Sale-Leaseback

Capital tied up in production equipment that is already paid off is dormant capital. A sale-leaseback converts it. You sell the equipment to a finance company at its appraised or agreed value, the finance company leases it back to you on an agreed monthly payment, and you continue running the line without any operational interruption. The machine stays on the floor. The cash goes to work.

This is one of the few financing structures that generates immediate liquidity from an asset you already own rather than from a new acquisition. Plants that went through an aggressive equipment-purchase phase and now need operating capital, expansion funds, or bridge capital for a new line often find that the equipment already on the floor is the most accessible source of that funding. We evaluate sale-leaseback requests from $100,000 upward on production-line assets across manufacturing, food processing, packaging, and industrial automation.

How a Production-Line Sale-Leaseback Works

The mechanics run in four steps. First, we appraise or agree on the equipment value. Second, we purchase the equipment from you at that value. Third, we execute a lease agreement returning the equipment to you for a defined term and monthly payment. Fourth, you operate the equipment exactly as before while making lease payments instead of carrying the asset on your balance sheet.

At end of lease term, the structure is typically either a fair market value purchase option or a defined buyback price negotiated at origination. If your goal is to eventually reacquire full ownership, a dollar-buyout structure or a defined purchase price at term-end preserves that path. If your goal is purely to monetize the equity and then return the equipment, an operating lease with no buyout obligation is cleaner.

The transaction needs to clear two hurdles. First, the equipment must have a reasonably established fair market value. General-purpose production assets from major OEMs, including Automated Assembly Systems Financing, Palletizer Financing, and Packaging Line Financing, clear this hurdle easily. Highly customized single-purpose tooling with no secondary market is harder to appraise and harder to monetize via sale-leaseback. Second, the leaseback payment structure must fit your operating cash flow. We structure the lease term and monthly payment to ensure you can service the obligation from the line's revenue.

When Plants Turn to Sale-Leaseback

Capital for a new line segment. If you need to add capacity to a Bottling Line Financing or expand a packaging cell but do not want to dilute equity or take on another term loan, the equity sitting in existing equipment can fund that expansion without touching your credit lines. The sale-leaseback on existing assets generates the down payment or full purchase price for the new equipment.

Working capital squeeze. Manufacturers running seasonal demand patterns, large contracts, or rapid SKU growth sometimes face a cash crunch that has nothing to do with profitability. The business is producing and billing, but cash is tied up in receivables or inventory. A sale-leaseback on owned equipment provides a lump sum that bridges the gap without the complexity of an asset-based loan against receivables.

Debt restructuring. Some operators use a sale-leaseback to retire higher-rate bank debt. If the equipment equity generates enough proceeds to pay down a line of credit carrying a high rate, the net interest cost can actually decrease even after factoring in the lease payment.

We work regularly with operators in Automotive Parts Suppliers (Tier 1/2) and Plastics Manufacturing, where equipment-intensive balance sheets make sale-leaseback a recurring capital tool rather than a one-time solution.

What the Transaction Costs and How It Is Priced

The monthly lease payment on a sale-leaseback is driven by the equipment value, the lease term, and your credit profile. The implied rate is typically higher than a conventional equipment loan because the lessor is taking on residual value risk and providing liquidity on a seasoned asset rather than a new purchase. That premium is the cost of unlocking dormant equity quickly without a traditional credit event.

The total cost of the transaction needs to be weighed against the return on the capital deployed. If the proceeds fund a production improvement that generates incremental gross profit exceeding the lease cost, the transaction is accretive. If the proceeds pay down credit-card debt at 20 percent interest, the arithmetic is almost always favorable. The use of proceeds matters.

There is no standard pricing table we can publish because rate depends on equipment type, age, condition, appraised value, and borrower credit. What we can say is that the transactions we close are structured so that the plant operator can service the lease comfortably from existing line economics, not by stretching. We do not structure our borrowers into obligations they cannot support.