Asset finance

Sale and leaseback finance: selling equipment to a lender and leasing or buying it back

Sell equipment, vehicles or machinery to a lender and lease or buy it back: sale and leaseback vs sale and HP back, typical advances and lender checks.

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Advance: Up to 90% of value with some lendersUp to 100% of invoice on recent purchases
Assets: Vehicles, plant and machinerySoft assets usually within about 90 days
Structures: Sale and leaseback or HP backOwnership returns to you under HP back
Lender panel: Asset finance specialistsMatched to the asset, its age and your sector

In short

What you need to know.

Sale and leaseback releases cash from equipment or vehicles your business already owns: a lender buys the asset and you lease it back, keeping it in use.

With sale and HP back the lender buys it and you buy it back in instalments, so ownership returns to you at the end. Hard assets such as HGVs, plant and machinery are widely accepted; softer assets such as IT and fit-outs are usually only refinanced shortly after purchase, often within about 90 days.

About sale and leaseback finance

Specialist knowledge. Better outcomes.

Businesses that paid cash for kit often find their money tied up in yards, workshops and vehicle fleets just when they need it for a contract, a tax bill or growth. Sale and leaseback, and its close relative sale and HP back, turn that equipment back into cash without taking it out of use. A lender buys the asset from you at an agreed value, pays you the money, and you keep using it under a new finance agreement.

Smart Funding Solutions is a broker. With well over a dozen asset finance lenders on our panel offering these products, the right lender depends mainly on what the asset is, how old it is and when you bought it. For a wider view, including loans secured on assets, see our guide to asset refinancing.

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Assets lenders will refinance

HGVs, vans and commercial vehicles: widely accepted because they hold their value and have a strong resale market. See haulage and HGV finance.
Plant and construction machinery: excavators, telehandlers, cranes and access equipment. See plant and machinery finance.
Manufacturing and engineering machinery: CNC machines, presses, fabrication and production lines.
Agricultural machinery: tractors, combines and farm equipment, with specialist farm lenders on our panel.
Recently bought soft assets: IT, technology, fit-outs and similar items, usually only within a short window after purchase.

How much can be raised

The advance is a percentage of the asset's current value, less anything still owed on it. Terms from lenders on our panel give a sense of the range:

Hard assets can be refinanced at up to 90% of value with some lenders, and more for very strong businesses.
Assets bought in the last three months can attract up to 100% of the invoice price with some lenders; older assets are typically advanced at 50% to 80% of value.
Specialist agricultural lenders typically advance up to 75% of their own valuation.
Minimum deal sizes vary from around £10,000 to £75,000 depending on the lender.

Every advance depends on a valuation and on the lender's view of your business. Assets that are hard to move or resell, such as specialist tooling built into a building, attract lower advances.

The 90-day rule for soft assets

Many lenders will only refinance soft assets, and sometimes any assets, if they were bought recently, typically within 90 days and in some cases within five months of the invoice date. The reasoning is that a recent invoice proves the value and shows the business paid for the asset from its own cash in the expectation of financing it. If you are about to pay a supplier for new equipment, it is usually better to arrange asset finance before you pay. If you have already paid, act quickly.

Underwriting

What lenders look at

Proof of ownership: purchase invoices, and V5C documents for vehicles.

The asset's make, model, age, condition and hours or mileage.

Any finance still outstanding, with settlement figures.

Trading history: some lenders only refinance for businesses trading for two or three years or more.

Why you are raising the money. Lenders want a clear business reason, not a business that needs refinancing to survive.

Recent accounts and bank statements, and business and director credit history.

Checklist

Documents to have ready

An asset list with make, model, year and serial or registration numbers.
Original purchase invoices and proof of payment.
Settlement letters for any existing finance.
Your last two years of accounts and recent management figures.
The last three to six months of business bank statements.

Advantages and disadvantages

Advantages	Disadvantages
Releases cash without selling equipment you rely on	It is new borrowing with interest and fees
The asset is the main security, which widens the choice of lenders	The asset can be repossessed if payments are missed
Fixed payments agreed at the start	Soft assets are only accepted shortly after purchase
Payments can often be set monthly, quarterly or seasonally	Older or specialist assets attract lower advances

Side by side

Compare your options

How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.

Option	How you repay	Security	Often used for
Unsecured business loan	Fixed instalments, usually monthly	No charge over assets; a personal guarantee is usually required	Growth, stock, tax bills and cash flow
Secured business loan	Fixed instalments, often over a longer term	A charge over property or other assets	Larger sums, property and refinancing
Revolving credit facility	Interest on what you draw; repay and redraw	Varies by lender and case	Recurring or uneven cash flow gaps
Merchant cash advance	A share of future card takings	No charge over assets	Card-taking businesses with uneven months
Asset finance	Regular payments over the life of the asset	The asset being financed	Equipment, vehicles and machinery
Invoice finance	Settled as customers pay their invoices	Your unpaid invoices	Businesses waiting on customer payment

General information only. Every lender has its own criteria, and all finance is subject to status.

Sale and leaseback vs sale and HP back

Feature	Sale and leaseback	Sale and HP back
How it works	The lender buys the asset and leases it back to you	The lender buys the asset and you buy it back in instalments
Ownership	Stays with the lender; end-of-term options vary	Returns to you after the final payment
Typical use	Assets you will use for their working life without needing to own them	Assets you want to own again, such as plant and vehicles with a long life
Tax and accounting	Changes how the asset is held, so check with your accountant	Changes how the asset is held, so check with your accountant

Some lenders do not offer sale and HP back in Scotland and use sale and leaseback there instead, so tell us where the assets are kept.

How we arrange sale and leaseback

List the assetssend us the asset list, invoices and any settlement figures.
Match the lenderswe approach lenders on our panel that value that type of asset, at that age, in your sector.
Compare offerswe set out the advance, term, payments and end-of-term position side by side.
Completethe lender checks ownership, settles any existing finance and pays the balance to your business.

Lenders make every credit decision. It is free to enquire; any broker fee is disclosed separately before you proceed. Start with our Instant Quotes tool, which asks whether you want to release cash from equipment you already own.

FAQs

Questions clients ask

What is the difference between sale and leaseback and sale and HP back?

In both, a lender buys an asset you own and pays you for it. With sale and leaseback you then lease it back, and ownership stays with the lender. With sale and HP back you buy it back in instalments, and ownership returns to you once the final payment is made.

Can I do a sale and leaseback on equipment I bought a year ago?

For hard assets such as vehicles, plant and machinery, usually yes, as long as the asset has a resale value. For soft assets such as IT or fit-outs, most lenders only accept items bought very recently, often within 90 days of the invoice.

Can I refinance equipment that is still on finance?

Often, yes. The new lender settles the existing agreement and pays you the difference between the advance and the settlement figure. You will need a settlement letter from the current lender.

How quickly can sale and leaseback complete?

Straightforward cases can complete within days once the lender has the asset details, invoices and accounts. It takes longer if an inspection or independent valuation is needed, or if several assets or existing agreements are involved.

Does sale and leaseback affect VAT and capital allowances?

It can, because the asset is sold to the lender and held differently afterwards. Your accountant should confirm the tax and VAT position before you sign. Our guide to asset finance and capital allowances covers the general principles, and HMRC explains the rules in its guide to claiming capital allowances.

Lender reviews

Lenders we compare for sale and leaseback finance

Independent write-ups of lenders on our panel that offer this type of finance. Smart Funding Solutions is a broker and is not part of any lender listed. See all lender reviews.

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