Equipment Loans: The Base Figures

*Average loan amount. Equipment loans for small business usually range from $5,000 – $2,000,000. Based on most recently available data and could be that it does not factor in recent rate hikes.

Growing Popularity in Australia

Equipment loans have always been extremely popular in Australia, partly due to the high number of businesses in the construction industry, but also because of the high costs of commercial equipment in comparison to the moderate cash-flow small businesses normally have. A 2021 survey conducted by Banjo Business Loans estimated 26% of SMEs to have a current equipment/asset finance agreement in place. Of the one in four businesses to actually exceed revenue targets during a tumultuous 2020, the third most popular action of these firms was to purchase a new significant asset/equipment for the business. In 2021, 65% of SMEs plan to buy a new piece of equipment.

View our top choices for business equipment financing in all of Australia below. Businesses accepted from ACT, NSW, NT, QLD, WS, Tasmania and Victoria.

Best Equipment Finance Companies

These are the top 3 specialist lenders for equipment financing.

#1 Finance One

• From $8,000 to $125,000
• Loan term 3 to 7 years
• Approval in 48h
• Following equipment accepted: forklifts, tools, commercial equipment, office equipment and safety equipment.
• Offices in Townsville and Brisbane
• ProductReview.com.au 2020 Awards winner.
• Optus Awards 2018 Finalist.
• Easy to make complaints via email, telephone or post. External dispute resolution in place.
• Min. requirements – generating income for the past 6 months, minimum 21 years of age, clean credit history.
• Pending Review on smallbusinessloansaustralia
  

#2 Grow (grow.com.au)

• Established in 2015, more than 7,000 customers and over $1bn funded.
• Specifically focus on asset , equipment, invoice and trade finance (whereas most lenders are predominantly focused on unsecured loans).
• Impressive management team with plenty of industry experience.
• Specialising in medical, office, industrial, solar and energy equipment finance.
• Pending Review on smallbusinessloansaustralia

#3 EarlyPay

• 4.8 /5 on TrustPilot with 150 positive reviews.
• ASX traded company.
• Impressive boards and executives.
• Specifically focus on asset , equipment, invoice and trade finance (whereas most lenders are predominantly focused on unsecured loans). Also offers foreign exchange payments.
• Fits both startup stage companies as well as larger corporations.
• Borrow $20,000 to $1m with equipment loans.
• Min rates on equipment loans – 7.5%.
• 24h approval.
• Equipment supported: trucks, buses, trailers, loaders, lifting equipment, farming equipment, construction, cranes, forklifts, excavators, and more.
• EarlyPay Review

Australia’s Largest Lenders also Offer Equipment Loans:

What Kind of Equipment Loans do These Companies Provide?

There are two types of lenders featured on this page. Dedicated equipment finance lenders and all-purpose specialist SME lenders. The former are used to providing business equipment finance, it’s their bread & butter. The nature of the latter is that they are happy to finance small businesses for any purpose, so long as they meet their lending criteria. It may be for working capital, equipment, paying ATO debt or any other purpose. That means that all of the following forms of financing are readily available to the business owner.

Popular Sectors for Equipment Loan Applications

• Medical and Dental equipment financing
• Heavy and mining equipment financing
• Commercial equipment finance
• Restaurant equipment financing
• Used equipment financing
• IT equipment financing
• Dental equipment finance
• Fitness equipment financing
• Business vehicle financing
• Construction equipment loan
• Farm equipment loans
• Forestry equipment financing
• Church equipment financing
• Brewery equipment leasing
• Mining equipment financing
• …any business asset financing and most short term business financing

The Most Popular Uses of Farming and Agriculture Equipment Loans in Australia

1. Hoe: it is used to remove weeds and maintain nursery birds.
2. Plower: used to turn and break up the soil.
3. Planters: this equipment is used for sowing plant seeds on the farm.
4. Sprayers: sprayers are used to spray liquids like water, fertilizers, and pesticides on the farmland.
5. Harvester: this is used to harvest crop produce.

Learn more about farm loans and agriculture financing here.

The Most Popular Uses of Medical Equipment Loans in Australia

1. Stethoscope: it is also called a “doctors necklace”- used to hear heartbeats and movements in the body.
2. Sphygmomanometer: it is used to measure blood pressure.
3. Suction Device: it is used to suck up secretions and blood.
4. Thermometer: commonly used to measure body temperature.
5. Stretchers: used to transport patients in emergencies situation.

The Most Popular Uses of Brewery Equipment Loans in Australia

1. Malt Mill: used in crushing grains into smaller pieces.
2. Mash Turn: a container used in mashing.
3. Heat Exchanger: used to alter the temperature of the wort.
4. Hydrometer: this is used to measure the level of sugar in a liquid.
5. Brite Tank: used as temporary storage.

The Most Popular Uses of Mining Equipment Loans in Australia

1. Dragline Excavator: used for surface mining and deep down excavation.
2. Bucket Wheel Excavator: used for continuous digging on a large scale.
3. Wheel-Tractor Scrapers: used to shave the ground.
4. Backhoe Loaders: smaller versions of excavators used for minor digging
5. Electric Rope Shovels: used for digging through hard materials.

The Most Popular Uses of Restaurant Equipment Loans in Australia

1. Ovens: used for heating and baking
2. Freezers and refrigerators: used for preserving food materials and ingredients.
3. Mixers: used in mixing cooking recipes.
4. Microwave: used for steam cooking and reheating.
5. Slicers: used for cutting meats, fish, and cheese.

The Most Popular Uses of Heavy Equipment Loans in Australia

1. Excavators: used for boring large holes.
2. Backhoe: used for lifting heavy materials on a construction site.
3. Bulldozers: used to scrape the soil surface thoroughly.
4. Graders: used to level land surface during construction.
5. Tower Cranes: used to pull up or raise construction materials.

What Makes These Lenders Particularly Apt for Small Business?

When it comes to the best equipment loans, whether it be for agriculture equipment, construction equipment or medical equipment, businesses normally need that equipment promptly. Our survey has shown that in many of the cases small businesses in Australia are in need of financing, they need to replace an item that has been put out of use. For example, a small business in Australia has a salesman’s vehicle totaled, they need a quick replacement and it is unlikely they have enough free cash to afford it. Equipment financing is necessary and speed is paramount, a cost is involved in the equipment loan but the opportunity cost of missed sales could be more damaging to the business. Banks are slow, and online lenders are quick.

What does quick actually mean in this context?

a) Apply online within minutes (you can even send a multiple application to several lenders via Lend Business Loans)

b) Get a response typically within 24h. Some online business lenders even go above and beyond and get back to applicants within an hour if applications are received during business hours.

c) After agreeing to the terms of the loans, money is in the bank instantly. Your business equipment can be purchased within a week!

Business Loan Application through a Lending Marketplace

One of the benefits to making an equipment finance application through a business loan marketplace like Lend.com.au is that their advanced loan matchmaking system will automatically recommend the most suitable equipment lender to your business circumstances. Crucially, what sets Lend above other lending marketplaces is their dedicated Lend Asset Finance division. Meaning Lend works with both specialist SME lenders and specialist asset/equipment lenders. 

The Lend algorithm will present applicants with the best financing option for them. As an example, if it’s a unique type of asset you need funding, Lend can match you with equipment lenders who generally target a wider range of asset types. If your business has a weaker credit profile, Lend can also match applicants with equipment lenders who have a long history of issuing loans to these types of businesses.

What is Equipment Finance?

Equipment finance (or specifically an equipment loan we refer to here – more on leasing later) is a secured lending product which sees the equipment being purchased act as collateral in the lending process. The equipment is owned by the borrower throughout the term of the agreement but the lender will have a fixed charge over the asset until the borrower has finished their equipment loan repayments. 

Depending on the equipment being purchased and the lender involved, either new or used equipment finance should be possible. The terms on an equipment loan are often a similar length to the expected duration of the asset. This can often be between 1-7 years though longer term equipment finance is certainly possible; particularly for heavy equipment finance such as yellow goods and farming equipment.

As the equipment acts as collateral in the loan, it should help to keep interest rates lower for the borrower. 

Equipment Loans or Equipment Leasing?

Perhaps the most common type of equipment loan is a chattel mortgage. A chattel mortgage works in the same vein as a residential mortgage, the name just refers to the fact it is often a movable object being financed and used as collateral, such as a car or heavy equipment, rather than a fixed property. A lender provides the borrower the cash to purchase the equipment outright but holds a charge over the asset until the borrower has repaid the equipment loan. If the borrower is unable to repay the equipment loan it’s likely the lender will activate its charge on the equipment and look to sell it in order to recoup the finance they issued.

A commercial hire purchase can be quite common too, particularly when it comes to business vehicle financing of cars and vans. In this instance, rather than the lender issuing the borrower the money to buy the asset themselves, the lender would purchase the asset from the supplier. The borrower then pays the lender off in agreed instalments. The borrower has total use of the asset during this period and like a chattel mortgage it would also see the borrower, in the end, own the equipment. Though in this instance, only once the commercial hire purchase agreement has finished and all repayments are complete.

Leasing equipment is another form of financing. In the same fashion that borrowers can get a lump of cash from a lender destined to purchase equipment through that funding, borrowers could also lease the equipment and pay for it in instalments. In this regard, it’s similar to a commercial hire purchase, though the borrower will not own the equipment at the end of the agreement. 

Leasing is something completely different to a chattel mortgage – when borrowers stop making payments they don’t owe the money but lose possession of the equipment  purchased. 

There are two main forms of leasing – a finance lease and an operating lease. 

Operating Lease

An operating lease is typically for lower value equipment and designed for when the borrower really has no need to own the equipment outright. Operating leases are usually shorter in duration and may not even cover the full value of the asset – borrowers often end up upgrading to a newer piece of equipment at the end of the agreement through a new operating lease agreement. Worth noting that due to changes in 2019, operating leases have to be listed on the balance sheet too.

Finance Lease

A finance lease sees the lender purchase an asset from a supplier and then rent it to the borrower (renting as opposed to paying the asset off in instalments with a commercial hire purchase). Borrowers are responsible for maintaining the asset even though they do not own it. At the end of the lease agreement, borrowers will usually have the option to purchase the asset for a fee.

There are pros and cons for traditional equipment loans and equipment leasing. Equipment loans may end up being cheaper in the sense that borrowers will own the machinery and could resell it while equipment leasing can certainly provide less hassle. Some of the key features to an operating lease can be that the provider fixes and maintains the equipment, providing one less thing for business owners to worry about.

Equipment Finance Comparison

To read more about equipment loans and equipment leasing, read the business.gov.au guide to leasing vs buying. There is also a helpful and straightforward comparison here.

Is Equipment Refinancing Available Too?

Australia’s online lenders are also keen on refinancing and consolidating debt. The benefits to a business owner is to consolidate multiple loans into one AND/OR reduce payments by obtaining a lower interest loan AND/OR freeing up  cash for working capital. As long as a business is financially solid and these lenders’ algorithms point out that a business could handle the equipment refinancing repayments and not default, there should be no issue with receiving approval for the refinancing of an existing equipment loan.

There are, however, a few things business owners will want to consider before pressing ahead with equipment refinancing. The equipment initially purchased (perhaps new) would now be considered used. Used equipment financing is certainly possible but chances are the equipment will now be considered of smaller value than it was new, so this will likely have a direct correlation to a smaller equipment loan too. Depending on the reasons for seeking a refinance, this may not be suitable to the borrower. As the equipment is used, there could also be a fee for having the item valued independently.

It might even turn out that the value of the used equipment is not as high as the balance which is still outstanding on the existing equipment loan, which could make it tricky for businesses looking to switch lenders. If switching lenders, the existing lender will also need to release its charge over the asset if it is to be used as collateral in another equipment loan.

Capital Raise with Existing Equipment

Whilst business owners tend to think of equipment loans for new pieces of equipment, they may not be aware of raising finance based on existing equipment owned by the business. This process, known as sale-bank finance, isn’t just about seeking a secured business loan. Businesses also have the option of selling an unencumbered asset to a financier and leasing the equipment back.

Sale-back finance works best with high value, slow depreciating equipment like heavy machinery, forklifts and trucks. Multiple assets can even be grouped together into a single finance agreement. 

Businesses are likely aware of secured business loans but not may not be so familiar with a sale and hireback agreement. Under a secured business loan, the asset remains in ownership by the business and the lender takes a charge over the asset. With a sale and hireback agreement, the financier owns the asset and would be off the balance sheet. Sale-bank finance is multi-purpose so can be used to pay debts, meet ATO obligations or fund business growth.

Equipment Finance Calculator

One of the most common issues relating to business equipment loans is the repayment schedule. Our simple and easy-to-use equipment finance calculator can provide borrowers with an indication of the amount they’ll be expected to pay for their equipment financing. Specific to the equipment finance calculator, users can also input a deposit amount in order to make a more accurate forecast. It’s quite common with equipment loans for lenders to ask that borrowers pay for 5-10% of the equipment upfront themselves:

Medical Equipment Finance – Example 1

A private hospital is looking to purchase a digital radiology x-ray machine for $400,000. The hospital pays 10% or $40,000 upfront for the x-ray machine. Receiving equipment finance for $360,000 with a repayment schedule of 5 years. The interest rate on the equipment loan is 5%.

Based on monthly repayments and providing every repayment is made on time, $47,618.65 is payable in interest over the duration of the five year term. 

In order to pay the interest due on the loan, plus repay the principal, the hospital is set to pay back a total of $407,619 or $6,793.64 per month. 

Farm Equipment Financing – Example 2

A farmer is wanting to purchase a second hand tractor for $130,000 inclusive of GST. The farmer is required to pay a 5% deposit of $6,500, receiving equipment finance for $123,500. 

The terms of the farm equipment loan is four years at an interest rate of 6%. 

Based on the farmer making weekly repayments and providing every repayment is made on time, $15,483.13 is payable in interest over the duration of the four year term. 

In order to pay the interest due on the loan, plus repay the principal, the farmer is set to pay back a total of $138,983 or $668.19 per week.

Equipment Finance Interest Rates

Equipment finance interest rates should be lower than the interest rates on unsecured business loans. As a fixed charge is placed over a specific asset, equipment finance interest rates should also be lower than secured business loans in which the lender places a floating charge in lieu of business assets. Whenever there is more protection for the lender, it should bring interest rates down.

For the same reason, equipment finance generally has a higher approval rate than other forms of business finance such as unsecured loans and especially bank loans, which are known to have notoriously low rates of approval. 

Equipment finance interest rates will always vary from business-to-business. Ultimately, the higher the risk a borrower presents to the lender, the higher the interest rates will be on their equipment loan. Though, when it comes to equipment finance interest rates, there are certain factors that will also have an impact, including:

• Whether the asset is new or used
• The type of equipment being purchased
• Equipment cost relative to company turnover
• The duration of the loan
• How repayments are structured, i.e. if a balloon payment is involved.

Given the individual nature of lending risk and thus pricing, it’s not common for lenders to advertise their interest rates. GetCapital, one of the most transparent online business lenders, provides an interest rate range for its business overdraft and line of credit products, but for equipment finance interest rates they simply state “based on individual business circumstances”. 

From our experience, equipment finance interest rates for small businesses are generally between 5%-15%.

Buying Equipment in 2023? Look Out

Production delays, coupled with supply shortages and logistics and freight cost increase, are having a major impact on both equipment sales and the secondary market. All sorts of equipment in all industries is getting significantly more hard to find, and correlatively, expensive. 

The secondary market for equipment and particularly tractors and trucks has gone absolutely bonkers with prices of used heavy vehicles increasing by more than 50% on average over the a year’s span. This high demand has lead to a unique seller’s market mentality – with multiple buyers often interested, it’s the buyer that can move fastest that gets the deal done. Alternatively, sellers are auctioning equipment and whomever buyer can spend the most at a given time wins the auction.

Used truck auction prices plunge as freight market cools

That has lead to a significant increase in demand for small business loans and particularly unsecured equipment financing to be able to be able to make quick purchases in such a fast-pace market.

Equipment Financing: Final Words of Caution

There are a number of different equipment financing solutions available on the market today. In fact there’s an argument that there are almost an overwhelming number of equipment finance options for Australia’s small businesses to choose from. But whatever the lender and whatever the solution, equipment finance falls into two major categories – equipment loans and equipment leasing. There are pros and cons to both and the decision will depend solely on the business requirements and preference of business owners. Some entrepreneurs may prefer paying more for an operating lease and enjoying the flexibility to upgrade its equipment at regular intervals, whilst other business owners might prefer to purchase an asset the business can own for years to come. Always pay good attention to the equipment finance calculator and the repayment terms presented at the onset of the loan/leasing agreement.

If payments are missed, the percentage of interest accrued over the lifetime of the equipment loan will increase and chances are there will be missed payment fees in the terms of the agreement as well. To understand alternative financing options to equipment finance our small business loans provider comparison is available.