Sell assets or borrow against them to clear business debt? How to decide

When debts are pressing, owners often look around the yard, the warehouse or the property portfolio and ask the obvious question: why not just sell something? Sometimes that’s exactly right. Sometimes it’s the most expensive decision in the whole rescue. The difference usually comes down to four things: time, price, tax and what the asset does for the business.

What are the real pros and cons of each?

Factor	Selling the asset	Borrowing against it
Speed	Depends on the market; can take weeks or months	Often faster, especially with property security
Price	Pressure often means a lower price	You keep the asset and its future value
New repayments	None	Yes — must fit the cash flow
Tax	May trigger capital gains, depreciation adjustments or GST	Generally no tax on borrowing itself
Income from the asset	Lost	Kept
Control	Final once settled	Asset stays yours if the loan is repaid
Meeting a hard deadline	Risky if settlement is later than the deadline	Can be planned around the deadline

Neither column wins every time. That’s why the answer starts with the asset.

Does the asset earn its keep?

Sort your assets into three groups:

• Idle assets. A spare excavator, surplus stock, a second vehicle, a vacant block. They cost money to hold and produce nothing. These are often the best things to sell.
• Income-producing assets. The machine that runs every day, the delivery van, the fit-out. Selling them may clear the debt but shrink the business’s ability to pay for anything else.
• Strategic assets. The premises your customers know, a property with strong growth. Selling may raise the most money but cost the most over time.

business.gov.au suggests selling excess inventory as one way to improve cash flow. The same logic applies to surplus equipment: if it’s sitting still, it’s working against you.

How close is the deadline?

This often decides it. A director penalty notice gives 21 days from posting. A statutory demand gives 21 days from service. A property sale that settles in 45 days is too slow for either, however good the price.

Our debt letter triage tool shows exactly how long you have. If the sale can’t complete in time, borrowing is usually the only way to meet the deadline — and the sale can still happen afterwards, on better terms.

What about tax on a sale?

Selling isn’t free. Depending on the asset and your structure:

• Property may produce a capital gain. The ATO has specific guidance on selling commercial premises.
• Depreciated equipment sold for more than its written-down value can trigger a balancing adjustment that adds to taxable income.
• GST may apply to the sale if the business is registered.
• Existing finance on the asset must be paid out from the proceeds.

The number that matters is the net amount after tax, finance payout and selling costs. Ask your accountant for it before you list anything. It’s sometimes much smaller than the owner expects — and a sale that creates a new tax debt to fix an old one isn’t a remedy.

Timing matters here too. A sale late in the financial year can land a larger tax bill within months, right when the business is trying to recover. Borrowing against the asset, on the other hand, generally has no tax effect of its own, and interest on a business-purpose loan is usually deductible. Your accountant can model both before you commit either way.

Can I borrow now and sell later?

Yes, and it’s often the best of both. A short-term property-secured loan — commonly a caveat loan — pays the pressing debt before the deadline. The asset is then sold properly, without a fire-sale discount, and the loan is repaid from the proceeds.

This works when:

1. There’s genuine equity in the asset or other property to secure the loan.
2. A sale is realistic within a sensible timeframe.
3. The expected net proceeds comfortably cover the loan.

The planned sale becomes the lender’s exit, which is exactly what a short-term lender wants to see. Property-secured lending runs from $20k to $5m. If you’d like to test the numbers, a short enquiry is all it takes — there’s no credit check involved.

An illustrative example

Illustrative only. A Toowoomba earthmoving contractor owes the ATO for three quarters of GST and PAYG withholding and receives a lockdown DPN. He owns two excavators: one works every day, the other has been idle since a major contract finished. He also owns a small rural block he’s been meaning to sell.

Selling the working excavator would clear the debt but cut his capacity in half. Selling the idle one would help, but a quick sale would mean a poor price, and it wouldn’t cover the full amount. The block would sell for a fair price, but not within 21 days.

He takes a caveat loan secured on the rural block and pays the ATO before the deadline. Over the next three months he sells the idle excavator through a dealer at a fair price, and lists the block properly. When the block settles, the caveat loan is repaid in full. He keeps the machine that earns his living, avoids a fire sale, and his personal liability is gone.

What if the business isn’t viable?

Then selling assets in an orderly way — while you still control the process — may produce a better result for everyone than waiting for a liquidator to do it. ASIC notes that directors should consider an insolvency appointment where restructuring, refinancing or new equity isn’t possible. If you’re at that point, get independent advice, and read how to avoid liquidation and alternatives to voluntary administration first.

A quick decision checklist

• Is the asset idle, income-producing or strategic?
• What would it realistically sell for in the time available?
• What’s the net figure after tax, finance and costs?
• When is the deadline, and can a sale settle before it?
• Is there equity to borrow against instead, or first?
• Will new repayments fit the business’s cash flow?
• What’s the plan if the sale takes longer than expected?

If you’re weighing up premises specifically, our page on commercial rent arrears covers the other side of that decision: what it’s like to be a tenant under pressure.

What about selling the whole business?

For some owners, the question isn’t which asset to sell but whether to sell the business itself. A sale as a going concern can preserve far more value than a liquidation, but it takes time: finding a buyer, due diligence and settlement rarely fit inside a 21-day deadline.

That makes the borrow-now, sell-later approach especially relevant. Clearing the pressing debts with a short-term loan gives you room to sell properly, to a buyer who isn’t circling a distressed business. Buyers also pay more for a business with no ATO debt and no creditors chasing it. Just be realistic about timing, and have a fallback if the sale takes longer — lenders will ask what happens if it does.

Want to keep the assets that earn your living?

Selling in a hurry rarely gets the best result, and it can quietly shrink the business that has to repay everything else. Borrowing first and selling on your own terms often leaves you stronger.

Tell us about the debt, the deadline and what you own — it takes about a minute. There’s no credit check involved in a first enquiry, and your details aren’t sprayed across a list of lenders. A real person looks at it and calls you to talk it through. Please be accurate about asset values, existing finance and your deadline, so we can recommend the right mix of borrowing and selling first time.

Work out your best mix with a real person →