Sale and leaseback is where you sell an asset you already own to a lender and immediately lease it back, so you keep using it while releasing capital tied up in it. You receive an agreed sum for the asset, then pay rentals to the funder over a new term. Ownership passes to the lender.
Businesses use it to free up working capital from machinery, plant or vehicles that are already paid for — for example to fund a project, cover a gap in cash flow, or invest elsewhere. The asset stays in use throughout.
The costs and conditions need weighing carefully:
- You give up ownership of an asset you already owned outright, and take on a new
monthly commitment.
- The amount raised is based on the lender’s valuation, which may be below what
you consider the asset to be worth.
- Because the agreement is secured on the asset, missing payments can put it at
risk — including equipment your business relies on to trade.
- Lenders usually restrict how recently the asset was bought and require clear
title and proof of ownership.
There may be tax and accounting consequences to selling an asset you own, so speak to your accountant. Availability and terms are subject to lender assessment.