwhile depends on the repayment commitment against the benefit you gain. It is a tool for a specific situation, not a universal answer, so weigh it against your margins and plans before proceeding.

How it differs from a normal loan

A standard business loan advances cash based on your overall creditworthiness and, sometimes, security such as property. Sale and leaseback instead monetises one specific asset you already own, with that asset effectively backing the arrangement. This can mean access to funds for businesses that might find a large unsecured loan harder to obtain, since the equipment provides comfort to the lender. However, you give up ownership of the asset for the lease term, and the total cost over that term should be weighed carefully. It is not inherently cheaper or dearer than other options; it simply suits a different situation. Comparing it against unsecured loans, secured lending, lines of credit and invoice finance gives you the clearest view of what makes sense.

Who tends to use it

Sale and leaseback is most relevant to established businesses in equipment-intensive sectors: manufacturing, engineering, transport, construction, civil works, printing and food production among them. These operators often own substantial plant that has been paid off over the years, representing capital that is doing nothing beyond sitting on the balance sheet. If that equipment is unencumbered and still useful, it may unlock a meaningful sum. Lighter, service-based businesses with few owned assets usually find unsecured working capital or a line of credit a more natural fit. The right answer depends on what you own and how predictable your income is. Because circumstances vary so widely, it helps to talk through your specific position rather than assume a general rule applies to you.

Getting a realistic picture

If sale and leaseback sounds relevant, the next step is understanding what your assets might release and at what cost. Indicatively, business funding ranges from around $5,000 up to $5 million across the products we compare, with terms commonly from a few months to five years. Rates start from around 7.49% p.a. for stronger secured facilities, with unsecured and short-term options higher depending on turnover, term, security and credit profile. For eligible applicants, pre-approval can be same-day and funds may follow within 24 to 48 hours, though asset valuations can add a little time. Every figure here is indicative and subject to lender criteria and a full assessment, so use them to frame a conversation rather than as a promise.

Now you know what sale and leaseback is, the useful question is whether it suits your business. Overdrive Business Loans compares more than 80 banks and non-bank lenders on one application, so you can see leaseback alongside unsecured, secured and line-of-credit options and choose clearly. Simon Kendrick can explain the numbers and any commitment in plain language, with an obligation-free quote and only a soft credit check to start, so your score stays intact. For eligible applicants, funding may be arranged within 24 to 48 hours. Reach out for a relaxed, no-obligation chat, and check with your accountant on how any leaseback would sit within your tax position.