Commercial equipment finance is a form of business funding used to purchase machinery, vehicles and other assets needed for day-to-day operations. Instead of paying the full cost upfront, an eligible business can spread the purchase over an agreed term.
For businesses that rely on expensive machinery or specialised assets, commercial equipment finance can help preserve working capital while still allowing the business to invest in the equipment it needs.
At LoanBrix, we help Australian businesses compare lenders and structure funding around the asset being purchased.
How Does Equipment Funding Work?
In most cases, commercial equipment finance starts with the business choosing the asset it wants to buy. The lender then assesses the business, the equipment and the proposed transaction before deciding whether to approve the application.
Depending on the lender, the assessment may consider:
- The type of equipment being purchased
- The purchase price
- Whether the asset is new or used
- The business’s trading history
- Revenue and cash flow
- Existing debts and commitments
- The applicant’s credit profile
- Any deposit or contribution
- The requested loan term
Different lenders can apply very different policies to the same purchase. That is why commercial equipment finance is often less about finding any lender and more about finding one whose criteria suit the business and the asset.
The most suitable commercial equipment finance option will therefore depend on the transaction rather than on one lender being best for every business.
What Types of Equipment Can Be Financed?
Businesses may be able to finance a wide range of assets, provided the equipment has a genuine commercial purpose and meets the lender’s requirements.
Commercial equipment finance may be used for:
- Excavators and earthmoving machinery
- Forklifts and warehouse equipment
- Manufacturing machinery
- Agricultural equipment
- Commercial kitchen equipment
- Medical and dental equipment
- Printing equipment
- Trailers and other business assets
- Computer and technology equipment
- Specialised industrial machinery
If you already know what you want to purchase, LoanBrix has more information about funding machinery and business equipment.
Why Do Businesses Finance Equipment Instead of Paying Cash?
One of the main reasons businesses use commercial equipment finance is to avoid using a large amount of available cash in a single purchase.
For example, a business buying a $100,000 machine could pay the full amount upfront or consider financing some or all of the purchase price.
Using commercial equipment finance may allow the business to keep more cash available for:
- Wages
- Stock and materials
- Supplier invoices
- Insurance
- Rent
- Marketing
- New projects
- Unexpected costs
The Australian Government provides additional guidance on leasing or buying business vehicles and equipment.
Whether paying cash or financing the purchase makes more sense depends on the business’s cash flow, borrowing costs and broader financial position.
Can New Businesses Get Equipment Funding?
Yes, a newer business may still be eligible for commercial equipment finance, although the number of suitable lenders can be smaller when there is limited trading history.
A lender may look more closely at:
- How long the ABN has been active
- The applicant’s experience in the industry
- Business bank activity
- Credit history
- The asset being purchased
- The amount being borrowed
- Any deposit available
- How the equipment will be used
For newer businesses, commercial equipment finance can require more careful lender selection because some providers have minimum trading-history requirements while others may consider applications with less time in business.
Can Used Machinery Be Financed?
Used machinery can often be considered for commercial equipment finance, but the age, condition and resale value of the asset can affect which lenders are available.
A lender may consider:
- The current age of the equipment
- Its expected age at the end of the loan term
- The condition of the asset
- The purchase price
- Estimated market value
- The expected useful life
- Whether there is an established resale market
Commercial equipment finance for a commonly traded machine may be easier to assess than funding for highly specialised equipment with a limited secondary market.
What Documents Might a Lender Ask For?
The documents required depend on the lender, transaction size and financial position of the business.
For a commercial equipment finance application, a lender may request:
- Identification
- ABN and business details
- An equipment quote or tax invoice
- Business bank statements
- BAS statements
- Financial statements
- Details of existing debts
- Information about the business’s activities
Some applications may qualify for a more streamlined assessment, while larger or more complex purchases can require more detailed financial information.
If the business needs funding for broader purposes rather than a specific asset purchase, LoanBrix also provides information about business funding options.
Is Equipment Funding Available in Melbourne?
Yes. Melbourne businesses can access commercial equipment finance through banks, non-bank lenders and specialist commercial lenders.
The available options can vary depending on:
- Business age
- Turnover
- Equipment type
- Asset age
- Loan size
- Financial documentation
- Deposit requirements
A Melbourne business does not necessarily need to use its existing bank. Commercial equipment finance can be available through a range of lenders, each with different appetite for particular industries, assets and business profiles.
How Is Equipment Funding Different From a General Business Loan?
Equipment funding is generally tied to the purchase of a specific business asset, while a general business loan may be used for a broader range of approved business purposes.
Commercial equipment finance might be used to purchase a $75,000 machine, while a business loan may instead be used for working capital, stock, renovations, expansion or other business expenses.
The right structure depends on what the business needs to fund and how the lender assesses the purpose of the loan.
How Long Can Equipment Be Financed For?
The available term depends on the lender, the asset and the financial position of the business.
When assessing commercial equipment finance, lenders may consider the age and expected useful life of the equipment.
A shorter term can mean higher regular repayments but a faster repayment period. A longer term spreads repayments over more time, although it can also increase the total cost of borrowing.
The term should therefore be considered alongside cash flow and how long the business expects to use the asset.
Are There Tax Considerations When Buying Business Equipment?
There may be tax consequences or deductions associated with business equipment, but the treatment depends on the asset, finance structure and circumstances of the business.
The Australian Taxation Office provides guidance on depreciation and the instant asset write-off.
Tax rules can change, so businesses should speak with an accountant or registered tax professional before choosing commercial equipment finance primarily because of an expected tax benefit.
Why Use a Broker When Financing Equipment?
A commercial finance broker can help compare multiple lenders instead of assessing the purchase against the policy of only one provider.
This can be useful because commercial equipment finance criteria differ between lenders.
A broker can help with:
- Identifying lenders that accept the asset
- Comparing rates, fees and loan structures
- Understanding documentation requirements
- Preparing the application
- Assessing finance terms
- Managing communication with the lender
- Coordinating settlement with the equipment supplier
The Australian Government also recommends comparing business finance products based on factors such as rates, fees, terms and security requirements when considering a business loan.
For a business purchasing an unusual asset, used machinery or expensive equipment, commercial equipment finance may be easier to navigate when lender selection is based on the specific transaction.
How Can LoanBrix Help?
LoanBrix helps businesses compare commercial equipment finance options based on the business, the equipment and the proposed purchase.
For businesses comparing commercial equipment finance, this may be useful where:
- The equipment is specialised
- The asset is used or older
- The business has limited trading history
- The purchase involves a large amount of capital
- The existing bank does not suit the transaction
- The business wants to compare multiple lenders
If you are planning an equipment purchase, you can review LoanBrix’s equipment and machinery lending options or contact LoanBrix to discuss the transaction.
Frequently Asked Questions
What Is Commercial Equipment Finance?
Commercial equipment finance is business funding used to purchase machinery, vehicles or other equipment for commercial use. The financed amount is generally repaid over an agreed term.
Can used equipment be financed?
Yes. Many lenders will consider used equipment, although age, condition, value and expected useful life can affect eligibility.
Can a new business apply?
Potentially. Some lenders consider newer businesses, but they may apply different requirements around trading history, credit profile, deposit and the type of equipment being purchased.
Do I need financial statements?
Not always. The documentation needed depends on the lender, the business, the asset and the amount being financed.
Can a broker help compare lenders?
Yes. A broker can compare lender policies, finance structures and documentation requirements, then help prepare an application based on the business and asset.
