Calculate an Equipment Sale-Leaseback

What a sale-leaseback is (in plain English)

A sale-leaseback turns owned equipment into cash without losing its use. You sell the asset to a financing partner and immediately lease it back. You unlock working capital today and repay over time through lease payments, with a buyout option at term-end.

Mehmi Financial Group structures Refinancing & Sale-Leaseback deals for Canadian SMEs across transportation, construction, manufacturing, hospitality, agriculture, and more. We also sell equipment directly from our in-house inventory if you’re upgrading or replacing gear.

The four numbers you need before you calculate

• FMV (Fair Market Value) – the agreed sale price for your asset today (often supported by comps, invoices, or an appraisal).
  
  
• Advance Rate (LTV) – percentage of FMV a lender will advance as cash (typical ranges vary by asset and age).
  
  
• Term & Rate – lease duration (months) and rate (APR or money factor).
  
  
• Residual / Buyout – your end-of-term purchase option (e.g., $10, 10% of cost, or FMV).
  
  

Helpful links as you prep numbers:

• Check your asset category in Eligible Equipment.
  
  
• Model payments with the Calculator.
  
  
• Compare structures: Equipment Leases vs Equipment Loans.
  
  
• For revolving purchases, consider an Equipment Line of Credit.
  
  
• Explore Asset-Based Lending if you’re also financing AR/inventory.
  
  

The sale-leaseback math, step by step

Step 1 — Estimate cash you’ll receive today (net proceeds)

Gross advance = FMV × LTV
Net proceeds = Gross advance − existing lien payout − fees

Fees vary by file (origination/admin, PPSA/registration, appraisal where applicable). Taxes may be financed or paid up front depending on structure. If your equipment has a lien, that lien is typically paid out at closing.

Step 2 — Calculate your monthly payment

Two common structures exist. Confirm which one your funding partner uses before you model:

• Full-capitalized lease: Payments are based on the full FMV (cap cost) with a chosen residual.
  
  
• LTV-principal lease: Payments are based only on the advanced amount (lower cap), with an appropriate residual.
  
  

Payment formula (balloon/residual lease):

Monthly Payment = (C−R(1+i)n)  i1−(1+i)−n\big(C - \dfrac{R}{(1+i)^n}\big)\;\dfrac{i}{1-(1+i)^{-n}}

Where:
C = capitalized cost (FMV or advanced amount)
R = residual/buyout at term-end
i = monthly rate (APR ÷ 12)
n = number of months

You can test scenarios instantly with our Calculator, then have our team quote a firm approval.

Worked example (illustrative only)

Assumptions

• FMV: $220,000
  
  
• LTV: 75% → Gross advance $165,000
  
  
• Fees: 2% of financed base + $595 doc (illustrative)
  
  
• Existing lien payout: $60,000
  
  
• Term: 60 months
  
  
• APR: 11% (monthly rate = 0.11/12)
  
  
• Residual: 10% (either of FMV or of financed base per structure)
  
  

Net proceeds today

Monthly payment comparison

Takeaway: the structure you choose changes both cash today and payment shape. Full-capitalized leases often show higher payments but may mirror equipment’s full cost; LTV-principal leases lower payments but cap the financed base.

When a sale-leaseback beats other options

• You own equipment free and clear or with low remaining debt.
  
  
• You need cash now for payroll, deposits, materials, or a new contract.
  
  
• You want to preserve bank lines for other needs.
  
  
• You prefer an operating-style expense with a clear buyout path.
  
  

If your assets are already leveraged or if you mainly need revolving flexibility, compare with Business Refinancing or a Line of Credit. For a simple working-capital top-up, consider a Working Capital Loan.

Tax & accounting notes (speak to your accountant)

Leases and sale-leasebacks can be treated differently for tax and accounting depending on buyout value, term, and structure. Many Canadian SMEs expense lease payments; ownership paths may involve depreciation and interest. Confirm treatment with your accountant and model both cash and after-tax impact using our Calculator.

Real-world case study (Ontario contractor)

An earthworks contractor owned two loaders and a dozer. Growth opportunities required cash for mobilization and crews before receivables hit.

• Mehmi structured a sale-leaseback on all three units at a blended LTV, paid out a small lien, and delivered net proceeds in 48 hours.
  
  
• The client chose a 10% residual, 60-month term to keep payments predictable.
  
  
• Proceeds covered deposits and onboarding for a larger municipal job. Revenues grew, and the client later exercised a mid-term refinance to reduce payments using Business Refinancing.
  
  

Common pitfalls (and easy fixes)

• Modeling the wrong cap cost. Confirm whether payments are based on FMV or advanced amount.
  
  
• Ignoring fees and taxes. Include them in cash-in/cash-out for a realistic picture.
  
  
• Forgetting the buyout. Your end-of-term residual (e.g., 10%) is part of the total cost of ownership.
  
  
• Not comparing alternatives. For frequent purchases, an Equipment Line of Credit might lower overall carrying cost.
  
  
• Mismatching term vs. useful life. Align the lease term to the asset’s remaining life; see our industry guidance: Transportation & Trucking, Construction & Contractors, Manufacturing & Wholesale, Hospitality & Food Service, Farming & Agriculture.
  
  

FAQ: Sale-Leaseback Calculations in Canada

How do I pick the right residual?
Choose a residual that matches expected resale value and your buyout plan. Common SME choices are $10 buyout or ~10% of cap cost.

What LTV can I expect?
It depends on asset type, age, condition, and marketability. Older/specialized assets often see lower LTVs; newer mainstream units may see higher.

Can I include taxes and fees in the lease?
Often, yes. Many clients finance taxes/fees for cash-flow relief; others pay them at closing. We’ll structure it either way.

Is a sale-leaseback only for “clear title” equipment?
No. If a lien exists, we typically pay it out at closing and net you the difference (see the table above).

What if I need more cash than the LTV allows?
Blend tools: add a Working Capital Loan or Asset-Based Lending against receivables/inventory.

How fast can it close?
With a clean file and clear title info, approvals are often 24–48h, and funding shortly after document execution.

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Ready to run your numbers?

Use the Calculator to model FMV, LTV, term, rate, and residual — then our credit analysts will structure the most cost-effective sale-leaseback for your situation. If you’re upgrading instead, we also sell equipment directly from our in-house Inventory.

Are you looking for a truck? Look at our used inventory.

Feel free to contact our credit analysts to get a firm quote, or read more about us here: About Us.