I Need Equipment Now but Can’t Afford the Upfront Cost

The business needs equipment now.

It may be a vehicle, machine, medical device, commercial kitchen appliance, construction tool or piece of technology that is essential to completing work and generating revenue.

But paying the full purchase price upfront could drain the business account and leave too little cash for wages, suppliers, rent, tax and everyday operating costs.

The key question is not simply:

Can I finance this equipment?

The better question is:

Which finance structure fits the equipment, its useful life and the business’s ability to repay?

Funding Loop is an Australian business finance marketplace that helps SMEs compare suitable business finance options across a panel of lenders.

Depending on the circumstances, this may include equipment or asset finance, a business loan, a business line of credit or another working capital option.

Key takeaway: Equipment finance can help a business spread the cost of an asset rather than paying the full purchase price from available cash. However, deposits, fees, repayment structures, ownership arrangements and lender requirements vary, so the business should compare the total cost and contract terms before proceeding.

Why Paying Cash for Equipment Can Create Another Problem

Buying equipment outright may avoid finance repayments, but it can also reduce the cash available to operate the business.

A business may need to preserve cash for:

• payroll
• suppliers
• rent
• insurance
• tax obligations
• stock
• fuel
• repairs
• marketing
• unexpected expenses
• working capital between jobs

The equipment may be commercially worthwhile, but paying for it in cash could create pressure elsewhere.

This is why the purchase decision should consider both:

1. whether the equipment will improve the business, and
2. whether the payment structure leaves enough working capital for normal operations.

What Is Equipment Finance?

Equipment finance is funding used to acquire a business asset without necessarily paying the full purchase price upfront from the business’s available cash.

Depending on the product and lender, the equipment itself may form part of the security supporting the facility.

Equipment finance may be used for:

• vehicles
• trucks and trailers
• construction machinery
• manufacturing equipment
• medical and dental equipment
• commercial kitchen appliances
• agricultural machinery
• office technology
• printing equipment
• forklifts
• tools
• specialised industry equipment

The structure can differ depending on whether the business wants to own the equipment, use it for a fixed period or replace it as technology changes.

For a broader explanation, read asset finance vs equipment finance.

Decision Framework: Which Equipment Funding Option Fits?

Use this framework before choosing a product.

The right option depends on the asset, ownership preference, cash flow and expected useful life.

Common Equipment Finance Structures

Chattel mortgage

Under a chattel mortgage, the business generally purchases and owns the equipment while the lender takes security over the asset until the facility is repaid.

This may suit businesses that want ownership from the beginning.

The business should check:

• deposit or contribution requirements
• repayment structure
• balloon or residual amount
• security registration
• insurance requirements
• early repayment conditions
• what happens if the facility defaults

Tax and GST treatment depends on the business and structure. Speak with an accountant or tax adviser before relying on any expected tax outcome.

Finance lease

Under a finance lease, the finance provider generally purchases the equipment and the business uses it under an agreed arrangement.

At the end of the term, there may be options involving return, renewal or purchase, depending on the agreement.

A lease may suit equipment that:

• becomes outdated quickly
• is likely to be replaced
• is needed for a defined period
• the business does not necessarily want to own immediately

The business should review end-of-term obligations carefully.

Hire purchase

A hire purchase arrangement may allow the business to use the equipment while making agreed repayments, with ownership generally transferring after the required payments and conditions are completed.

Check:

• when ownership transfers
• deposit requirements
• fees
• insurance
• maintenance responsibility
• early termination rules
• end-of-term conditions

Equipment rental

Rental may suit businesses that need temporary access to equipment or want flexibility to upgrade.

It may be relevant when:

• the asset is needed for a short project
• equipment technology changes quickly
• the business wants to avoid long-term ownership
• maintenance is included in the rental arrangement

Rental can provide flexibility, but the business should compare the total cost against buying or financing the equipment.

Do You Really Need No Upfront Cost?

The phrase “no upfront cost” can be misleading.

Some equipment finance options may fund a large portion of the purchase, but this does not mean every transaction will require no cash contribution.

The business may still need to cover:

• a deposit
• GST
• supplier delivery
• installation
• registration
• insurance
• training
• accessories
• repairs
• documentation fees
• an initial repayment
• upgrades or fit-out costs

Requirements vary by lender, equipment type, business profile and transaction.

Before signing, ask:

What exact amount must the business pay before the equipment can be delivered and used?

Calculate the Full Cost of the Equipment

The quoted purchase price is only part of the decision.

The total cost may include:

• equipment purchase price
• deposit
• finance costs
• establishment or documentation fees
• GST
• delivery
• installation
• registration
• insurance
• servicing
• repairs
• consumables
• staff training
• downtime
• balloon or residual payment
• disposal or upgrade costs

A piece of equipment can look affordable based on the repayment alone but become expensive once operating and end-of-term costs are included.

Will the Equipment Generate Enough Value?

Before financing an asset, estimate the commercial benefit.

Ask:

• Will it help complete more jobs?
• Will it reduce labour costs?
• Will it replace unreliable equipment?
• Will it reduce outsourcing?
• Will it allow the business to offer a new service?
• Will it improve quality or turnaround time?
• Is customer demand already present?
• How long will the asset remain useful?
• What happens if revenue is lower than expected?
• Can the business still meet repayments during quiet months?

The equipment does not need to produce revenue directly in every case, but the commercial benefit should be clear.

Practical Example: Equipment Needed for a New Contract

A construction business wins a contract that requires additional machinery.

The equipment is needed before the first project payment is received.

The business has two separate funding questions.

Equipment question

How should the machinery itself be financed over its useful life?

Equipment or asset finance may be relevant because the facility is linked to the asset being purchased.

Working capital question

How will the business cover wages, fuel, materials and operating costs until the customer pays?

A business line of credit or another working capital option may be more suitable for those expenses.

Using equipment finance for the asset and working capital finance for operating costs can provide a clearer structure than trying to place every expense into one short-term loan.

Equipment Finance vs Business Loan

Equipment finance may suit purchases where the asset can be clearly identified and valued.

A business loan may offer broader use of funds but may not be specifically structured around the asset.

The better option depends on the purchase, business profile and lender terms.

Read how to compare business loans in Australia before choosing based only on the repayment amount.

Equipment Finance vs Business Line of Credit

A line of credit is generally more flexible but may not be the ideal way to fund a long-life asset.

Equipment finance may be better suited to the purchase itself.

A line of credit may be useful for:

• deposit shortfalls
• installation costs
• initial operating expenses
• fuel
• stock
• wages
• cash flow while the equipment begins generating revenue

The business should avoid using a revolving facility for a long-term asset without understanding how and when the balance will be repaid.

Can You Finance Used Equipment?

Used equipment may be eligible, but lender appetite can depend on:

• age
• condition
• supplier
• purchase price
• market value
• remaining useful life
• resale value
• service history
• equipment type
• whether the seller is private or commercial
• whether an independent valuation is needed

Older or highly specialised equipment may be more difficult to finance because its value can be harder to verify.

Before purchasing used equipment, consider arranging:

• an inspection
• service history review
• valuation
• warranty check
• ownership and PPSR check
• confirmation that no existing finance remains over the asset

Can a Newer Business Get Equipment Finance?

A newer business may have fewer options, but that does not automatically mean finance is unavailable.

Lenders may assess:

• director experience
• business bank statements
• current revenue
• contracts
• equipment purpose
• supplier quote
• deposit available
• credit profile
• ability to support repayments
• expected income from the equipment

A strong request explains why the equipment is needed and how the business will repay the facility.

Read business finance after six months of trading for a broader discussion of newer business finance.

What If You Do Not Have Property Security?

Property is not always required for equipment finance.

Depending on the product, the equipment itself may form part of the security supporting the facility.

The lender may also consider:

• business cash flow
• bank statement conduct
• credit history
• guarantees
• equipment value
• supplier quality
• deposit or contribution
• repayment capacity

Other unsecured or low-doc pathways may also be available depending on the business profile.

Read unsecured business finance with no property for more information.

What Lenders May Assess

For equipment finance, lenders may assess:

• equipment quote or tax invoice
• asset type
• purchase price
• age and condition
• supplier details
• expected useful life
• resale value
• business bank statements
• trading history
• revenue
• repayment capacity
• existing debts
• credit history
• director profile
• industry
• deposit or contribution
• insurance arrangements
• funding purpose

The lender will usually want to understand why the asset is commercially useful and whether the business can afford it.

Documents You May Need

Funding requirements vary by lender, product and amount.

A lender may initially request:

• supplier quote
• equipment description
• business bank statements
• ABN or ACN details
• director information
• purchase price
• deposit details
• equipment age and condition
• details of the funding purpose

Depending on the lender, equipment, transaction amount and business profile, additional documents may be requested.

These could include:

• financial statements
• BAS statements
• tax returns
• contracts
• proof of income
• asset valuation
• insurance details

Many low-doc pathways can begin with recent business bank statements and the equipment quote rather than a full set of financials.

Questions to Ask Before Signing

Before accepting equipment finance, ask:

• Is a deposit required?
• What is the total amount financed?
• What repayments apply?
• How often are repayments made?
• Is there a balloon or residual amount?
• Who owns the equipment during the term?
• When does ownership transfer?
• What fees apply?
• Can the facility be repaid early?
• What happens if the equipment is sold?
• Who is responsible for insurance and maintenance?
• What happens if the equipment fails?
• Is the equipment registered as security?
• What happens at the end of the agreement?
• Does the repayment remain affordable during quiet periods?

The answers should be clearly documented in the finance contract.

For more detail, read what to look for in a business loan contract.

Common Mistakes to Avoid

Common equipment finance mistakes include:

• focusing only on the monthly repayment
• assuming no deposit will be required
• ignoring fees and end-of-term payments
• financing equipment for longer than its useful life
• buying equipment without confirmed demand
• forgetting insurance, maintenance and installation
• using short-term working capital finance for a long-life asset
• failing to inspect used equipment
• not checking ownership or existing security
• relying on assumed tax benefits
• accepting a facility without reviewing guarantees
• buying equipment that is too large for the business’s actual needs

For more detail, read business loan red flags and traps.

When Equipment Finance May Not Be Suitable

Equipment finance may not be suitable if:

• the business cannot support repayments
• the equipment will not improve operations or revenue
• the asset may become obsolete quickly
• demand for the equipment’s output is unproven
• the equipment is in poor condition
• the full operating cost is unclear
• existing debts are already unaffordable
• the finance term is longer than the useful life of the asset
• a short-term rental would be more appropriate
• the business is relying on the purchase to solve a broader profitability problem

In these situations, the business may need to delay the purchase, rent the equipment, buy a lower-cost alternative or review the investment with an accountant or adviser.

Will Applying Affect Your Credit File?

It depends on the application process.

Funding Loop can help businesses explore suitable options without a credit check at the initial stage. A credit check may occur later if the business proceeds with a formal lender application.

This can help the business understand potential product and lender fit before making multiple formal applications.

Read how to get multiple business loan offers without hurting your credit for more information.

How Funding Loop Can Help

Funding Loop helps Australian SMEs compare suitable finance options across a panel of lenders.

If your business needs equipment but cannot afford the full upfront cost, Funding Loop can help assess:

• what equipment is being purchased
• whether asset or equipment finance may fit
• whether a deposit may be required
• whether used equipment may be considered
• whether a business loan is more suitable
• whether additional working capital is needed
• whether low-doc options may be available
• what documents may be required
• when a formal application and credit check may occur
• what contract risks should be reviewed

Funding Loop can help businesses explore suitable finance options without a credit check at the initial stage. A credit check may occur later if the business proceeds with a formal lender application.

Funding Loop is free for businesses to use. Funding Loop is paid by lenders when a settled facility is arranged, so businesses do not pay Funding Loop a broker fee.

There is no guaranteed approval. Outcomes depend on lender assessment.

Frequently Asked Questions

Can I get equipment finance without paying the full price upfront?

Potentially. Equipment finance may allow the business to spread the purchase cost, but a deposit, contribution, GST or other upfront costs may still apply depending on the lender and transaction.

Is equipment finance available without property security?

It may be. The equipment itself may form part of the security supporting the facility, although guarantees or other security requirements can still apply.

Can I finance used equipment?

Potentially. The lender may assess the asset’s age, condition, value, supplier and remaining useful life.

Can equipment finance cover installation and delivery?

It depends on the lender and facility. Some associated costs may be included, while others may need to be funded separately.

Should I use a business loan or equipment finance?

Equipment finance may suit an identifiable asset, while a business loan may provide broader use of funds. Compare total cost, term, security and repayment fit.

Are equipment finance repayments tax deductible?

Tax treatment depends on the finance structure and the business’s circumstances. Speak with an accountant or tax adviser before relying on any deduction or GST outcome.

Can a newer business apply?

Potentially. Lenders may consider trading history, director experience, bank statements, contracts, equipment purpose and repayment capacity.

Can I compare options without a credit check?

Funding Loop can help businesses explore suitable options without a credit check at the initial stage. A credit check may occur later if the business proceeds with a formal lender application.

Is Funding Loop free for businesses?

Yes. Funding Loop is free for businesses to use. Funding Loop is paid by lenders when a settled facility is arranged, so businesses do not pay Funding Loop a broker fee.

Related Guides

• Asset finance vs equipment finance
• Business finance products
• Business line of credit
• Business finance product diagnosis
• How to compare business loans
• Unsecured finance without property
• Business loan contract review
• Business loan red flags and traps

Get Started

If your business needs equipment but cannot afford the full purchase price upfront, the right option depends on the asset, supplier, useful life and repayment capacity.

Funding Loop can help compare equipment finance, asset finance, business loans and working capital options across its lender panel.

Explore business finance options or read more about asset finance vs equipment finance.

General information only - it doesn't take your situation into account. Consider whether a product suits your business before acting, and get independent advice where you need it. No credit check to see your options. A credit check only happens if you choose to formally proceed with a lender.