What is a Sale and Leaseback?
The mechanism is straightforward. You sell your owned plant to a finance company at an agreed value. They become the legal owner of the asset. They then immediately lease it back to you under a finance lease agreement. You pay monthly rentals and continue to use the plant exactly as you did when you owned it. At the end of the lease term, you can return the asset, extend the lease, or arrange its sale and retain most of the proceeds.
The result: a cash injection from an asset that was sitting unencumbered on your balance sheet, converted into liquid working capital - while your operations continue uninterrupted.
Cash Flow Pressure
Winning a contract but tight on working capital - sale and leaseback of existing plant provides the cash to mobilise without a separate borrowing facility.
Growing the Fleet
Using equity in existing plant as the capital to fund a deposit on additional plant - effectively leveraging your existing assets to grow capacity.
Capital for Other Projects
Releasing capital for a bridging loan, property purchase, or business opportunity that requires upfront cash.
Refinancing Legacy HP
Replacing near-the-end HP agreements with a new leaseback facility - resetting the payment profile and releasing residual equity.
How the Process Works
- 1
Valuation
The lender commissions a desktop valuation (or physical inspection for higher-value assets). This establishes the current market value of the plant - what it would realistically sell for at auction or private sale. For major plant brands (JCB, Komatsu, Volvo, Caterpillar), desktop valuations using Ritchie Bros auction data are standard. For specialist or rarer equipment, a physical inspection may be required.
- 2
Offer
The lender makes a formal offer: the amount they will pay for the plant (typically 60-80% of market value), the monthly lease payments, the term, and the end-of-term options. You have the choice to accept, negotiate or walk away. There is no obligation until you sign.
- 3
Documentation
Title checks confirm you have clean ownership of the asset (no existing finance or charges). The sale agreement and lease agreement are signed. If there is existing finance on the asset, it must be settled from the proceeds at this stage. Straightforward for unencumbered plant; a little more paperwork where settlement is involved.
- 4
Drawdown
The agreed purchase price is paid to your business - typically by CHAPS on completion day. Monthly lease payments begin the following month. The plant stays exactly where it is - nothing moves, nothing changes operationally. The lender's interest is registered against the asset.
Lenders Who Offer Plant Sale and Leaseback
| Lender | Typical LTV | Min Asset Value | Rate Range | Notes |
|---|---|---|---|---|
| Close Brothers Asset Finance | 65 – 80% | £10,000 | 7.0 – 13.0% | Strong appetite; good for mid-value plant; clean title essential |
| Lombard (NatWest) | 70 – 80% | £50,000 | 6.5 – 11.5% | Best rates for larger-value, established businesses; slower process |
| Aldermore Bank | 60 – 75% | £5,000 | 8.0 – 14.0% | Good for smaller amounts and SMEs; accepts light adverse credit |
| Shawbrook Business Finance | 60 – 75% | £10,000 | 8.5 – 15.0% | Strong on older plant - useful where asset is 7-12 years old |
LTV and rates as at October 2026. Indicative only - actual terms depend on asset valuation, credit profile and term.
Worked Example: Sale and Leaseback - Volvo EC250 Excavator
| Asset | Volvo EC250 25T excavator, 2020, 4,200 hours, serviced |
|---|---|
| Market Value (desktop valuation) | £85,000 |
| Sale Price to Lender (75% LTV) | £63,750 |
| Cash Released to Business | £63,750 (CHAPS on completion) |
| Lease Term | 48 months |
| Monthly Lease Rental (ex-VAT) | approx £1,580 |
| Rate | 9.5% APR |
| Plant Continues in Use | Yes - no operational change |
| End of Term Option | Return, extend, or arrange sale and receive ~95% of proceeds |
Indicative example. Actual LTV and rates depend on the lender, asset condition and credit profile. VAT on rentals is additional and reclaimable for VAT-registered businesses.
Tax Treatment
Sale and leaseback has specific tax implications that are worth discussing with your accountant before proceeding. The key points:
Lease payments: Monthly lease rentals are typically allowable as a business expense for tax purposes - reducing your taxable profit. This is different from HP, where you claim capital allowances on the asset. If you have already claimed capital allowances on the plant when you owned it, the leaseback structure allows continued tax deduction through the lease expense.
Capital gain on sale: Selling the plant to the finance company at market value may trigger a taxable gain if the asset was on your books at a lower written-down value (particularly if you previously claimed the Annual Investment Allowance). This is a real consideration, especially for plant purchased several years ago at a higher cost. Your accountant should model the tax impact before you proceed.
VAT: VAT is charged on the sale and on each rental payment. For VAT-registered businesses these should be reclaimable in the normal way, but the timing of VAT flows changes - discuss with your accountant or VAT adviser.
What Plant Qualifies
Most commercial construction plant qualifies for sale and leaseback provided it meets the following criteria:
- Clean title: No existing finance secured against the asset (or existing finance can be settled from the proceeds at drawdown)
- Commercial resale value: The asset must have a market - known brands with active auction and private sale markets are easiest to finance
- Reasonable age and condition: Most lenders will finance plant up to 10-12 years old; Shawbrook and Aldermore will stretch to 15 years for well-maintained assets
- Identifiable and verified: Serial numbers, VIN plates, registration documents where applicable
- Commercial use only: Plant used in the business - not personal use equipment