Pallet racking isn’t just storage; it’s throughput, pick accuracy, and margin. The problem is timing: peak season won’t wait for slow approvals, and expansions often collide with cash-flow reality. That’s why Canadian operators increasingly use sale-leasebacks—they convert installed racking into capital while you keep using it, then repay through predictable lease payments.
As a financing partner with 30+ Canadian lenders, Mehmi Financial Group structures racking transactions every week—new installs, retrofit expansions, and equity unlocks on systems you already own. Below is the broker playbook we use to move a warehouse racking file from inquiry to funded—cleanly, quickly, and with covenants that won’t trip your operations. If you want a pre-screen on your layout or budget, feel free to contact our credit analysts.
What “counts” as financeable racking (and why it matters)
Underwriters start with the asset:
- Selective pallet racking (teardrop, Redi-Rack, structural)
- Drive-in/drive-through and push-back systems
- Carton flow / pallet flow (rollers, brakes)
- Cantilever racking for long goods (steel, lumber, pipe)
- Pick modules & mezzanines (stairs, platforms, guardrails)
- Wire guidance, row spacers, safety netting, end-of-aisle protection
- Engineering & permitting: stamped drawings, seismic/municipal approvals, fire code considerations (sprinklers, flue spacing)
Financeability improves when components are standard, documented, serialized where applicable, and installed per stamped drawings. Private lenders put a premium on orderly removal/liquidation value—clean documentation lowers perceived risk and price.
Why choose a sale-leaseback for racking
- Unlock cash from assets you already own. Convert paid-for racking (and mezz) into working capital for inventory, a WMS, or additional forklifts. See Refinancing & Sale-Leaseback.
- Keep operations running. You sell the racking to the lender and lease it back—no physical move.
- Match payments to seasonality. Private lenders are comfortable with seasonal or skip payments for distribution/retail cycles.
- Tax & accounting alignment. Leases can simplify budgeting versus a lump-sum capex hit (confirm with your accountant).
- Stackable with other tools. Overlay Invoice Factoring or a Working-Capital/LOC to smooth ramp-up.
If you’re buying new racking, a conventional lease/loan still works—but a sale-leaseback shines when equity is trapped on your floor.
Bank vs. private lender for racking
- Bank/credit union: Best headline rates, heavier package (financial statements, covenants), stricter on used/private-sale components and mezz structures.
- Private lender: Faster, comfortable with installed assets, private-sale components, and equity unlocks; flexible on term structure and seasonality; will often fund mixed packages (racking + reach truck + dock equipment).
Not sure which lane fits? Get a side-by-side with our calculator, then contact us for precise pricing.
Underwriting lens: what a credit analyst actually checks
Asset package
- Itemized bill of materials: uprights, beams, wire decking, row spacers, anchors, guard rails, flow tracks, stops.
- Stamped layout drawings (height, bay counts, aisle widths), mezz spec sheets, stair codes.
- Install/completion certificates, photos (wide shots + detail), and permit sign-offs.
- For sale-leaseback: original invoices or a third-party valuation; evidence of proper anchoring and seismic compliance.
Business & cash-flow signals
- 3–6 months business bank statements (steady deposits, few NSFs, headroom for payment).
- Utilization story: pick rates, pallet positions added, labour savings, rental-avoidance math (overflow storage).
- Customer mix/seasonality (retail peaks, import cycles) to justify skip or seasonal payments.
Support & security
- Owners ≥25% for guarantees; corporate registry; liability/contents insurance naming the lender as loss payee.
- On tougher files: modest down payment or cross-collateral (e.g., a forklift) improves terms.
Broker playbook: step-by-step to fund a racking sale-leaseback
Scope the asset properly (before pricing).
Get the stamped drawings, BOM, completion certificate, photo set, and any permits. Confirm floor condition (anchors), sprinkler clearance, and egress—these reduce re-inspection requests.
Choose the right structure.
- Sale-leaseback on installed racking to raise cash quickly.
- $10/$1 buyout lease on new add-ons (uprights/beams) you plan to keep for 7–10 years.
- FMV/residual lease for rapidly changing pick modules or expansions you’ll reconfigure soon.
Pre-clear insurance and PPSA details.
Your policy should schedule the racking/mezz specifically; lender files PPSA on the package.
Tighten the banking story for 30 days.
Reduce NSFs, keep balances healthy, and stage deposits so the debt-service ratio looks clean when we pull statements. If receivables are lumpy, layer factoring on core accounts.
Submit a one-touch package.
Send everything via Leasing & Loans: application, IDs, corporate registry, BOM/invoices, drawings/permits, photos, bank statements, insurance broker contact. We route to best-fit lenders the same day.
What terms you’ll actually see (Canada, 2025 reality)
- Ticket size: ~$50k–$750k+ (selective + mezz + protection hardware at the upper end).
- Terms: 24–60 months typical; 72 months possible on newer builds or large engineered systems.
- Down payment: 0–10% on strong files; 10–30% for startups, tighter credit, or heavy used/private-sale components.
- Conditions: PPSA filing, documentation fee, first/last in advance, insurance binder, inspection as required.
- Funding speed: With a complete package and insurance ready, same-week funding is common.
Snapshot: Sale-Leaseback vs. New Purchase Lease
| Factor | Sale-Leaseback (Installed Racking) | New Purchase Lease |
| Primary Use | Unlock cash from existing racking | Acquire new racking with low upfront cost |
| Approval Speed | Fast (docs + inspection) | Fast (vendor invoice + layout) |
| Monthly Payment | Similar, can include seasonal/skip | Similar, can include residual options |
| Paperwork | BOM, invoices/valuation, stamped drawings, photos | Vendor quote/invoice, stamped drawings |
| Best For | Equity unlock, cash-flow bridge, refinance | Greenfield build or capacity expansion |
Budget the “true monthly,” not just the payment
- Insurance (contents + racking scheduled, lender as loss payee)
- Inspections & maintenance (annual rack inspections, damaged upright replacements, anchor checks)
- Safety hardware (end-of-aisle guards, rack protection, netting)
- Engineering/permitting for re-configs or mezz additions
- Downtime buffer: target 1–1.5 payments saved for unplanned repairs or re-slotting
Start with payment ranges on our calculator, then add the above to confirm margin.
Real-world case pattern (Ontario 3PL)
A 3PL added 1,200 pallet positions using a mix of used selective and new beams, then needed cash for inbound seasonal inventory. Bank approval stalled over used components and timing. We executed a sale-leaseback on the installed racking:
- Third-party valuation supported by stamped drawings and photo set
- 48-month lease, first/last in advance; seasonal skip in February
- Insurance binder same day with racking scheduled; PPSA filed
- Added a small working-capital LOC to bridge vendor terms
Outcome: cash unlocked within the week, zero operational downtime, and capacity ready for peak.
Fast-track checklist (send these first)
- Stamped layout drawings and BOM (uprights, beams, decking, protection, mezz if any)
- Invoices (original purchase) or independent valuation for sale-leaseback
- Completion/installation certificate and photo set (wide shots + details + anchors)
- Permits/approvals (seismic, municipal, fire)
- 3–6 months business bank statements
- IDs for owners ≥25%; corporate registry
- Insurance broker contact to bind with lender as loss payee
- Short use-of-funds note (inventory buy, WMS, labour ramp-up)
Upload once via Leasing & Loans—we’ll route to the right lender the same day.
Related Mehmi resources
FAQs
Can installed racking really be financed in a sale-leaseback?
Yes. With drawings, invoices/valuation, photos, and proper insurance, private lenders fund installed racking routinely—operations continue uninterrupted.
What credit profile is needed?
Banks often prefer 650–700+ with strong financials. Private lenders can work below 650 with compensating factors (clean install docs, down payment, stable deposits). Talk to our analysts for a tiered quote.
How much can I unlock from existing racking?
Advance is based on documented value and liquidation assumptions. Well-documented, standard systems advance better; mezz and complex pick modules may need additional support.
Is a residual (FMV) useful for racking?
For long-life selective systems, many choose $10 buyout. If you expect re-configs or tech changes (pick modules), an FMV structure can keep payments lower and options flexible.
How fast can funding occur?
With a complete package and insurance ready, 24–72 hours from approval is common in private lending. Start with our calculator for ranges.
Why Mehmi (seller + financier, Canada-wide)
We’re unusual in Canada: we sell commercial assets and finance them—daily. Our credit team understands real liquidation values, installation risks, and the red flags underwriters spot immediately. We place files across 30+ lenders, deliver 24–48h approvals on deal-ready packages, and tailor payments to your seasonality and pick patterns.
Next step: If you’re pricing a sale-leaseback—or planning a new racking build—feel free to contact our credit analysts for a friendly, pressure-free review: Contact Us. Prefer to see numbers first? Use the calculator and we’ll price both sale-leaseback and new-purchase options side by side.
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