The basic transaction
The business sells eligible equipment to a financing company at an approved value and immediately leases it back. The financing company becomes the legal owner during the lease, and the business keeps the asset operating subject to the agreement.
The available proceeds depend on current market value, lender advance limits, condition, ownership and any liens—not what the equipment cost years ago.
Assets and ownership must be clear
Expect to provide purchase evidence, serial numbers, registrations where applicable, photos, hours or kilometres, maintenance information and details of existing liens. An independent appraisal or inspection may be required.
Highly specialized, obsolete, damaged or difficult-to-value equipment may not produce usable proceeds.
Review the reason and the cost
A sale-leaseback creates a new payment and security obligation. The business should understand the use of funds, total lease cost, end-of-term rights, tax consequences and what happens if the agreement ends early.
Get independent accounting and legal advice before proceeding.
Key points to carry into the transaction
- Current value determines the starting point
- Ownership and liens must be verified
- An appraisal may be required
- The equipment remains in use under contract
- Independent tax and legal advice is important