A business that owns its equipment outright has capital sitting still. Two structures can put it back to work, and what the money is for decides whether either of them should.
Indicative only. Not a quote or offer of credit. Actual rates, fees, and repayments depend on the business profile and the lender's decision.
Sending to Prospa
Your $100,000 scenario
4 years at 13.00% . Prospa will ask a few quick questions, then provide a firm quote and funding if eligible.
Redirecting…
The short version
Four lines on releasing equity.
→Two routes, with different amounts and different costs. A secured loan keeps ownership and releases a proportion of value. A sale and leaseback releases closer to full value and ownership passes.
→Lenders lend on market value, not on cost. The advance reflects what the asset would realise on sale, which is commonly a good deal less than a business expects.
→The purpose is the real question. Funding something that earns more than the facility costs is sound. Funding an operating shortfall treats a symptom and removes a reserve.
→Indicative only. Every band on this page is illustrative. Actual rates, fees and terms come from the lender after assessment.
The two routes
Borrow against it, or sell it and lease it back.
A secured asset loan grants a lender a security interest over plant the business owns and advances a proportion of its value as a lump sum. Ownership does not change, the depreciation position does not change, and the business has a repayment obligation and an encumbered asset.
A sale and leaseback goes further. The financier buys the asset at an agreed value, pays the business, and leases it straight back. Ownership passes, the depreciation claim ordinarily moves with it subject to the accountant’s confirmation, and the business becomes a lessee. It releases materially more capital, because a buyer pays a price rather than advancing a fraction against security.
The practical differences beyond the amount are speed and reversibility. A secured loan can commonly be arranged in days; a sale and leaseback requires a formal valuation and takes weeks. And a loan is undone by repaying it, whereas a sale and leaseback has genuinely changed who owns the asset.
Both leave the asset
Where it is
Indicative rate band
10% to 18% p.a.
Valuation basis
Current market
Speed
Days, against weeks
The comparison
The same $150,000 machine, both routes.
Illustrative on stated assumptions. The figures show the shape of the trade rather than what any particular lender would offer. Not an offer of credit.
Secured asset loan
Sale and leaseback
Capital released
$60,000 to $105,000
Closer to $150,000
Ownership after
The business
The financier
Depreciation claim
Stays with the business
Ordinarily moves
Time to arrange
Days to two weeks
Three to six weeks
Obligation created
Loan repayments
Lease rentals
At the end
The security is released
Return, settle a residual, or renew
Reversible by
Repaying the loan
Not straightforwardly
Illustrative comparison on a $150,000 asset. Tax treatment in both is subject to the accountant’s confirmation.
The question worth answering honestly
What is the capital actually for.
This is the situation on this site with the widest gap between good use and bad, and the difference is not in the structure. Capital released to fund a contract already won, a growth step with a return the business can articulate, or a purchase that would otherwise cost more on an unsecured facility, is capital going somewhere it earns more than the arrangement costs. That is the whole test and it is a test a business can apply to itself in a few minutes. Capital released to cover an operating shortfall does not pass it. The plant becomes encumbered or is sold, a new fixed cost is added to a business that was already short, and the reserve that could have been drawn on later has been spent. The shortfall usually returns. A financier assessing serviceability will not press hard enough to make this distinction, which is why the business has to.
Worked scenarios
The same transaction, three situations.
Illustrative scenarios on stated assumptions. Two of these are sound and one is not, and the structure is identical in all three.
A contractor with plant owned outright and no property security
Funding work already won
The business has won a contract requiring materials and labour months ahead of the first progress payment. It owns machinery outright and has nothing else to borrow against.
On these assumptions a $100,000 facility over 48 months at an indicative 13% carries roughly $600 a week, and the contract covers it comfortably. The capital is funding delivery of revenue that is already contracted, which is the clearest version of the test being passed.
Indicative figures
Amount released
$100,000
Term
48 months
Indicative weekly
~$600
What it funds
A contract already won
A business that would otherwise borrow unsecured
Avoiding a more expensive facility
The business needs capital for a defined purpose and can borrow unsecured at a materially higher indicative rate, or secure against plant it owns at a lower one.
In this scenario releasing equity is simply the cheaper way to fund something it was going to fund anyway. The asset is encumbered, which is a real cost in flexibility, and the interest saved across the term is the benefit being weighed against it.
Indicative figures
Alternative
Unsecured borrowing
Rate difference
Material
What is given up
An unencumbered asset
What is gained
A lower cost
A business several months behind with suppliers
Covering a shortfall
Same structure, same asset, same weekly figure. The capital clears the arrears and the business continues trading on the pattern that produced them.
A few months later the position has reproduced itself, the plant is encumbered or gone, and the fixed cost base is higher. The finance did not cause that and it did remove the one reserve the business had. In this scenario the useful step was never the facility; it was whatever addresses why the shortfall exists, and the facility bought a few months in which to do it.
Indicative figures
What it funds
Arrears
Underlying position
Unchanged
Reserve after
Spent
Fixed costs after
Higher
A structural note
A lump sum is the wrong shape for a recurring gap.
Both structures here produce a lump sum repaid on a fixed schedule, which suits a one-off need with a defined purpose. Where the gap being funded is recurring, opening and closing with the trading cycle, neither is the right shape however cheap they are.
A gap that reopens is a working capital problem, and funding it with a term facility means the business is still repaying the last one when the next arrives. The structures built for that shape are revolving rather than amortising, and they are a different product from anything on this site.
The distinction is worth making before choosing between the two routes on this page, because it is the more consequential decision. Getting the structure right and the shape wrong produces a facility that is cheap and useless.
The process
What releasing equity typically involves.
Written as an observation of what commonly happens rather than as instructions. Every financier differs, and none of this is a guarantee of an outcome.
01
2 to 5 working days
Ownership is established
The business has to be able to grant clean security or to sell, which means clear title and no existing registered interest. A PPSR search establishes it, and a discharge of any earlier facility has to be completed first.
Documents commonly required
·Proof of ownership
·PPSR search result
·Discharge of any prior interest
02
1 day to 3 weeks depending on the route
The asset is valued
The valuation drives the amount available and is where expectations most often adjust. An independent appraisal carries more weight than a supplier’s view, and on a sale and leaseback it is normally required rather than optional.
Documents commonly required
·Independent valuation or dealer appraisal
·Service history
·Serial or VIN number
03
3 to 15 working days
The business and the purpose are assessed
Serviceability is assessed as on any facility, and the purpose is asked about. Being straightforward about it produces better outcomes than being vague, because a lender that understands the plan can frequently structure around it.
Documents commonly required
·Financial statements
·12 months of bank statements
·NZBN and GST details
04
1 to 3 working days after acceptance
Documents are issued and funds are advanced
The financier registers its position and pays the business rather than a supplier. Insurance naming the financier is a condition, and the first payment usually falls a month later.
Documents commonly required
·Signed agreements
·Insurance certificate naming the financier
On a sale and leaseback the sale itself is a tax event, because disposing of an asset for more or less than its depreciated book value produces an adjustment in that year. That is a question for the accountant before the transaction rather than after it.
Honest assessment
When releasing equity fits, and when it does not.
It fits when
·The capital funds something that earns more than the facility costs
·The need is a defined one-off rather than a gap that will reopen
·The business has plant but no property to secure against
·It is simply the cheaper way to fund something already decided on
·The asset is mainstream enough that the valuation will be useful
It does not when
·The capital would cover an operating shortfall rather than fund something
·The gap is recurring, where a revolving facility is the right shape
·The asset is specialised and the advance will disappoint
·The business is close to its total commitment limit already
·Nobody has articulated what the money will do, which usually means it will do nothing in particular
Test the maths
Released capital, in weekly numbers.
The figure worth putting beside this is what the released capital is expected to earn. Where that number cannot be stated, the comparison cannot be made. Indicative only, and not a quote or offer of credit.
Context for the indicative rate bands referred to on this page.
FAQ
Releasing equity from owned assets, questions answered
What does releasing equity from an asset mean?
Converting capital tied up in plant the business owns back into cash, without giving up the use of the plant. Two structures do it: a secured asset loan borrows against the asset and keeps ownership, and a sale and leaseback sells it to a financier and leases it back.
Which route releases more?
A sale and leaseback, usually by a wide margin, because the financier is buying the asset rather than advancing a proportion against it. On a $150,000 machine the difference between the two routes is commonly tens of thousands of dollars, which is the main reason to prefer it where maximum release is the objective.
Why is the advance lower than the asset is worth?
Because a lender lends against what an asset would realise on sale rather than against its value to the business as a working item. On used plant that figure is commonly well below both the purchase price and the replacement cost, which is the most frequent source of disappointment in this situation.
Is releasing equity a sign of trouble?
Not inherently, and the purpose decides. Funding a contract already won or a growth step with an articulable return is ordinary treasury. Funding an operating shortfall converts productive assets into short-term cash without changing what caused the shortfall, and it spends a reserve the business was holding.
Can the business keep using the asset?
Yes under both routes. That is the point of the structures: the machine stays where it is and keeps working. Under a secured loan ownership does not change at all, and under a sale and leaseback ownership passes but possession and use do not.
Does the asset need to be owned outright?
It needs to be free of any registered security interest for the business to grant clean security or to sell it. A PPSR search establishes the position, and where an earlier facility remains registered despite being repaid, the discharge has to be completed first.
What if the need is recurring rather than one-off?
Neither structure here is the right shape. Both produce a lump sum repaid on a fixed schedule, and a gap that reopens with the trading cycle means the business is still repaying the last facility when the next gap arrives. That shape is served by revolving facilities, which are a different product from anything on this site.
How long does each route take?
A secured asset loan can commonly be arranged within days to two weeks, with the valuation usually setting the pace. A sale and leaseback takes longer, commonly three to six weeks, because a formal valuation is normally required and the financier is buying rather than lending.
Is the interest deductible?
Interest on borrowing used for business purposes is ordinarily deductible, subject to the accountant’s confirmation. Under a sale and leaseback the position is different, because the business is paying rentals rather than interest and the sale itself produces a tax adjustment. Both are worth establishing before the transaction.
What happens if payments stop?
Under either structure the financier can enforce against the asset, take possession and sell it, applying the proceeds to what is owed. Where the sale raises less than the balance, the shortfall commonly remains payable by the business and by any guarantor. The asset that was providing capacity is then gone as well.
Indicative content only. Not personalised financial advice.
Financing a machine is a commitment that runs for years, and the repayments come out of the same operating cash flow as everything else. Modelling the weekly and monthly cost against the working-capital position before committing is what this site is built for. Borrowing at a level that stays comfortable through a quiet quarter, rather than only through a strong one, is widely regarded as the safer frame.
What this site is
A calculator and information tool. Not a lender, not a broker, not a registered financial adviser. Nothing here is personalised financial advice.
What the figures show
Modelled estimates based on the inputs shown. Not a quote. Not an offer of credit. Not a guarantee of approval, rate or fees.
What the lender decides
Final rates, fees, and approval are set by the lender after a CCCFA-appropriate assessment of the applicant's circumstances and credit decision.
Commercial disclosure
Assetfinance.org.nz earns a commission from Prospa when a visitor applies through this site and their application is approved. The commission is paid by Prospa, not by the borrower, and it does not influence the rate Prospa offers. Full disclosure on the partner page.
Tax, GST, and accountant framing
Tax-treatment statements (GST claim timing, interest deductibility, depreciation rates) are general in nature and subject to the accountant's confirmation on the specific business position. For material amounts, professional advice from a registered financial adviser or chartered accountant is widely regarded as the safer frame.
