A farming or agricultural business can own hundreds of thousands of dollars in machinery and still be short of cash.
The tractor is paid out.
The loader is owned outright.
There may be other equipment sitting on the balance sheet with no finance against it.
But the business account still has to cover wages, feed, fuel, repairs, suppliers, tax and the next stage of the operation.
Around Colac and the wider Colac Otway region, where dairy and beef are significant agricultural industries, that can create an important finance question.
Does the business really need to sell equipment or take another short term unsecured loan to create working capital?
Or could equity held in suitable business machinery potentially be used as part of a different finance structure?
Owning the Asset Does Not Mean the Cash Has Disappeared
Consider a business that owns a tractor worth approximately $180,000 outright.
That tractor is valuable.
It is also producing income or supporting the farming operation.
Selling it to create cash may make little commercial sense if the business would simply need to replace it.
Depending on the asset, business position and lender, there may be circumstances where refinancing machinery can release some of the capital tied up in an owned asset while the business continues using it.
That does not mean every paid out machine should be refinanced.
It means the equity sitting in business equipment may be worth considering before automatically reaching for another short term loan.
With around 30 years in finance, Thrive Broking looks at where capital is already sitting inside the business before deciding how a new funding requirement might be structured.
Why Does the Business Need the Cash?
This is where the conversation needs to start.
Releasing money from machinery should have a commercial purpose.
The business might need working capital for:
Feed
Fuel
Wages
Contractors
Repairs and servicing
Supplier accounts
ATO commitments
Inputs
Expansion
Another business asset
A temporary seasonal cashflow requirement
There is a significant difference between releasing $100,000 because the business has a clearly identified operating requirement and refinancing machinery simply because a lender is prepared to provide additional money.
The funding still needs a job.
Tell Us About the Machinery and What You Need the Cash For
If your business owns machinery outright and you are considering using some of that value to support working capital or another business requirement, tell Thrive Broking about the actual assets.
Send us:
The type of machinery
Year, make and model
Approximate current value
Whether any finance is still owing
What the machinery is used for
How much funding the business requires
What the money will be used for
Existing business finance commitments
We can then look at whether
Webroot Classification: yellow
machinery finance or another business finance structure may be relevant.
Availability and the amount that may be available will depend on the asset, lender and financial position of the business.
The Asset Still Needs to Make Sense to the Lender
Owning a machine worth $200,000 does not automatically mean a lender will advance $200,000 against it.
The asset itself matters.
Its age matters.
Its condition and expected market value can matter.
The type of machinery can matter because some equipment has a broader resale market than highly specialised assets.
The lender will also assess the business.
That may include factors such as turnover, existing commitments, credit history, trading history and the purpose of the finance.
This is why an estimated asset value is only one part of the conversation.
At Thrive Broking, we want enough information to consider both sides.
What is the machinery?
And what does the business need the money to achieve?
Refinancing a Paid Out Asset Creates a New Repayment
There is an obvious trade-off.
The machinery may currently be debt free.
Once it is refinanced, the business has another repayment.
That means the cash being released needs to provide enough commercial value to justify adding that commitment.
Suppose $120,000 is released from machinery.
If that money gives the business enough working capital to manage a predictable seasonal gap, purchase inputs on better terms or complete profitable work that is already available, there may be a clear reason for considering it.
If the money is simply absorbed into an ongoing operating loss with no change to the underlying problem, another repayment could make the business position harder.
Finance can create liquidity.
It cannot make an unprofitable operation profitable by itself.
That distinction matters.
Could Working Capital Be a Better Option?
Refinancing machinery is not the only way to create additional cash.
Depending on the circumstances,
Webroot Classification: yellow
working capital finance may be more appropriate.
The decision can depend on factors such as:
How much money is required
How long it will be needed
Whether the requirement is once off or recurring
What existing assets are already financed
Whether invoices or other business receivables exist
How quickly the business expects cashflow to improve
What repayment structure fits the operating cycle
A short seasonal requirement may call for one structure.
A larger expansion or longer term capital requirement may call for another.
We should not refinance an asset simply because the asset is available as security if another structure suits the business better.
What if the Machinery Still Has Finance Owing?
The machinery does not necessarily need to be completely paid out before the current position can be reviewed.
But the payout matters.
Imagine a tractor is worth approximately $200,000.
If the current finance payout is $40,000, there may be substantial equity in the asset.
If the payout is $175,000, the position is very different.
That does not determine by itself whether additional funding will be available.
It does tell us how much value is actually sitting above the existing debt.
This is why Thrive Broking asks for payout information early.
The market value of the asset and the equity in the asset are not the same thing.
Do Not Strip Working Assets Out of the Business Just to Create Cash
Selling machinery can sometimes be the right decision.
Perhaps the asset is no longer needed.
The business may have duplicate equipment.
A change in operations may mean the machine no longer earns its place.
In those circumstances, selling can release capital and remove ongoing costs.
But selling an essential piece of machinery solely because the business needs cash can create another problem.
The business may then need to hire equipment.
Use contractors.
Or buy another machine later.
Before selling a productive asset, compare the alternatives.
Could the business retain the machine and finance the cash requirement another way?
Could part of the asset value potentially be released?
Would a working capital facility make more sense?
Or is selling genuinely the better commercial outcome?
The finance decision should support the operation rather than weaken it.
Expansion Can Tie Up Cash Faster Than Expected
This becomes particularly relevant when an agricultural business expands.
More cattle.
More leased land.
Additional contracting work.
Another employee.
A new customer.
Larger supplier orders.
Growth can absorb working capital quickly.
The business may own substantial machinery but still find that cash becomes the constraint preventing the next stage of growth.
That is when looking at the overall balance sheet can be useful.
Where is the business capital?
How much is sitting in machinery?
How much is tied up in stock or receivables?
What finance already exists?
What additional cash does the expansion actually require?
Rather than simply applying for another loan, the finance structure can be considered around the assets and cash cycle already inside the business.
ATO Debt Needs a Separate Conversation
A business owner may also consider refinancing machinery because ATO debt has built up.
That can be possible in some circumstances, subject to lender assessment, but the reason the ATO debt developed still matters.
Was it a temporary cashflow issue?
Was there an unusually difficult season?
Has the business now returned to normal trading?
Or is new tax debt still accumulating?
If the underlying cashflow issue has not changed, refinancing an asset to clear older debt can simply move the liability from one place to another.
The business may still face the same problem later.
If ATO debt is part of the requirement, tell us at the beginning so the broader position can be reviewed.
What Happens After the Cash Is Released?
This is the question that should be answered before settlement.
If $150,000 is released, what happens next?
Perhaps $60,000 clears suppliers.
$40,000 provides operating cash.
$25,000 covers upcoming repairs.
And $25,000 remains available as a buffer.
That is a clear plan.
If there is no clear answer and the money is likely to disappear immediately into general expenses, it may be worth understanding the cashflow problem more deeply first.
The business should know what the funding is solving.
Otherwise, valuable asset equity can gradually be converted into additional debt without materially improving the business.
Colac Has a Strong Agricultural Base
Colac Otway Shire identifies dairy and beef among the region’s key agricultural industries, with agriculture continuing to be an important part of the local economy.
That means many businesses around Colac have significant capital invested in tractors, loaders, farm machinery and other productive equipment.
Sometimes the finance opportunity is not another asset purchase.
It is understanding whether the assets already owned by the business can form part of a better capital structure.
Own the Machinery but Need the Cash? Let Us Look at Both
If your farming, contracting or agricultural business around Colac owns valuable machinery but needs additional working capital, tell Thrive Broking about the assets before assuming another short term loan is the only option.
Send us the machinery details, approximate values, any current payouts and what the additional money needs to achieve.
With around 30 years of finance experience, Thrive Broking can look at whether refinancing suitable machinery, arranging working capital or using another business finance structure may be appropriate.
Owning an asset outright can be a strong position.
The question is whether leaving all of that capital tied up in the asset is still the best use of it for your business.