Selling an asset the business already owns to a financier and leasing it straight back. The machine never moves, the capital comes out, and the ownership goes with it.
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
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The short version
Sale and leaseback in five lines.
→The asset is sold and leased back in one transaction. The financier buys it at an agreed value and immediately leases it to the business, which keeps using it without interruption.
→It frees more than borrowing against the asset would. A lender advancing against security lends a proportion of value; a buyer pays a price. That gap is the reason to choose this structure.
→Ownership genuinely passes. The business becomes a lessee with the obligations of one, and the depreciation claim ordinarily moves with the asset, subject to the accountant’s confirmation.
→It is worth asking why the capital is needed. Funding growth is one thing. Funding an operating shortfall by selling productive assets is a signal worth taking seriously.
→Indicative only. Every band on this page is illustrative. Actual rates, fees and terms come from the financier after assessment.
What it is
Two transactions that happen at once.
The mechanics are two agreements executed together. The business sells an asset it owns to a financier at a value both agree, and the financier leases that same asset back to the business for a fixed term. Money moves once, from the financier to the business, and the machine does not move at all.
What makes it attractive relative to a secured loan is the amount. A lender taking security over an asset advances a proportion of what it would realise on sale, commonly well under two thirds. A financier buying the asset is paying a price for it, which is closer to its value. On a substantial piece of plant that difference can be tens of thousands of dollars, and where maximum capital release is the objective it is the deciding factor.
What it costs is ownership. The business is a lessee afterwards, with lease obligations, a return condition at the end unless it settles a residual, and no asset on its books where one used to be. That is a real change even though the machine is in the same shed doing the same work, and it is worth being clear-eyed that the trade is capital now against ownership later.
Common term
24 to 60 months
Indicative rate band
10% to 18% p.a.
Valuation basis
Current market value
Registered on
PPSR
The comparison
Against borrowing secured on the same asset.
Illustrative on stated assumptions, using a machine with an agreed market value of $150,000. Not an offer of credit.
Sale and leaseback
Secured asset loan
Capital released
Closer to $150,000
Commonly $60,000 to $105,000
Who owns the asset after
The financier
The business
Indicative rate band
10% to 18% p.a.
10% to 18% p.a.
Obligation created
Lease rentals
Loan repayments
At the end of the term
Return, settle a residual, or renew
The security is released
Depreciation claim moves
Ordinarily yes
No, the business keeps it
Fits when
Maximum release is the objective
Ownership matters and less capital is enough
Illustrative comparison on a $150,000 asset. Tax treatment in both is subject to the accountant’s confirmation.
The honest part
What the capital is for matters more here than anywhere else on this site.
Every structure on this site can be used well or badly, and this one has the widest gap between the two. Used to fund something that earns, it is straightforward treasury: capital sitting inertly inside a machine is put to work, and the lease cost is covered by what the capital does. Used to fund an operating shortfall, it is a business selling its productive assets to pay for last month, and it has now spent the option of doing that again. The shortfall usually returns, the plant is gone, and there is a lease commitment on top. That is not a reason to avoid the structure. It is a reason to be honest internally about which of the two situations applies, because a financier assessing serviceability will not ask the question hard enough to answer it for you.
Worked scenarios
Two uses, illustratively.
Illustrative scenarios on stated assumptions, showing the same transaction in two very different situations.
A contractor with plant owned outright and a working-capital gap
Funding a contract already won
The business has won a substantial contract requiring materials and labour ahead of the first progress payment. It owns machinery outright worth around $150,000 and has no property to secure against.
A sale and leaseback releases close to the full value where a secured loan would have released a fraction of it. On these assumptions a 48-month arrangement at an indicative 12% carries a rental near $790 a week, and the contract covers it several times over. The capital is going somewhere that earns more than the arrangement costs, which is the whole test.
Indicative figures
Asset value
$150,000
Term
48 months
Indicative weekly
~$790
What the capital does
Delivers a won contract
A business several months behind on supplier payments
Covering a shortfall
The same transaction, the same asset, the same rental. The capital clears the arrears and the business continues trading on the pattern that produced them.
Three months later the position has reproduced itself, the plant is no longer owned, and there is a lease commitment on top of the original cost base. The transaction did not cause that and it did remove the one option the business was holding in reserve. In this scenario the useful step was never the finance; it was whatever addresses why the shortfall exists.
Indicative figures
Capital released
Clears the arrears
Underlying position
Unchanged
Assets owned after
Fewer
Fixed costs after
Higher
The process
What a sale and leaseback typically involves.
Written as an observation of what commonly happens rather than as instructions. Every financier differs, and none of this is a guarantee of an outcome.
01
2 to 5 working days
Ownership and title are established
The business has to be able to sell the asset, which means clear title and no existing security interest. A PPSR search confirms it, and where an earlier facility remains registered despite being repaid, the discharge has to be completed first.
Documents commonly required
·Proof of ownership
·PPSR search result
·Discharge of any prior interest
02
1 to 3 weeks
The asset is valued
Because the financier is buying rather than lending against, the valuation carries more weight than in any other structure here. An independent valuation or dealer appraisal establishes the purchase price, and it is commonly lower than the business expects because it reflects market value rather than replacement cost.
Documents commonly required
·Independent valuation or appraisal
·Service history
·Serial or VIN number
03
5 to 15 working days
The business and the purpose are assessed
Serviceability is assessed as on any lease, and financiers commonly ask what the capital is for. The answer matters here more than elsewhere, because a sale and leaseback funding a shortfall is a different credit proposition from one funding a contract.
Documents commonly required
·Financial statements
·12 months of bank statements
·NZBN and GST details
04
1 to 3 working days after acceptance
Both agreements are executed together
The sale and the lease are signed at the same time, the financier pays the purchase price to the business, and its ownership and any security position are recorded. The first rental usually falls a month later.
Documents commonly required
·Sale agreement
·Lease agreement
·Insurance certificate naming the financier
Selling an asset produces a tax event. Where the sale price differs from the asset’s depreciated book value, an adjustment arises in that year, and on a substantial piece of plant it can be material. That is a question for the accountant before the transaction rather than after it.
Honest assessment
Where sale and leaseback fits, and where it does not.
Where it fits
·Maximum capital release from an owned asset is the objective
·The capital is going somewhere that earns more than the arrangement costs
·The business has plant but no property to secure against
·The asset is mainstream enough to be valued and bought confidently
·Continuing to use the asset matters, so selling it outright is not an option
Where it does not
·The capital would cover an operating shortfall rather than fund something that earns
·Ownership of the asset matters contractually or is otherwise required
·Less capital would do, where a secured asset loan keeps ownership intact
·The tax adjustment on disposal has not been checked and could be material
·The asset is specialised enough that the valuation will disappoint
Test the maths
A sale and leaseback, in weekly numbers.
Entering the agreed sale value gives an approximation of the rental. The number worth putting beside it is what the released capital is expected to earn. Indicative only, and not a quote or offer of credit.
Context for establishing the selling entity and its authority to dispose of assets.
FAQ
Sale and leaseback in New Zealand, questions answered
What is a sale and leaseback?
A transaction where a business sells an asset it owns to a financier and immediately leases it back. The financier pays the purchase price, the business keeps using the asset without interruption, and it becomes a lessee. The asset never physically moves.
How much capital does it release?
Closer to the asset’s market value than a secured loan would, because the financier is buying rather than advancing a proportion against security. On a $150,000 machine the difference between the two routes can be tens of thousands of dollars, which is the main reason to choose this structure.
Does the business lose the use of the asset?
No. That is the entire point. The machine stays where it is and keeps working under the lease. What the business loses is ownership, along with the depreciation claim, subject to the accountant’s confirmation, and it takes on lease obligations in place of an owned asset.
Is a sale and leaseback a sign of distress?
Not inherently, and it is worth asking. Used to fund a contract already won or a growth step with a clear return, it is ordinary treasury. Used to cover an operating shortfall, it converts productive assets into short-term cash without changing what caused the shortfall, and it spends an option the business was holding in reserve.
What tax consequences does the sale create?
Selling an asset for more or less than its depreciated book value produces an adjustment in the year of disposal, and on substantial plant it can be material. The GST treatment of the sale and of the subsequent rentals also needs establishing. Both are questions for the accountant before the transaction rather than after it.
Can the asset be bought back at the end?
It depends on the lease. Where a residual is set, settling it returns ownership to the business. Where the lease is a true operating lease, the asset goes back. Which applies is decided when the arrangement is written, so it is worth being explicit about the intention at that point rather than assuming.
What kinds of asset suit this structure?
Mainstream plant and vehicles with an established resale market, because the financier is buying and needs confidence in what it is buying. Specialised equipment with few New Zealand buyers attracts a lower valuation and sometimes no offer at all, for the same reason it attracts a shorter term everywhere else on this site.
Must the asset be owned outright?
To sell it, yes, and it must be free of any registered security interest. Where an earlier facility is still registered despite being repaid, the discharge has to be completed first. A PPSR search establishes the position and is the first step in any application.
How is it treated for accounting?
NZ IFRS 16 contains specific requirements for sale and leaseback transactions, including whether the transfer qualifies as a sale at all for accounting purposes. That is technical and depends on the terms, and for entities reporting under that standard it is worth establishing with the accountant before the documents are signed.
How long does a sale and leaseback take to arrange?
Typically longer than any other structure here, commonly three to six weeks, because a formal valuation is usually required and the financier is buying rather than lending. Where capital is needed urgently, that timeline is worth establishing at the outset rather than assumed.
Can a business do this with several assets at once?
Commonly yes, and it is frequently how the structure is used, because a single machine rarely releases enough to be worth the transaction cost. Bundling several assets into one arrangement spreads that cost and produces a more useful sum, and it also commits more of the business’s plant to one agreement.
Is it more expensive than a secured loan?
The indicative rate bands are broadly similar, and the total cost is usually higher because more capital is being provided over the same period. The comparison that matters is not the rate but whether the extra capital released is worth the extra cost and the loss of ownership.
Indicative content only. Not personalised financial advice.
Financing a machine is a commitment that runs for years, and the repayments come out of the same operating cash flow as everything else. Modelling the weekly and monthly cost against the working-capital position before committing is what this site is built for. Borrowing at a level that stays comfortable through a quiet quarter, rather than only through a strong one, is widely regarded as the safer frame.
What this site is
A calculator and information tool. Not a lender, not a broker, not a registered financial adviser. Nothing here is personalised financial advice.
What the figures show
Modelled estimates based on the inputs shown. Not a quote. Not an offer of credit. Not a guarantee of approval, rate or fees.
What the lender decides
Final rates, fees, and approval are set by the lender after a CCCFA-appropriate assessment of the applicant's circumstances and credit decision.
Commercial disclosure
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Tax, GST, and accountant framing
Tax-treatment statements (GST claim timing, interest deductibility, depreciation rates) are general in nature and subject to the accountant's confirmation on the specific business position. For material amounts, professional advice from a registered financial adviser or chartered accountant is widely regarded as the safer frame.
