You own an excavator outright, or a couple of prime movers, or a workshop full of machining gear. The finance is long paid off and the equipment sits on the books as an asset. Then a run of slow-paying invoices, a new contract that needs a deposit on more gear, or a tax bill lands, and the cash you need is locked up in iron that is earning but not liquid.
Sale and leaseback is the structure built for exactly that situation. You sell an asset the business already owns to a financier, they pay you for it, and you lease it straight back and keep using it without missing a shift. The gear never leaves your yard. This page explains how the arrangement works, when it makes sense, how the valuation step drives everything, what happens at the end of the lease, the risks and costs to weigh, and how it differs from simply borrowing against the same asset.
How a sale and leaseback works
The mechanics are straightforward. A financier buys a piece of equipment you own and pays you an agreed amount for it. In the same transaction you sign a lease that gives you continuous use of that equipment for an agreed term, with regular payments back to the financier. Ownership passes to them; possession and use stay with you.
Because the deal frees up cash tied to gear the business already runs, it is sometimes called equipment sale and leaseback or sale and hire back. The labels describe the same idea: convert an owned asset into working capital while keeping it in service.
The amount you receive is set against the equipment's assessed value, not what you originally paid or what it is worth to you emotionally. From there the term, the payment size and any end of term arrangement get structured around what the asset can support and what your business can service.
When businesses actually use it
The structure earns its place in a few recognisable situations, and it is worth being honest about which one you are in before you go looking for quotes.
Freeing up cash for growth. A business with owned plant lands a bigger contract that needs a deposit on additional machines, more crew, or upfront materials. Rather than watch the opportunity pass, it releases capital from equipment it already owns and puts that cash to work on the new job.
Smoothing a cash flow squeeze. Seasonal work, a slow debtor, or a lumpy project cycle can leave a profitable business short on cash while its balance sheet is full of paid-off gear. A leaseback turns a static asset into liquidity without selling the tool you need to keep earning.
Restructuring after a period of paying assets down. Some operators buy gear outright when times are good, then later decide they would rather have that capital deployed elsewhere in the business. A leaseback lets them recover it without giving up the machine.
The common thread is that the equipment is still central to how the business makes money. If you no longer need the asset, you sell it and move on. Leaseback is for when you need both the cash and the gear.
The valuation step, and why it drives everything
Everything in a leaseback hangs off what the financier decides the asset is worth. This is the step that most surprises first-time users, so it pays to understand how lenders think about it.
A financier is buying an asset they may one day have to recover and resell. So they value it conservatively, on what it would realistically fetch in an orderly sale, not on replacement cost or sentimental value. Age, hours on the meter, condition, service history, brand, and how deep the resale market is for that type of gear all feed in. A well-maintained, in-demand machine with full service records values more strongly than a tired unit in a thin market.
Asset type matters too. Heavy plant and earthmoving gear tend to hold value and have active resale markets, which lenders like. Specialised or fast-depreciating equipment values more cautiously. This is the same logic that shapes heavy equipment finance and excavator finance, where the machine's resale profile is central to how any deal is written.
A formal valuation or inspection is common, especially for older or higher-value gear. Having your service records, hour readings, ownership proof and photographs ready makes this step faster and helps the asset present at its best.
What happens at the end of the lease
How the lease ends depends on how it was structured at the start, and this is a genuine decision point rather than an afterthought.
Some arrangements are built so you can take ownership back at the end, often through a final payment or option agreed up front. Others run purely as a lease, where at the end you hand the gear back, extend, or negotiate a new arrangement. A balloon or residual can be set to lower payments across the term with a larger amount owing at the end.
Each lever trades off against another. A structure that returns ownership to you tends to cost more across the term. Lower payments now usually mean a larger figure to deal with later. There is no single right answer, only the one that fits how long you plan to keep the asset and how much monthly room your cash flow has. The tax treatment of lease payments and end of term arrangements also varies with the structure, and that is a question for a registered tax agent or the Australian Taxation Office, not something to assume.
Risks and costs to weigh
A leaseback is a useful tool, not a free one. Weigh these honestly before you commit.
You give up ownership. The asset comes off your books as owned property and you now have lease payments and, depending on structure, a path to reacquire it or not. If the machine is central to the business for years to come, releasing it and paying to use it needs to earn its keep.
There are costs in the deal. Valuation, documentation and the financier's margin all sit inside the arrangement. What you receive up front is net of how the deal is priced, and pricing reflects the asset, the term, your trading history and the perceived risk. The only way to see real numbers on your own gear is to compare offers.
You take on an ongoing commitment. Payments run for the term regardless of how the work flows. A leaseback that solves a short squeeze but strains cash flow for years may just move the problem.
And the value you unlock is capped by the conservative valuation, not by what the asset is worth to your operation. If you are counting on a certain figure, get it assessed before you plan around it.
How it differs from simply borrowing against the asset
Both a leaseback and a loan secured by the same machine can put cash in your hands, but they are not the same thing.
With a secured loan you keep ownership of the asset and the lender takes security over it. You borrow, repay, and the security is released when the debt is cleared. With a leaseback you sell the asset outright, so ownership passes to the financier and you become a lessee using their property under agreed terms.
That difference flows through to everything else: how the arrangement sits on your books, how the tax treatment works, what happens at the end, and what the financier can do if payments stop. Neither is universally better. A leaseback can suit a business that wants the asset off its books and a clean lease structure; a secured facility can suit one that wants to retain ownership throughout. The right choice depends on your accounts, your plans for the asset, and advice from a registered tax agent on the treatment of each.
Common questions
Can a newer business use a sale and leaseback?
It can, but a limited trading history changes how the deal reads. Lenders weigh both the asset and the business behind the payments, so a newer ABN with strong owned gear and work lined up presents differently to an established operator. If your history is short, the same principles in equipment finance for a new business apply, and a low doc approach may come up in conversation with a broker.
Does the equipment have to leave my site?
No. The point of a leaseback is continuous use. The financier may inspect or value the gear, but in the ordinary course it stays in your yard and on your jobs throughout the term.
Is one lender's no the final word?
Not at all. Financiers differ in the assets they favour, how they value used gear, and their appetite for a given industry or trading history. A machine one lender values cautiously another may treat as strong security. Comparing offers is the practical way to see the spread rather than taking a single view as the market's answer.
Can I do a leaseback on older equipment?
Often yes, though age and hours affect the valuation and may narrow which financiers are interested. Full service records and evidence of condition help older gear present at its best.
What to do next
If you have owned equipment and a genuine business use for the cash it represents, a sale and leaseback is worth pricing properly. Get your ownership proof, service records and hour readings together, be clear on whether you want ownership back at the end, and then compare real offers on your actual gear.
You can request three free quotes at /quote/ to see what your equipment supports and how different financiers structure the arrangement. For the tax treatment of a leaseback, speak with a registered tax agent or check the current position with the Australian Taxation Office.