You’ve found the equipment.
Price:
$285,000.
The supplier wants to know:
“How are you paying for it?”
You know the business needs it.
What you may not know is:
how you should fund it.
Pay cash?
Finance the whole purchase?
Contribute a deposit?
Use equipment finance?
Use a business loan?
Use property?
Trade an existing machine?
Finance several assets together?
And perhaps the most important question:
how much cash should the business still have after the equipment arrives?
Equipment finance isn’t simply about finding a lender willing to fund:
$285,000.
The better question is:
What funding structure makes sense for the business buying the equipment?
The Port Augusta Business
Imagine an established Port Augusta civil contracting and maintenance business working across regional South Australia.
Trading history:
12 years.
Annual turnover:
approximately $5.7 million.
Employees:
21.
The business currently operates:
excavators,
loaders,
trucks,
trailers,
and smaller plant.
It has just secured additional work and needs another excavator.
Equipment found:
late-model excavator.
Purchase price:
$285,000.
Cash in the business:
approximately $420,000.
The owner initially says:
“We’ve got the money. I might just pay cash.”
Maybe.
But before transferring:
$285,000,
let’s look at what happens to the business afterwards.
Option One: Pay Cash
Purchase price:
$285,000.
Current cash:
$420,000.
Cash remaining:
$135,000.
No equipment repayment.
No new lender.
No finance application.
The excavator is paid for.
That sounds attractive.
But:
is $135,000 enough operating cash for this business?
Look at the Business Around the Excavator
Fortnightly payroll:
approximately $82,000.
Fuel and suppliers:
substantial.
Insurance:
ongoing.
Existing equipment repayments:
ongoing.
New contract mobilisation:
approximately $110,000 over the first several weeks.
Customers:
generally pay between 30 and 45 days.
Suddenly:
$135,000
doesn’t look particularly large.
Owning the Excavator Outright Doesn’t Help if Payroll Is Due Before the Customer Pays
That’s the first equipment-finance principle.
Don’t look only at:
the asset.
Look at:
the business buying it.
Cash Has a Job
Business cash may be needed for:
wages,
fuel,
materials,
repairs,
tax,
super,
insurance,
mobilisation,
unexpected expenses,
and the gap between completing work and receiving payment.
If:
$285,000
is transferred to an equipment supplier,
that liquidity is no longer sitting in the operating account.
Does That Mean You Should Never Pay Cash for Equipment?
No.
Sometimes cash is completely sensible.
Perhaps the business has:
$2 million
available,
stable customer receipts,
little debt,
and no significant upcoming cash requirements.
Paying:
$285,000
may barely affect liquidity.
Different business.
Different decision.
Option Two: Finance the Equipment
Instead of using:
$285,000
of cash,
the business investigates equipment finance.
Depending on the transaction, borrower, asset and lender, there may be commercial asset-finance structures available to fund eligible equipment.
The exact structure, repayment, documentation and approval requirements vary.
But conceptually:
the business keeps more of its cash
and
repays the equipment over time.
Why Would a Business Choose That?
Because the equipment is expected to:
produce revenue
over several years.
The business may prefer the cost of acquiring it to be spread over time rather than consuming a large amount of cash immediately.
But Finance Isn’t Free
There will generally be:
repayments,
interest or finance costs,
and potentially fees depending on the facility.
So preserving:
$285,000
of cash isn’t automatically the best decision either.
You need to compare:
the value of retaining liquidity
against
the cost and commitments of finance.
Option Three: Contribute Some Cash and Finance the Rest
This can sometimes be the middle ground.
Purchase price:
$285,000.
Suppose the business contributes:
$60,000.
Potential finance requirement:
$225,000.
Cash remaining from the original $420,000:
approximately $360,000.
Now the business has:
less finance
than if it funded the full purchase,
while still retaining substantially more operating cash than if it paid the entire purchase price itself.
Whether a deposit or contribution is required, beneficial or appropriate will depend on the transaction and lender.
Don’t Choose the Deposit Before Looking at the Cashflow
The owner says:
“I’ll put in $100,000 so the repayments are lower.”
Maybe.
But why:
$100,000?
Why not:
$50,000?
Or:
$150,000?
The contribution should make sense in the context of:
cash reserves,
repayment capacity,
asset value,
and lender requirements.
Option Four: Trade an Existing Machine
The business already owns an older excavator.
Estimated trade value:
$95,000.
Finance owing:
$35,000.
Potential net trade equity:
approximately $60,000.
That could potentially contribute towards the replacement transaction.
Now the business may not need to take:
$60,000
from its operating cash.
But Check the Payout
Don’t assume:
machine worth $95,000
means:
$95,000 deposit.
If:
$35,000
is still owed,
the relevant equity is closer to:
$60,000
before considering transaction costs or differences in actual trade value.
What If the Equipment Is Worth Less Than the Finance Owing?
Suppose:
trade value:
$70,000.
Finance payout:
$90,000.
Difference:
$20,000.
Now the old machine has:
negative equity.
That changes the replacement conversation.
We’ll deal with that situation later in this equipment-finance journey.
Option Five: Finance Several Assets
Maybe the business doesn’t only need:
an excavator.
The new contract requires:
excavator:
$285,000.
Skid steer:
$95,000.
Trailer:
$42,000.
Attachments:
$38,000.
Total:
$460,000.
Now the question becomes:
should these be financed:
together,
separately,
or under different structures?
Don’t Automatically Put Everything Into One Loan
Different assets may have:
different useful lives,
different suppliers,
different delivery dates,
and different funding considerations.
The appropriate structure depends on the transaction.
Option Six: Business Finance Rather Than Traditional Asset Finance
What if the purchase doesn’t fit neatly into a conventional equipment-finance transaction?
Perhaps the business needs:
equipment
plus
mobilisation cash.
For example:
equipment:
$285,000.
Mobilisation:
$120,000.
Total requirement:
$405,000.
The equipment itself may potentially suit asset finance.
The:
$120,000
working-capital requirement
is a different problem.
Don’t Force Working Capital Into an Equipment Purchase
Separate the purposes.
Ask:
How much is for the asset?
How much is for operating cash?
Then investigate the appropriate structure for each.
Option Seven: Debtor Finance May Be Part of the Solution
The business has:
$880,000
in outstanding commercial invoices.
Average customer payment time:
approximately 44 days.
The owner says:
“I need equipment finance because I can’t afford the excavator.”
Maybe.
But perhaps the bigger issue is:
cash trapped in debtors.
The Equipment Purchase Can Reveal a Working-Capital Problem
If the business is profitable but:
hundreds of thousands of dollars
is continually sitting in unpaid invoices,
the equipment decision may expose a broader funding requirement.
Potentially:
asset finance funds the excavator,
while an appropriate working-capital or debtor-finance facility addresses the operating cycle.
Not every business will need both.
Option Eight: Property-Secured Business Finance
Some business owners may have:
commercial
or
residential property
with available equity.
Depending on the circumstances and transaction, property-secured commercial finance may potentially be considered.
But don’t automatically put:
a $285,000 excavator
against property simply because equity exists.
Match the Finance to the Purpose
An excavator is:
a productive business asset.
If suitable equipment finance is available, compare it before moving the purchase onto property security.
There may be circumstances where a property-backed structure makes sense.
There may also be circumstances where it doesn’t.
Option Nine: Refinance Existing Equipment Debt
Suppose the business already has:
six equipment facilities.
Current combined balance:
$760,000.
Then it wants:
another $285,000 excavator.
Before adding a seventh facility, perhaps the owner asks:
“Should we review everything?”
Potentially.
But don’t refinance existing equipment merely because you’re buying something new.
Existing Finance May Already Be Good Finance
If:
repayments are manageable,
terms suit the assets,
and facilities are performing,
there may be no reason to disturb them.
Or Existing Repayments May Be Restricting Growth
Different situation.
Perhaps several facilities have short remaining terms and large repayments.
Now the overall equipment debt position deserves examination.
Option Ten: Don’t Buy the Equipment Yet
This is also an option.
The owner says:
“We need the excavator.”
Do you?
Ask What the Equipment Will Actually Do
Is it:
replacing a failing machine?
Supporting a signed contract?
Increasing capacity?
Reducing subcontractor costs?
Improving productivity?
Opening a new revenue stream?
Or:
does the owner simply want a newer machine?
Equipment Should Have a Commercial Job
Suppose the business currently hires an excavator for:
approximately $18,000 per month
during busy periods.
Owning one may potentially change the economics.
Now there is a measurable reason for the purchase.
Or the New Excavator Supports a $1.4 Million Contract
Again:
commercial reason.
But What If It Will Be Used Two Days a Month?
Maybe:
hiring
remains the better option.
Finance doesn’t make a poor asset decision good.
Start With Utilisation
How often will the equipment work?
How much revenue does it support?
What costs does it replace?
What maintenance will it require?
What is the expected useful life in the business?
These questions matter before:
interest rate.
Equipment Finance Is Not Only About Approval
Business owners naturally ask:
“Can I get approved?”
But approval is only one part of the decision.
Also ask:
“Should the business take this finance?”
Let’s Compare Two Port Augusta Businesses
Both want:
the same $285,000 excavator.
Business A
Cash:
$1.4 million.
Debtors:
$300,000.
No significant upcoming expenditure.
Existing debt:
low.
Stable contracts.
Paying cash may be completely reasonable.
Business B
Cash:
$420,000.
Debtors:
$880,000.
Payroll:
$82,000 per fortnight.
New contract mobilisation:
$110,000.
Existing equipment repayments:
significant.
Customers:
30 to 45 days.
Paying cash could leave the business unnecessarily tight.
Same excavator.
Same price.
Different finance decision.
What About New Equipment?
New equipment may potentially offer:
manufacturer warranty,
predictable maintenance,
newer technology,
and longer expected service life.
It may also cost more.
What About Used Equipment?
Used equipment may reduce:
purchase price.
But:
age,
hours,
condition,
valuation,
remaining useful life,
and lender appetite
can become more relevant.
We’ll examine new versus used equipment separately in this journey.
What About Equipment From a Private Seller?
That can potentially be financed in some circumstances.
But private-sale transactions can involve different:
verification,
documentation,
valuation,
and settlement considerations
from dealer purchases.
That deserves its own article too.
What About Auction Equipment?
Again:
possible in some situations,
but auctions create different pressures.
You may need to understand finance:
before bidding,
not after winning.
What About Older Machinery?
A:
15-year-old excavator
is not necessarily assessed the same way as:
a two-year-old excavator.
Asset age at:
purchase
and potentially at the end of the finance term
may matter depending on lender.
What About a New ABN?
Perhaps the owner has:
20 years of industry experience
but only established the new business:
six months ago.
That’s different from an established 12-year trading entity.
It doesn’t automatically mean:
no finance.
But the assessment may be different.
What About Low-Doc Equipment Finance?
Documentation requirements can vary depending on:
borrower,
transaction,
asset,
amount,
and lender.
Low-doc does not mean:
no assessment.
What About a $50,000 Machine?
The same principles apply.
Don’t use:
$50,000
of business cash automatically if that cash is required elsewhere.
And don’t automatically finance:
$50,000
if the business has ample surplus cash.
What About a $500,000 Machine?
Now the impact becomes larger.
Suppose:
equipment:
$500,000.
Cash available:
$650,000.
Paying cash leaves:
$150,000.
For a business with:
$120,000 weekly operating expenses,
that may be far too tight.
What About $1 Million of Equipment?
At that level, the structure becomes even more important.
Perhaps:
multiple machines,
different delivery dates,
different suppliers,
trade-ins,
deposits,
and contract commencement dates
are involved.
The finance should reflect the actual acquisition.
Don’t Forget GST and Purchase Structure
The invoice needs to be understood correctly.
Purchase price.
GST treatment.
Deposits already paid.
Trade-ins.
Payouts.
Accessories.
Attachments.
Delivery.
The final amount required may not be the number you initially had in mind.
Your accountant or tax adviser should provide tax advice where required.
Don’t Pay a Large Non-Refundable Deposit Before Understanding Finance
This can create unnecessary pressure.
The owner finds:
the perfect excavator.
Supplier says:
“I need $30,000 today to hold it.”
Before committing, understand:
what the deposit terms are
and
whether the proposed finance is realistic.
A Deposit Doesn’t Guarantee Finance Approval
Neither does:
a purchase order.
Or:
a signed contract to buy the equipment.
Finance remains subject to lender assessment and requirements.
Don’t Promise the Supplier Settlement Tomorrow Before Finance Has Been Assessed
Instead, understand:
supplier expectations,
asset availability,
and required settlement timing.
Then tell the broker.
Speed Matters Differently Depending on the Purchase
Dealer equipment sitting in stock:
one situation.
Private seller leaving the country:
another.
Auction settlement deadline:
another.
Machine required for a contract starting next week:
another.
Tell us:
why the timing matters.
What Will a Broker Want to Know?
Start with:
equipment type,
purchase price,
new or used,
year,
seller,
deposit paid if any,
trade-in if any,
and finance amount required.
Then:
business name,
ABN,
trading history,
annual turnover,
and purpose of the equipment.
For Larger Transactions, We May Need More Context
Existing equipment debt.
Cash available.
Major contracts.
Financial information.
Property position if relevant.
Debtors.
Other business liabilities.
Exactly what is required depends on:
the lender
and
the transaction.
Tell Us About the Equipment
Don’t simply say:
“machine.”
Tell us:
2023 excavator,
purchase price $285,000,
dealer sale,
approximately 1,800 hours,
needed for civil contract commencing next month.
That’s useful.
Tell Us About the Business
“Civil contractor, 12 years trading, approximately $5.7 million turnover, 21 employees.”
Useful.
Tell Us Why You’re Buying It
“Currently hiring equivalent equipment and have secured additional contract work.”
Useful.
Now we have:
a commercial transaction,
not simply:
“I need $285,000.”
What If You Haven’t Chosen the Equipment Yet?
That’s okay.
You can still investigate:
potential borrowing position
before choosing the exact machine.
That may help establish:
a realistic budget.
Don’t Shop for a $600,000 Machine if the Business Can Only Support $250,000
Understanding finance capacity earlier can save:
time
and
disappointment.
What If You’ve Already Found It?
Then have the details ready.
Supplier.
Invoice or quote.
Asset description.
Price.
Year.
Serial or identifying information when available.
Settlement timing.
Deposit.
Trade.
Equipment Finance Should Support the Business, Not Starve It
This is the central idea.
The goal isn’t:
maximum finance.
And it isn’t:
minimum debt at all costs.
The goal is an appropriate balance between:
equipment ownership,
repayment commitments,
and business liquidity.
A Business With Equipment and No Cash Can Still Be in Trouble
You can own:
three excavators,
two trucks,
a loader,
and a workshop
and still struggle to pay:
wages
on Friday.
Assets don’t replace working capital.
Equally, Cash Sitting in the Bank Has a Cost
If a business refuses to invest in equipment that could:
increase capacity,
reduce hire costs,
or support profitable contracts,
excessive caution can also restrict growth.
The decision needs context.
Before Buying Equipment, Ask Five Questions
What will the equipment do?
How much will it cost?
How often will it be used?
What cash will remain after the purchase?
And:
what finance structure best supports the business?
If You’re Buying Equipment, Start With the Transaction
Tell Thrive Broking:
what equipment you’re buying,
purchase price,
new or used,
dealer, private seller or auction,
whether you’ve paid a deposit,
whether there’s a trade-in,
and when settlement is required.
Then tell us:
how long the business has traded,
approximate annual turnover,
what the equipment will be used for,
and whether you’re:
replacing equipment,
expanding,
or starting a new contract.
For larger or more complex transactions, we can also look at:
existing equipment finance,
working capital,
debtor position,
and other business commitments.
From there, we can investigate whether:
equipment finance,
a broader business-finance structure,
or a combination of facilities
may be appropriate.
Because when you’ve found:
$285,000
of equipment,
the question isn’t only:
“Can I finance it?”
It’s:
“How should I pay for it without putting unnecessary pressure on the business that needs it?”
That’s where the equipment-finance conversation should start.