An equipment sale-leaseback lets you sell equipment you already own to a lender or lessor for a lump sum of cash, then lease it back and keep using it. It unlocks the trapped equity in paid-off machinery, trucks, or heavy equipment for working capital — without a conventional loan. You trade ownership for liquidity: lease payments (generally tax-deductible) replace owning the asset outright. It's most attractive when the alternative is a high-rate short-term loan or merchant cash advance.
If your business owns valuable equipment outright but is short on cash, a sale-leaseback turns that hard asset back into working capital while you keep operating the same gear. It's a staple for equipment-heavy businesses — construction, trucking, manufacturing — that have real value sitting in their fleet or shop floor. Here's how it works and when it's the right call.
How a Sale-Leaseback Works
Three steps: (1) a lender/lessor appraises and buys equipment you own, paying you a lump sum; (2) you immediately lease it back under a fixed-term lease and keep using it without interruption; (3) at the end of the lease you typically have an option to buy it back (often for a nominal or fair-market amount, depending on the lease type). Functionally it's a loan secured by equipment you already own — but structured as a lease, which changes the tax and balance-sheet treatment.
When It Makes Sense
- You own valuable, paid-off equipment and need cash for growth, payroll, a slow season, or a big opportunity.
- You want to avoid a high-cost short-term loan or MCA — leasing back your own equipment can be cheaper than those alternatives.
- You'd struggle to qualify for unsecured credit — the equipment secures the deal, so approval leans on the asset.
- You want to consolidate higher-rate debt into a single, predictable lease payment.
Pros & Cons
| Pros | Cons |
|---|---|
| Immediate liquidity from assets you already own | You give up ownership and pay to use your own equipment |
| No separate loan; equipment secures it (easier to qualify) | Total cost can exceed the cash you receive |
| Lease payments generally tax-deductible as an expense | You may lose depreciation benefits of owning |
| Predictable fixed payments; buy-back option at term end | Advance is a percentage of appraised value, not full value |
Always run the all-in cost against your alternative. Compare with a straight equipment loan or lease and with working capital options before committing.
What Equipment Qualifies
Lenders want titled or serialized, long-lived equipment with clear resale value that you own free-and-clear or with minimal remaining financing — heavy construction equipment, trucks and trailers, CNC and manufacturing machinery, and similar. They appraise it and advance a percentage of value. Older, highly specialized, or fast-depreciating assets get lower advances; clean title and good condition get the best terms. Tax treatment varies by lease structure, so confirm the details with your accountant.
Next Step
If you're equipment-rich but cash-tight, a sale-leaseback may beat a high-rate loan. Get matched with sale-leaseback lenders to see what your equipment can free up and at what cost.
A worked example
Say a contractor owns a paid-off excavator and skid steer worth about $200,000 and needs cash for a big project. A lessor appraises the gear, buys it for roughly $150,000–$170,000 (a haircut to resale value), and leases it straight back over 36–48 months. The contractor gets a lump sum today and keeps using the same machines, then owns them again at the end on a $1-buyout structure or returns them. The cash is pricier than a bank loan against the equipment, but it is available to a business that is asset-rich and cash-tight and could not pass conventional underwriting.
Tax and accounting notes
A sale-leaseback has tax consequences worth running past your accountant. Selling equipment you have already depreciated can trigger a gain, and the lease payments are generally deductible as a business expense — but whether the deal is treated as a true lease or a financing (capital) lease changes how it hits your books and your taxes. Confirm the structure before you sign, because the wrong classification can erase the benefit you were after.
Frequently Asked Questions
What equipment qualifies for a sale-leaseback?
Titled or serialized, long-lived equipment with clear resale value that you own free and clear or nearly so — trucks, trailers, heavy machinery, and major shop equipment are typical. Fast-depreciating or hard-to-resell items are poor candidates.
Is a sale-leaseback a loan?
Not technically — you sell the asset and lease it back, so it is structured as a sale plus a lease rather than borrowing. Practically it works like asset-based financing: you convert owned equipment into cash and pay to keep using it.
Frequently Asked Questions
What is an equipment sale-leaseback?
A sale-leaseback is a financing move where you sell equipment you already own to a lender or lessor for a lump sum of cash, then immediately lease it back and keep using it. You get working capital out of an asset you already paid for, and you make lease payments instead of owning it outright. It's a way to unlock the trapped equity in machinery, trucks, or heavy equipment without taking on a conventional loan.
When does a sale-leaseback make sense?
It fits when a business owns valuable, paid-off (or lightly financed) equipment but needs cash for working capital, growth, payroll, a downturn, or to consolidate higher-cost debt. Common users are construction, trucking, manufacturing, and other equipment-heavy operators sitting on real value in their fleet or machines. It's most attractive when the alternative — a high-rate short-term loan or MCA — would cost more than leasing back your own equipment.
What are the pros and cons of a sale-leaseback?
Pros: immediate liquidity from assets you already own, no need to add a separate loan, lease payments are generally tax-deductible as an operating expense, and it can be easier to qualify for than unsecured credit because the equipment secures it. Cons: you give up ownership and pay to use your own equipment, the total cost can exceed the cash you receive, and you may lose depreciation benefits you'd have kept by owning. Run the all-in cost against the alternative before committing.
What equipment qualifies for a sale-leaseback?
Lenders want titled or serialized, long-lived equipment with clear resale value that you own free-and-clear or with minimal existing financing — heavy construction equipment, trucks and trailers, manufacturing machinery, and similar. They'll appraise the equipment and advance a percentage of its value. Older, specialized, or fast-depreciating items get lower advances; clean title and good condition get the best terms.