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

Key highlights

• Turns machinery you already own into working capital without losing its use
• The asset keeps operating while you free up cash for the business
• Lease rentals may be deductible where the equipment earns income
• Useful for growth, tax timing, debt consolidation or smoothing cash flow
• One application compares 80+ lenders for a competitive leaseback

What sale and leaseback means

In a sale and leaseback, you sell a machine your business already owns to a financier at an agreed value, then lease it straight back under a rental agreement. The equipment never leaves your yard or your job site, but ownership transfers to the lender and you receive the sale proceeds as a cash injection. You continue using the asset exactly as before, now paying regular rentals instead of holding it outright. It is a way to recycle the equity built up in owned plant into cash you can deploy elsewhere, without the disruption of actually parting with the machinery. From the outside nothing changes: the same excavator or loader runs the same jobs, and only the ownership and the monthly cost line quietly shift behind the scenes.

Why businesses use it

The core benefit is liquidity. Machinery is often a business's largest owned asset, and that value can be locked away when it would be more useful as working capital. A sale and leaseback releases that equity to fund growth, take on a big contract, consolidate more expensive debt, cover a seasonal dip, or invest in additional equipment. Because the machine stays in service, there is no loss of productive capacity. For operators who bought gear outright and later find cash is tight, it can be a far cheaper source of funds than unsecured borrowing, since the finance is secured by the asset itself. It is a particularly common move when a large opportunity, such as a major tender win, needs funding faster than a bank overdraft can be arranged and the equity in owned plant is the quickest lever to pull.

How the numbers are worked out

The amount you can raise depends on the current market value of the machinery and its age, condition and resale appeal. Lenders will assess the equipment, often against industry valuation guides, and advance an amount based on that figure. The leaseback rentals are then set over an agreed term, typically one to seven years, sometimes with a residual at the end if you want to reclaim ownership. Newer, mainstream machines in good order generally support a higher advance and keener rentals than older or specialised gear. Overdrive can help you understand what your equipment is likely to release before you proceed. You can also apply the structure across several owned machines at once, pooling the equity in a mixed fleet of loaders, trucks and attachments into a single, larger cash release.

Who sale and leaseback suits

This structure suits established businesses that own machinery outright and want to put that trapped equity to work. Civil and earthmoving contractors, plant hire operators and farmers with valuable owned plant are common candidates, particularly when a growth opportunity or cash-flow pinch arrives faster than the bank can move. It can also help businesses tidy up a patchwork of higher-cost debts into a single secured facility. If your equipment is already financed, this is less relevant, though refinancing may achieve a similar goal. It works best where you own the asset clear and have a productive use for the freed-up cash.

Rates, amounts and tax notes

Indicative leaseback rates start from around 6.55% p.a. for strong, asset-backed applicants, with older equipment, lower-doc submissions or weaker credit priced higher and subject to lender assessment. The capital released commonly ranges from about $20,000 up to $10 million or more, in line with the value of the machinery involved. Lease rentals are generally deductible where the asset is used to earn income, and GST usually applies to both the sale and the rentals, but the treatment can be intricate. This is general information only, so confirm the tax and GST outcomes with your accountant before committing, particularly around how the sale of the asset is treated in the period it takes place.

Eligibility, documents and speed

You will need to own the machinery outright, or close to it, and hold an active ABN. Lenders will want to verify the asset and will look at your credit and trading position, though lower-doc options using bank statements or BAS may be available where full financials are not to hand. Because the deal is secured by equipment you already have, it can move quickly, and for eligible applicants funds may settle within 24 to 48 hours. An enquiry through Overdrive is a soft credit check only, so you can find out what your gear could release without any impact on your credit score.

The value of comparing lenders

Financiers value machinery and price leasebacks differently, so the advance and rentals you are offered can vary widely from one lender to the next. Rather than testing the market yourself, Overdrive submits a single application and compares more than 80 banks and non-bank lenders on advance amount, rate, term and fees. You work with one broker, Simon Kendrick, who assesses your equipment, explains your options and negotiates to maximise what you release on sensible terms. That gives you confidence the leaseback is competitive rather than simply the first valuation you happened to receive. Because how a lender values your machine directly sets how much cash you walk away with, getting the equipment in front of the right valuers matters just as much as the rate.

If you have machinery working hard in your business but capital locked inside it, a sale and leaseback could free that value without slowing you down. Request an obligation-free quote and we will compare more than 80 lenders on one application. The enquiry is a soft credit check that will not affect your credit score, and for eligible applicants funds may settle quickly. Get in touch and we will help you turn owned plant into working capital on terms that suit your business. Tell us what you own and what you need the funds for, and we will show you what your equipment could release, with no obligation to proceed.