Machine Sale or Sale-Leaseback? Calculating the Profits

Life example: Production from Tczew and 487 thousand in debt

In October 2023, a machining workshop owner from near Tczew contacted us. He had 487,320 PLN of debt in two banks and unpaid contributions for 4 months on his shoulders. In the hall stood two modern CNC lathes purchased in 2019 for cash. The banks terminated the loan agreements and gave 14 days to repay everything. This was the moment we had to decide quickly: what do we do with this steel so that the company doesn't disappear from the map in November?

The owner wanted to sell one lathe on an auction portal. However, we calculated that selling the machine for 192,000 PLN (that was the real market price for a quick sale) would only solve the problem for a moment. It would also deprive him of 44% of production capacity, which meant he wouldn't finish orders for a contractor from Germany. Without those orders, the company would fold in two months. We calculate with cold logic: selling was the worst option possible.

We proposed another way. Instead of getting rid of a work tool, we opted for a sale-leaseback. This is a mechanism where a leasing company buys the machine from you, pays you cash, and you continue working on it while paying monthly installments. In the case of the client from Tczew, we managed to get 312,000 PLN net in 17 business days. This was enough to pay off the most urgent debts and stop the execution.

Selling a machine that earns money is like cutting off your leg to run faster. In the long run, it won't work.

When does simple sale actually make sense?

Asset sales are the easiest way to get cash, but it only makes sense in one case: when a machine is sitting useless. In November 2023, we helped a construction firm from Gdynia that had three forklifts in its machine park. Log analysis showed that one of them worked on average for 12.4 minutes a day. It was dead capital that only generated maintenance and insurance costs.

We sold that forklift in 6 days for 84,300 PLN. The money went directly to settle arrears in the Tax Office, which unblocked the firm's ability to bid for public tenders. In such a scenario, selling is logical. You get rid of ballast, not your company's engine. Often owners keep equipment out of sentimentality, but at Capital and Logic, we only look at the spreadsheet.

If your machine hasn't been used for the last 167 business days, it means you don't need it. Sell it before it loses value due to technological progress. In 2024, used construction machine prices fell by an average of 8.7% compared to last year, so waiting for better times is a waste of money.

Sale-Leaseback: How does it look in practice?

A sale-leaseback is open-heart surgery on a company. You must have a reliable valuation prepared by an appraiser. In May 2024, the average cost of such a valuation for a machine worth up to 500,000 PLN was 1,850 PLN net with us. Leasing companies usually pay out from 79.5% to 92% of the net market value. Don't count on 99.2%, because the fund must secure its risk in case of your insolvency.

The process usually lasts from 11 to 23 days. The longest part is the technical documentation and service history. If you don't have service invoices from the last 2 years, the lessor may lower the valuation by 15% or refuse financing altogether. We have a plan for Tuesday, so preparing such documents is the first step we take with our clients before sending the application.

Who is this for? Primarily for companies that have an order book but lost liquidity due to payment bottlenecks or sudden contractual penalties. A sale-leaseback turns frozen capital into liquid cash. The average installment for a machine worth 250,000 PLN over 48 months is about 5,840 PLN net. You must know if your business will generate such a surplus every month.

Sale-leaseback is turning metal into cash while maintaining the ability to produce. It's pure survival mathematics.

Calculating with cold logic: Costs and taxes

Many people forget about VAT when selling a machine to leasing. This is a normal sales transaction, so you must issue an invoice. If the machine was bought with EU grants, the matter gets complicated. In 2024, we had to save a client from Elbląg who wanted to sell an excavator bought with earmarked funds before 5 years had passed since purchase. If he had done it without consultation, he would have had to return 134,000 PLN of the grant plus interest.

Debt is not a life sentence, but taxes can finish you off. In an operating sale-leaseback, the entire installment (principal and interest part) is a tax-deductible expense. This allows for a real reduction in income tax by 19% or 12%, depending on the taxation form. Last year, our clients saved an average of 22,400 PLN on taxes per year thanks to this maneuver.

You also have to look at the APR (RRSO). In the case of financing for firms with problems, the real cost of money in a sale-leaseback ranges from 11.2% to 16.8% per year. It's more expensive than a standard loan, but significantly cheaper than private loans or reverse factoring in non-bank institutions. We calculate with cold logic: if the margin on your products is 30%, then financing at the level of 14% is acceptable.

The Decision: What to choose today?

If you have 14 days to repay a debt and a machine that earns 15,000 PLN net per month, don't sell it. Go for a sale-leaseback. However, if you have equipment that generates 2,000 PLN profit and the lease installment would be 3,500 PLN — sell it immediately. Since September 2017, we have saved 217 businesses because we were able to tell owners this painful truth straight to their faces.

Each case is different, so don't trust ready-made tables from the internet. At Capital and Logic, we analyze your cash flow from the last 8 months and check what your budget can realistically carry. We don't promise miracles; we promise a plan that balances in Excel. Sometimes the best way out is to sell half the assets and restructure the other half.

Don't wait for the bailiff to seize the machines. Then their value will drop to 50% of the market price at the first auction. By acting now, you have control over the price and terms. If you need a specific valuation and a plan to get out of the hole, let us know. We will prepare an analysis of your machine park within 48 hours so that you know where you stand.