Running a business in Wantirna means staying ahead of the curve, and sometimes that requires investing in new equipment. Whether you're looking to upgrade your machinery, purchase vehicles, or acquire technology that'll boost your operations, the right financing can make all the difference.
As a Business Finance Broker, we see many local business owners who want to expand but aren't sure how to fund their equipment purchases. Let's talk about what you need to know before applying for a business loan to purchase equipment.
Understanding Equipment Finance Options
When you're ready to purchase equipment, you'll discover there are several ways to structure your financing. Finance Brokers can help you access Business Loan options from banks and lenders across Australia, giving you more choices than going directly to your bank.
The main types of business loans for equipment include:
• Secured Business Loan: The equipment itself serves as collateral, often resulting in lower interest rates
• Unsecured Business Loan: No collateral required, but typically comes with higher interest rates
• Equipment finance: Specifically designed for purchasing business assets
• Commercial hire purchase: You'll own the equipment at the end of the loan term
How Much Can You Borrow?
The loan amount you can access depends on several factors. Lenders will look at your cash flow, existing working capital, and your business's financial history. Most equipment loans can cover up to 100% of the purchase price, though some lenders prefer you to contribute 10-20% upfront.
Your business's ability to service the loan is crucial. Lenders want to see that your cash flow can comfortably handle the repayments while still maintaining healthy working capital for day-to-day operations.
Interest Rates and Loan Structure
You'll typically choose between a variable interest rate or fixed interest rate. Fixed rates give you certainty with your repayments, while variable rates might start lower but can fluctuate over time.
The loan structure can also vary significantly:
• Progressive drawdown: Perfect if you're purchasing equipment in stages
• Revolving line of credit: Allows you to redraw funds as you pay down the loan
• Flexible repayment options: Monthly, quarterly, or seasonal payments to match your cash flow
The Application Process
The application process for business equipment finance involves several steps. You'll need to provide:
- Financial statements and tax returns
- Details about the equipment you want to purchase
- Quotes from suppliers
- Business registration documents
- Bank statements showing your cash flow patterns
Working with Finance Brokers can streamline this process because they understand what different lenders require and can help you prepare your application accordingly.
Why Equipment Finance Makes Sense
Purchasing equipment through finance rather than using your working capital has several advantages. It preserves your cash flow for other business needs, whether that's covering unexpected expenses, purchasing inventory, or even considering opportunities to purchase a property or expand into buying a business.
Equipment finance also offers tax benefits. You can often claim depreciation on the equipment and deduct the interest payments, though you should always consult your accountant about your specific situation.
Choosing the Right Lender
Different lenders offer varying terms and conditions. Some specialise in certain industries or types of equipment, while others focus on particular loan amounts or business sizes. This is where having access to multiple lenders becomes valuable.
Flexible loan terms matter too. Look for lenders who understand that business needs change and offer features like:
• Early repayment options without penalties
• The ability to make additional payments
• Seasonal payment structures if your business has fluctuating income
• Options to refinance or restructure if needed
Making the Right Decision for Your Wantirna Business
Every business situation is unique. What works for a manufacturing company might not suit a service business. The equipment you're purchasing, your current financial position, and your growth plans all influence which financing option makes the most sense.
Some business owners prefer the security of knowing exactly what they'll pay each month with a fixed interest rate. Others value the flexibility of a revolving line of credit that lets them access funds as needed.
Consider how the equipment will impact your revenue. If it's going to directly increase your earning capacity, you might be comfortable with a shorter loan term and higher repayments. If it's more about efficiency or replacing aging equipment, a longer term might make more sense for your cash flow.
Don't forget to factor in maintenance, insurance, and training costs when calculating the total investment. Your equipment finance might cover the purchase price, but you'll want to ensure your working capital can handle these ongoing expenses.
Investing in the right equipment can transform your business, improve efficiency, and open new opportunities. With the right financing structure and terms that suit your situation, you can acquire what you need while maintaining healthy cash flow.
Call one of our team or book an appointment at a time that works for you. We'll help you explore your options and find the right equipment finance solution for your Wantirna business.