Selling and leasing back equipment creates a new bill behind the settlement cash
The equipment stays but its financial role changes
A finance provider proposes buying your equipment and leasing it back so you can use the sale proceeds to settle overdue supplier debt. Keeping the machine on site can make the transaction seem almost invisible to operations. The business still needs to assess the new lease commitment. A discount on the old debt does not describe the complete financial result.
Read both sides of the proposed transaction
Obtain the purchase and lease terms, not just the expected cash advance. Ask advisers to confirm ownership, existing finance, approvals and any restrictions on selling the equipment. Identify the amount actually available after required payouts and costs. Do not promise that amount to the supplier before the proposed arrangement and the business's authority to enter it have been assessed.
Add the continuing outgoings
Business.gov.au's cash-flow guidance tracks outgoing payments and their timing. Put the proposed lease schedule beside the settlement payment and current forecast. Include stated upfront charges and later payments without assuming an end-of-term purchase is included. Ask the provider to explain the full arrangement and have the accountant check the comparison; sale proceeds are not free operating income.
Compare a hypothetical funding trade-off
Imagine $20,000 becomes available after the sale's immediate costs, allowing a supplier settlement. The lease then requires regular payments over several years. The comparison must show both events rather than counting the debt discount and omitting the lease because the machine never moved. The example does not recommend this funding method or establish that the provider will accept the equipment.
Clarify what happens at the end
Ask who owns the asset during and after the term, whether returning or buying it involves further cost, and what maintenance, insurance and default terms apply. Do not assume continued possession means continuing ownership. Review the consequences with qualified advisers, especially where the equipment is essential and the company's present ability to meet debts is uncertain.
Decide from the whole proposed obligation
Compare supported alternatives using the same period and record the assumptions. Keep the supplier settlement and finance commitments separately identifiable, including any conditions before either proceeds. A sale-and-leaseback may change the timing and form of obligations; the useful question is whether the business can perform the complete arrangement after the initial debt relief, not simply whether cash appears on settlement day.