Business loan vs selling assets: should you borrow or sell to raise cash?

Every owner who needs money has a quiet look around the business at some point. There’s the second truck that hasn’t left the yard since the contract ended. There’s the block of land bought for an expansion that never happened. There’s the excavator that works every day. Turning one of them into cash instead of taking on a loan seems sensible. Whether it actually is depends on which one you sell.

Three questions that decide it

Before comparing products, answer these about the specific asset:

1. Is it earning? An asset that produces income every week is part of how you repay anything. An idle one is just stored value.
2. How fast can it sell at a fair price? Common trucks and machinery can move in days. Specialised plant and property often can’t, at least not without a discount.
3. What does the ATO take? The tax outcome of selling can be zero, modest or surprisingly large, and borrowing has none.

If the answers are “no, quickly, not much”, selling probably wins. If they’re “yes, slowly, a lot”, a loan probably does. Most real situations land somewhere in between.

How do the two compare?

	Selling assets	Business loan
New debt	None	Yes, with repayments
Effect on earnings	Lose any income the asset produced	Keep it
Speed	Fast for common equipment, slow for property	Days to a few weeks, depending on type
Price risk	A quick sale often means a lower price	None on the asset
Tax	Possible assessable income or capital gain	None on the borrowed amount; interest generally deductible
GST	Generally payable on sale if registered	Not payable on loan funds
Reversible?	No; you’d need to buy it again	Yes; repay early and you’re back where you were
Cost	Transaction costs plus any discount and tax	Interest and fees over the term

Why does selling a working asset backfire?

Consider a refrigerated transport business that sells one of its three trucks to cover a $90k shortfall. The cash problem disappears, but now it can only service two-thirds of its routes. If that truck was bringing in more each month than a loan repayment would have cost, the business is poorer after the sale, just in a less visible way.

Lenders see the same logic. A productive asset is often the best security you can offer. Asset finance or an equipment-secured loan can raise money against it while it keeps working, which is the opposite of selling it.

There’s also no undo button. If trade picks up six months later, buying a replacement truck costs more than the price you sold for, and you’ll likely be borrowing anyway.

What does tax do to the numbers?

This is the part owners often discover after the sale.

Equipment and vehicles. Selling a depreciating asset is a balancing adjustment event. The ATO compares the sale price with the asset’s adjustable value (cost less the depreciation you’ve claimed). Get more than that value and the excess is assessable income. With the $20,000 instant asset write-off now permanent for eligible small businesses, plenty of tools and smaller items have a tax value of nil, so most of the sale price becomes income.

Property and goodwill. Selling these is a CGT event. Here the small business CGT concessions can help a lot. To qualify, you broadly need to pass a basic test such as aggregated turnover under $2 million or net assets of $6 million or less, and the asset must be an active asset. The concessions include a 15-year exemption, a 50 per cent active asset reduction, a retirement exemption with a $500,000 lifetime limit, and a rollover. Depreciating assets don’t qualify for any of them, which surprises people.

GST. A GST-registered business generally charges GST when it sells a business asset, and that slice goes to the ATO with the next BAS. Commercial property can involve the margin scheme or a going-concern sale, so speak to your accountant before listing.

A loan sidesteps all of this. Borrowed money isn’t income, and the asset’s tax history stays as it is.

When does selling win?

• The asset is genuinely surplus. Idle machinery, an unused second vehicle, excess stock or a block you’ll never build on.
• It costs money to keep. Insurance, registration, storage, rates and maintenance on something that earns nothing are a slow leak.
• You can sell properly. Time to advertise, get several offers and pick the best one.
• The tax cost is low. A recently bought asset with a high tax value, or a property that qualifies for concessions.
• The underlying problem is permanent. If the business is shrinking or changing direction, more debt only delays the adjustment.

When does a loan win?

• The asset is earning its keep. Keeping it working is usually worth more than the interest.
• The need is temporary. A slow-paying customer, a seasonal dip or a one-off tax bill. Our guide to covering a cash flow gap walks through options sized to the gap.
• A quick sale means a poor price. Specialised plant, rural land and commercial property rarely sell well under time pressure.
• The tax bill on selling would be large. Borrowing defers that question until you choose to sell.
• You might need it again. Selling and later rebuying is the most expensive cycle of all.

Not sure which side you’re on? Tell us what you’re weighing up and we’ll look at the borrowing side honestly. Asking costs nothing and doesn’t trigger a credit enquiry.

The middle path: borrow now, sell later

Often the best answer is both. If the asset should go but the cash is needed this month, a short-term loan secured against property or the asset itself can cover the need while you sell on your own timetable.

An illustrative case: a business owner has a vacant block worth about $500k and a $160k ATO debt with a deadline. A rushed sale might settle in six weeks at a lower price. Instead, a bridging loan or caveat loan against the block clears the ATO now, the land goes to market properly, and the loan is repaid from settlement. The interest and fees are the price of avoiding a forced sale. Whether that’s worth it depends on how big the discount would have been, which the bridging loan calculator can help you estimate. For the property-specific version, see bridging until a property sells.

The key is a clear exit strategy: a realistic sale price, a sensible timeline and a buffer if it takes longer than planned.

If equipment is the asset, our comparison of sale and leaseback versus a business loan covers a route that sells the gear but keeps it working.

Before you list anything

• What does this asset earn each month, and what would replacing it cost?
• What’s its tax value, and is it eligible for any CGT concessions?
• How long would a fair sale realistically take?
• What’s the total dollar cost of borrowing the same amount for that period?
• Is the cash need a one-off, or a sign the business needs to change shape?

Talk it through before you sell

Deciding whether to part with something you’ve built up is hard, and it’s much easier with the borrowing side priced properly. Send us the amount, the asset and the deadline. Filling in the form is roughly a minute’s work, and your credit history is left alone while we look. Your enquiry stays with one team from beginning to end rather than being sent out to a stack of lenders, and the call you get comes from someone who has actually read your circumstances. Describe the asset and your current debts as they really are; accurate detail is what allows a sound match on the first go.

Price the borrowing before you sell →