If cash is tied up in trucks, trailers, or shop equipment while payroll, parts, or tax installments loom, a sale-leaseback can be the cleanest fix. You sell equipment you already own (or mostly own) to a finance partner and immediately lease it back—freeing cash now while keeping the asset working on site. As both a financing partner and seller of commercial assets, Mehmi Financial Group structures sale-leasebacks across Canada with milestone funding, soft-cost bundling, and fast decisions. If you’d like a second set of eyes on your situation, feel free to contact our credit analysts.
What is a sale-leaseback? (Plain English)
You convert equity in owned equipment into cash. Title transfers to the lender; you get funds and a lease with predictable monthly payments. At term end, you buy it back (e.g., $10 or fixed residual) or roll/upgrade.
Why businesses use it:
- Liquidity for payroll, parts/inventory, CRA installments, or growth projects
- Debt consolidation—retire high-cost short-term loans/MCA
- Credit bridge—B/C/D credit can still be approved with strong collateral
- Opportunity capture—buy inventory at a discount or win a time-sensitive contract
Explore structures: Refinancing & Sale-Leaseback • Financing & Leasing.
What assets are eligible?
- Transportation: Class 8 tractors, day cabs, dumps, reefers, dry vans, flatbeds
- Construction/Industrial: Excavators, skid steers, loaders, dozers, forklifts, scissor/boom lifts, compressors, CNC, press brakes
- Medical & Services: Imaging/laser, dental/vet/lab, washers/autoclaves, POS & back-office stacks
- Agriculture: Combines/headers, grain handling, dryers/bins, irrigation, mixers
- Hospitality/Retail: Espresso lines, dishwashers, refrigeration, display cases
When our in-house inventory fits, we can also sell and finance assets directly for one-contract simplicity.
How a sale-leaseback works (step-by-step)
- Scope & valuation. You send asset list (VIN/serials, hours/km, photos). We price fair market value and target advance.
- Underwriting. We focus on bank-statement coverage, asset quality, insurance, and clear PPSA. B/C/D credit is workable with solid collateral.
- Offer & structure. Choose FMV (lower payment, flexible exit) or fixed residual/$10 (clear path to ownership).
- Docs & payoff (if encumbered). We clear liens/pay off balances; you receive net proceeds.
- Funding & lease start. You keep the equipment on site, insured, and productive.
- After 12–18 clean payments, we can revisit pricing via Refinancing.
Terms, pricing levers, and payment shaping
- Term: 24–72 months (84 for larger packages)
- Advance rate: Typically a % of appraised value; higher on late-model mainstream assets
- Down / first & last: 0–15% or 1–2 payments in advance (improves B/C/D files)
- Payment options: Step-up during ramp, seasonal/skip for ag/forestry, or standard level payments
- Security: PPSA on assets; insurance naming lender as loss payee; telematics where applicable
Use our Calculator to ballpark monthly impact.
When a sale-leaseback is the better tool
- Time-sensitive cash need and solid equipment value
- Bank said no / too slow but work is lined up
- Refi pivot from expensive MCA/short-term loans
- Project with heavy soft costs (install, training, cabling) you’d like to bundle into one facility
Compare overlays if needed: Equipment Line of Credit for flexible spend, or Invoice Factoring to accelerate AR.
Underwriting: what actually moves approvals
- Asset quality & resale. Mainstream OEMs, good hours, service history, inspection photos, parts support
- Cash-flow coverage. 6–12 months of business bank statements with room for the new payment
- PPSA hygiene. Clear liens or documented payouts; no unresolved conflicts
- Insurance & risk. Correct limits, theft/fire coverage, loss-payee language in place prior to funding
- Sponsor strength. Operator experience, plan for utilization, and simple contingency (backup unit/rental)
If documentation is light, send what you have—our team will stage the rest.
Taxes & accounting (read this carefully)
A sale-leaseback is typically structured as a lease; tax treatment depends on your accountant’s advice and the lease type (FMV vs. capital). Many clients prefer the predictability of monthly expense; others target ownership economics. We’ll map both versions, but always confirm with your CPA.
Broker fast-track: from list of assets to funds in seven steps
- Asset list with VIN/serials, hours/km, photos
- 6–12 months bank statements + last filed year & YTD interims (if available)
- Insurance contact to add loss-payee language
- PPSA search & any payout letters (if encumbered)
- Offer review: FMV vs. fixed residual, term, step-up/seasonal
- Sign docs; lien payouts and net proceeds released
- Post-funding check-in; set a 12–18 month refinance reminder
Case study (Ontario): Breaking the MCA cycle
Situation. Transport firm had three paid-off tractors and two trailers; cash squeezed by MCA repayments and a large repair bill.
Solution. Sale-leaseback on all five units with a 60-month fixed-residual and 3-month step-up. Proceeds retired the MCA and covered repairs; payments aligned to stable weekly billings.
Outcome. DSO improved; after 14 on-time payments we refinanced, trimming monthly ~8%. Working capital normalized without selling core assets.
Common pitfalls (and how to avoid them)
- Hidden liens. Run PPSA early; get payoff letters to avoid last-minute delays.
- Under-insuring. Confirm limits and add lender as loss payee before funding.
- Over-advancing on tired assets. Be realistic on value; package photos and service records to support pricing.
- Ignoring soft costs. Installation, cabling, rigging, and training are often eligible—bundle them up front.
FAQs
What credit score do I need?
Many lenders prefer 650+, but strong collateral and stable deposits can offset thinner credit.
Can I sale-leaseback multiple assets at once?
Yes—common for fleets or shop packages; you receive one consolidated facility.
Used equipment okay?
Often yes—late-model mainstream assets with healthy resale and documented condition.
Can I lower the payment later?
Often. After 12–18 clean payments, we can explore refinancing to reduce rate or extend term.
Can soft costs be included?
Frequently. Delivery, install, training, and even small build-outs may be eligible.
Ready to unlock cash from your equipment?
If you’re weighing FMV vs. fixed-residual—or deciding which units to include—feel free to contact our credit analysts for tailored guidance. Get a quick estimate using our Calculator, explore Refinancing & Sale-Leaseback and Financing & Leasing, consider cash-flow overlays like an Equipment Line of Credit or Invoice Factoring, and when you’re ready, Contact Us for next steps.
.avif)