Running a small business in Australia means you’re faced with making hard choices daily on how to spend your hard-earned cash. The hardest choice you’ll ever have to make is how to obtain the equipment that you require without draining your bank account.
Whether you require a new delivery truck for expanding business, or need to replace that worn-out construction equipment that’s constantly on the verge of collapsing. Whatever, the one question is always the same: Do you pay cash or opt for equipment finance?
As a finance partner focused on SMEs, Probiz Finance enables entrepreneurs to make informed decisions and grow their businesses with confidence. As a first-time loan taker or refinancing needs, the blog has been designed to help you in attempting to make the correct, well-planned decisions for the future of your business.
What is Equipment Finance, Precisely?
Equipment financing lets you acquire the machinery you need right away and pay for it over time. It’s pretty simple: why pay $50,000 all at once for that new machine when you can spread the cost over monthly or annual payments?
You’ve got two broad alternatives to consider:
When you take out a loan, you receive the equipment right away and repay the borrowed amount over time.
Leasing is longer-term renting. You utilise the equipment and pay for it, but if you want to keep it after, you may need to buy it.
Small business equipment loans have been a saviour for so many Australian companies. It lets you purchase necessary items without tying up all your working capital in a single large expense.
The overlooked expenses that no one talks about
Equipment funding may look simple at the start, but it involves careful planning to avoid costly mistakes. Here are a few cost considerations that are often overlooked:
- Accumulate Interest Rates
Although the monthly instalment payments may not be too much to handle, the equipment finance interest rates can also make a significant difference to your overall repayment over time. Rates differ depending on credit history, asset type, and lender terms. Even a 1–2% variation in interest can amount to tens of thousands of dollars in a 3 to 5-year period.
- Maintenance and Insurance
Subject to the contract, you will be required to service or insure the plant. In heavy-duty and specialist industries, these will be substantial costs. Refer to the ATO’s guide on deductions for depreciating assets and capital expenses for more details.
- Residual or Balloon Payments
Some business equipment financing deals involve a balloon payment at the end—that is, you’ll be required to pay a lump sum after you’ve made your regular payments. If you’re not ready for it, it will be a blow to your future cash flows.
- Limited Flexibility
Some finance agreements keep you waiting for years with little flexibility to upgrade or change equipment for free. This might be a roadblock if your business is expanding or changing rapidly.
Equipment Funding Options for Small Businesses
There isn’t one size that fits all when it comes to equipment funding for small businesses. We assist clients at Probiz Finance with selecting:
- Chattel mortgages: Standard for businesses that need to own the asset initially.
- Operating leases: Best for those who prefer fewer upfront costs and regular upgrades.
- Finance leases: Best if you plan to keep the equipment in the long term but want to spread expenses over time.
Knowing your business goals will help determine whether to use business asset finance or a more flexible leasing arrangement.
Comparing Your Funding Options
Before enrolling in any loan, take these options into account:
| Finance Type | Ideal For | Pros | Considerations |
| Asset Loans | Tools, vehicles, technology | Fixed terms, structured payments | May contain balloon payments or deposits. |
| Business Asset Finance | Property, fleet, and equipment package loan | Flexible for diverse assets | A greater scope could include cross-collateral. |
| Commercial Equipment Finance | High-value or multiple machines | Structured for significant business needs | Longer repayment and stricter qualification. |
| Asset Finance Australia | Existing asset-backed loans. | Use current assets without selling them. | Risk of losing the asset if payments are delayed |
Probiz Finance guides you through the options so that you pick the one that’s right for you. It is a matter of determining the right kind of financing for your specific situation. What works for a trucking company might not work for a restaurant.
A Real-World Example
Take Sarah, for instance: she runs a catering business in Melbourne and had to make a big equipment decision. She needed a costly $40,000 commercial oven to handle larger events. She used specialist business finance, paying for the equipment over three years with good equipment finance interest rates of 8%.
With extra charges, she paid approximately $45,000 in total. But the surprise here is that the oven enabled her to secure larger contracts, which earned her an additional $4,000 monthly. The numbers worked out just fine.
But we’ve also had companies where the equipment wasn’t bringing in as much cash as they hoped, and those monthly payments were a challenge. The key is usually having a solid plan and realistic projections.
The Value of an Experienced Finance Broker
Asset financing in Australia is made simple with the right guidance. We at Probiz Finance walk you through the whole procedure, from selecting the most appropriate product to dealing with improved terms.
As an independent finance broker, we take the time to understand your business and match you with the right type of financing. We also assist in ensuring your small business equipment financing is part of your long-term expansion and not merely a band-aid for a short-term issue.
Six Questions to Ask Before You Sign
Before signing up for any small business equipment loans, ask yourself these six significant questions:
- Will this equipment bring enough extra revenue to make it worth the cost? Don’t be unrealistic with your projections.
- Have you compared the most competitive equipment finance interest rates? Saving 1% will save you a thousand dollars.
- Is there a balloon payment, e.g., one towards the end? Be clear about the entire payment schedule.
- Does the payment schedule match your cash flow? If your business goes through cycles in a year, you want payments to align with your income cycles.
- If you want to pay it off ahead of time, some lenders charge you, but some don’t.
- Have you thought about buying versus leasing? Sometimes, one is the best choice.”
Paperwork Checklist
Your lender will require roughly the same amount of paperwork, so it’s logical to get this done first:
- Your photographic identification, such as your driver’s licence, and your ABN and GST registration numbers for your business.
- Recent bank statements, typically six to twelve months’ worth, so they can assess your cash flow patterns.
- Your tax returns or BAS statements to confirm your income.
- Pricing quotation or the invoice for the equipment you want to buy.
- If your business is small, the lender may also ask for a business plan or financial forecast. But don’t stress, we support our clients in gathering and preparing all necessary documentation.
If you don’t feel confident, it is always recommended to consult a finance broker who specialises in small business equipment loans.
Conclusion: Select Smarter Equipment Finance Options with Probiz
The real cost of equipment leasing isn’t always in the figures; it’s in the approach. Getting the proper structure, knowing your terms, and having a good finance partner by your side can be the game-changer.
Ready to explore your options? Let us discuss how Asset Finance Australia solutions can help your business.