Unlock the secrets to purchasing plant equipment

Buying plant equipment without draining your reserves

Purchasing plant equipment outright ties up capital that could otherwise keep your business flexible. Asset Finance allows Adelaide businesses to acquire machinery, work vehicles, and specialised equipment through structured repayments, preserving cash reserves for wages, materials, and unexpected opportunities.

Consider a landscaping contractor in Salisbury who needs a new excavator. Rather than spending $85,000 upfront, they arrange a chattel mortgage with a 20% deposit and fixed monthly repayments over five years. The equipment starts generating income immediately while the business retains funds to cover seasonal wage costs and bid on larger projects that require upfront materials purchases.

What types of equipment can you finance

Most income-producing assets qualify for commercial equipment finance. This includes excavators, dozers, cranes, tractors, graders, trucks, trailers, factory machinery, medical equipment for clinics, hospitality equipment for cafes and restaurants, and office equipment like printing presses or fit-outs. Lenders typically finance new or used equipment up to ten years old, provided it has a clear commercial purpose and reasonable resale value.

A panel beater in Regency Park recently financed a spray booth and alignment system through equipment finance. The combined value of $120,000 was approved within a week because the equipment directly supported the business's core operations and had strong resale demand if needed.

How chattel mortgages preserve working capital

A chattel mortgage lets you own the equipment from day one while spreading the cost across a fixed term. You pay a deposit, usually between 10% and 30%, then make regular repayments that include principal and interest. The lender holds security over the equipment until the loan is repaid. At the end of the term, the equipment is yours outright with no further payments.

This structure suits businesses with steady cashflow who want to claim depreciation and interest as tax deductions. The equipment appears on your balance sheet as an asset, and you can include GST in the loan amount and claim it back through your Business Activity Statement if you're registered.

Balloon payments and how they manage cashflow

A balloon payment is a lump sum due at the end of your loan term, separate from your regular repayments. It reduces your monthly commitment during the loan period, which can be useful if your business has seasonal income or if you expect the equipment to retain strong resale value. Balloons are typically set between 10% and 40% of the loan amount, depending on the equipment type and loan term.

An earthmoving business in Elizabeth used a 30% balloon on a $200,000 grader. Monthly repayments dropped by nearly $1,400, giving the business breathing room during winter when project work slows. At the end of the five-year term, they refinanced the balloon into a short-term loan rather than selling the grader, which was still in high demand for road construction projects across Adelaide's northern growth corridors.

How hire purchase differs from a chattel mortgage

Hire purchase also spreads equipment costs over time, but you don't own the asset until the final payment is made. The lender owns the equipment during the loan term, and you hire it with an option to purchase at the end. Monthly repayments are usually fixed, and there's often no deposit required.

This option suits startups or businesses with limited cash reserves who want certainty around repayments but don't need immediate ownership. The trade-off is that you can't claim depreciation during the loan term because you don't own the asset yet, though you can still claim the interest portion of your repayments.

Tax benefits and depreciation claims

When you own equipment through a chattel mortgage, you can claim depreciation based on the asset's effective life as set by the Australian Taxation Office. This reduces your taxable income each year. You can also claim the interest component of your repayments and any ongoing costs like insurance, servicing, and registration if the equipment is a vehicle.

For assets under the instant asset write-off threshold, eligible businesses can claim the full purchase price as a deduction in the year of purchase. This threshold changes periodically, so it's worth checking current rules with your accountant before committing to a purchase. The combination of depreciation and interest deductions often makes financing more tax-effective than an outright purchase funded from after-tax profit.

Vendor finance and dealer finance arrangements

Some equipment suppliers and dealers offer their own finance arrangements, often called vendor finance or dealer finance. These can be convenient because they're arranged at the point of sale, but it's worth comparing rates and terms with what a broker can access across multiple lenders. Dealer finance is sometimes structured as a lease rather than a purchase, which changes the tax treatment and ownership timeline.

A café owner in Norwood was offered dealer finance on a commercial coffee machine and refrigeration setup. The rate was 9.8% over four years. After speaking with a broker, they accessed a chattel mortgage at 7.2% through a national lender, saving over $3,000 across the term and gaining the flexibility to claim full depreciation from day one.

How lenders assess equipment finance applications

Lenders look at your business's cashflow, trading history, and the equipment's resale value. Most want to see at least six months of trading, though some lenders work with newer businesses if the equipment is essential to operations and the applicant has relevant industry experience. Your credit history matters, but lenders also consider the strength of the security and whether the equipment will generate income that covers the repayments.

If your business is registered for GST, you can usually include the GST component in the loan amount and claim it back through your Business Activity Statement. This means you're not required to pay the GST upfront, which helps with cashflow at settlement.

When to consider a lease instead of a purchase

A finance lease or operating lease keeps the equipment off your balance sheet and can suit businesses that need regular upgrades or want to avoid ownership risk. At the end of a finance lease, you can return the equipment, upgrade to newer models, or purchase it for a predetermined residual value. Monthly payments are typically tax-deductible as an operating expense.

Leases suit businesses in industries where equipment becomes outdated quickly, like technology or medical fields, or where usage is heavy and residual values drop fast. For long-term assets like earthmoving machinery or trucks that hold value well, a chattel mortgage or hire purchase often provides more flexibility and lower overall costs.

Accessing asset finance options across multiple lenders

A broker can access asset finance options from banks and lenders across Australia, including lenders who specialise in construction equipment finance, commercial vehicle finance, medical equipment finance, hospitality equipment finance, and technology equipment finance. This means you're not limited to one lender's rates or criteria, and you can compare options based on loan amount, deposit requirements, balloon payments, and repayment terms that suit your cashflow.

For Adelaide businesses looking to upgrade existing equipment or acquire new machinery without tying up working capital, structured finance lets you match repayments to the income the equipment generates. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions