Funding business equipment without draining your working capital

Equipment earns money, but buying it can starve the business of the cash it needs to keep running. A new coffee machine, a second excavator, a CNC router, a refrigerated van or a dental chair can each eat weeks of working capital if paid for outright. Funding equipment properly means getting the asset on site without leaving the account too thin to pay wages and suppliers.

Your three main funding routes

Dedicated equipment finance. Loans, chattel mortgages and leases secured over the equipment itself. Financiers register their interest on the Personal Property Securities Register and lend against the asset’s value. This often suits new or near-new, mainstream equipment with a clear resale market.

Unsecured business loans. A cash flow loan, typically $5k to $500k, assessed on your bank statements rather than the asset. Useful for second-hand or specialised equipment that financiers will not take as security, for packages that mix equipment with installation and training, or when you need to move quickly. See unsecured business loans.

Property-secured loans. For large equipment purchases or when you want to combine equipment with other business needs, a loan secured on residential or commercial property from $20k to $5m can fund it all at once. See secured business loans.

Match the term to the asset

The golden rule: fund equipment over a term no longer than the period it will earn money for you. A laptop that lasts three years should not be on a five-year repayment plan. A heavy machine that works for a decade can sensibly be funded over several years. Matching the two means repayments are covered by what the equipment produces, rather than coming out of other income.

Equipment	Typical working life	Sensible funding approach
Computers and tablets	2 to 4 years	Short term or cash
Commercial kitchen equipment	5 to 10 years	Medium-term equipment finance or loan
Light commercial vehicles	5 to 8 years	Equipment finance
Earthmoving and heavy plant	8 years or more	Longer equipment finance
Specialised second-hand machines	Varies	Unsecured or property-secured loan

Our guide on matching the loan term to its purpose has more examples.

Need equipment on site soon? Start your enquiry and tell us what you are buying and when.

Will it pay for itself?

Before buying, estimate what the equipment will add: extra jobs, more covers, faster output, fewer outsourced tasks or lower repair bills. Compare that monthly benefit with the repayment. The break-even calculator includes a payback estimate, so you can see how many months the equipment needs to cover its cost. If the payback stretches well past the funding term, reconsider the purchase or the size of it.

Tax and the instant asset write-off

Equipment purchases can have tax implications, including depreciation and, for eligible small businesses, instant asset write-off rules. Thresholds and dates change, so check the ATO’s current guidance and talk to your accountant before you buy. Do not let a tax deadline push you into equipment that does not make commercial sense; a deduction is worth only a portion of what you spend.

New or used?

New equipment comes with warranties, predictable costs and easier financing. Used equipment can be much cheaper but may need repairs and can be harder to finance with traditional equipment lenders. If you buy used, consider an inspection, ask for service records and check the PPSR for existing finance owed on the item so you do not inherit someone else’s debt.

Lease or own?

Leasing can keep upfront costs low and suit equipment that dates quickly, such as technology. Owning suits equipment with a long life that you will use until it wears out. Tax treatment differs, so your accountant’s view is important. business.gov.au has a helpful overview of leasing versus buying.

Protecting working capital

The biggest equipment mistake is paying cash for a long-life asset and then borrowing at short notice to cover wages. Keeping cash for operations and funding equipment over its life usually costs less in the long run and is far less stressful. If your working capital is already stretched, the working capital calculator shows how much the business needs just to keep turning over.

Questions to ask before you sign

• Who owns the equipment during the term, and what happens at the end?
• Is there a balloon or residual payment due at the end of the term?
• Are installation, delivery and training included in the funded amount?
• Can the agreement be paid out early if you upgrade or sell the equipment?
• What insurance does the financier require while the equipment is under finance?

Equipment agreements vary widely between providers, and the details that matter most, such as balloons and end-of-term options, are easy to miss on a busy day. Ask for each answer in writing before you commit.

An illustrative example

An illustrative cabinet maker wants a second-hand edge bander from a closing workshop. It is well maintained but too old for the equipment financiers she approached. The machine will let her bring in work she currently outsources, saving a meaningful amount each month. An unsecured loan over two years, sized to the purchase and installation, is repaid from those savings, and she keeps her cash for timber and wages.

Get the gear without the squeeze

Tell us what you are buying, whether it is new or used, the total cost and how quickly you need it. There is no credit check to enquire, we never shop your details around a crowd of lenders, and a real person reviews it. Accurate information helps us recommend the most sensible way to fund it. Apply now.