Quick answer: Refinancing or a sale-leaseback may release equity from eligible business equipment, subject to valuation, existing liens and the business’s repayment capacity. Compare net cash after payouts and fees with the full replacement payment schedule and any change in ownership or security.
If your business owns valuable equipment—trucks, trailers, CNC machines, commercial kitchen gear, or medical devices—but you’re short on working capital, you may be sitting on a hidden source of liquidity.
That’s where equipment sale-leaseback financing comes in.
This underused strategy lets you sell your equipment to a lender for cash—then lease it back so you can continue using it without disruption. It’s a smart move for companies looking to:
- Reinvest in growth
- Bridge payroll or vendor payments
- Bid on new contracts
- Or simply strengthen cash flow during tight quarters
In this guide, we’ll break down exactly how sale-leasebacks work, when they make sense, and how they compare to traditional refinancing or loans.
What Is a Sale-Leaseback?
A sale-leaseback is a two-part financing agreement:
- You sell equipment you already own to a lender (typically at fair market value).
- You lease it back through monthly payments, so your operations stay uninterrupted.
The asset remains in your hands—you keep using it just like before—but now it’s generating cash flow instead of sitting as locked-up equity.
This structure is commonly used in transportation, construction, manufacturing, medical, and food service industries.
Why Businesses Use Sale-Leaseback Financing
Many Canadian businesses run asset-heavy operations but have limited access to capital through banks—especially if they need to:
- Catch up on tax, payroll, or vendor obligations
- Fund equipment repairs or insurance premiums
- Expand crews or inventory ahead of a busy season
- Pay off high-interest debt (e.g. merchant cash advances)
Rather than borrowing new money, a sale-leaseback releases capital from assets you already own.
Common Equipment Eligible for Sale-Leaseback
| Industry | Typical Eligible Equipment |
|---|---|
| Trucking | Highway tractors, trailers, reefer units |
| Construction | Excavators, skid steers, compactors, lifts |
| Manufacturing | CNC machines, presses, conveyors |
| Medical | X-rays, ultrasound, sterilizers, lab equipment |
| Food Service | Commercial ovens, refrigeration, dish lines |
Pros of Sale-Leaseback Financing
✅ Immediate cash injection – Get working capital in days
✅ No operational disruption – Keep using the equipment
✅ Doesn’t dilute ownership – Unlike equity financing
✅ More accessible than bank loans – Flexible underwriting
✅ Improves balance sheet liquidity – Converts fixed assets to cash
✅ Works with used or private-sale gear – Age-flexible if equipment has value
Cons or Limitations to Consider
⛔ You no longer own the equipment outright – Though you regain ownership at lease-end if structured that way
⛔ Monthly lease payments resume – Adds back a payment obligation
⛔ Not every asset qualifies – Very old or low-value gear may not be eligible
⛔ May involve inspection or third-party valuation – Especially for used assets
When Does a Sale-Leaseback Make Sense?
This structure is ideal when:
- You own equipment with market value and no lien
- You need access to capital, subject to lender review.
- You’re not ready to give up or sell the equipment
- You have a short-term cash need but long-term growth outlook
- You want to avoid traditional loans or adding more debt
It’s especially popular with:
- Transportation fleets trying to fund additional drivers
- Contractors preparing for new job site mobilizations
- Medical clinics upgrading diagnostic systems
- Manufacturers balancing inventory financing
Real Case Study: Food Wholesaler Uses Sale-Leaseback to Fund Growth
Business: Toronto-based food distributor
Challenge: Needed $95,000 to launch a new delivery route and hire staff—but bank line was maxed out
Assets Owned: Two 5-ton refrigerated trucks (paid off)
What They Did:
- Entered a sale-leaseback on both trucks
- Received $92,000 cash within 3 business days
- Structured as a 36-month lease with $1 buyout per truck
Result:
They launched the new route in under two weeks, increased order volume by 22%, and used the extra revenue to reinvest in inventory. Equipment usage continued uninterrupted.
How Sale-Leasebacks Compare to Other Financing Options
| Financing Type | Requires New Purchase? | Asset Ownership | Cash Received Upfront | Best For |
|---|---|---|---|---|
| Equipment Loan | Yes | You own | No | Buying new or used gear |
| Lease-to-Own | Yes | Lender owns until buyout | No | Low down payment option |
| Sale-Leaseback | No – uses existing gear | Lender owns temporarily | Yes | Freeing up capital from assets you own |
BDC distinguishes a revolving operating facility from a term loan when explaining cash-flow financing.
“A line of credit is appropriate for short-term financing needs”
Match the repayment structure to when cash is expected to arrive. Confirm whether the facility revolves, how repayments work and which security and renewal conditions apply.
What You’ll Need to Qualify
Lenders typically want:
- Proof of equipment ownership (no liens)
- Serial numbers and condition photos
- Equipment inspection or valuation
- Business registration and photo ID
- 3–6 months of bank statements
Approval and funding timelines vary by lender, application completeness, and required conditions.
Explore full details on our Refinancing & Sale-Leaseback Services.
FAQs: Sale-Leaseback Equipment Financing
Do I lose the equipment?
No—you continue using it through a lease. In most cases, you can buy it back at the end of the term for as little as $1.
What’s the difference between a leaseback and a loan?
Loan = debt on new asset.
Leaseback = you unlock equity from an asset you already own.
Can I refinance the equipment again later?
Yes. You may be able to restructure, buy it out early, or refinance the lease again if business conditions change.
Does it affect my credit?
It appears as a lease obligation. If managed well, it can actually strengthen your borrowing profile by improving cash flow.
Want to turn your equipment into working capital—without giving it up?
Speak to a credit analyst about sale-leaseback options or use our calculator to model monthly payments.