Saving your cash flow: Plant and Machinery Finance Solutions

Sunday 21 August, 2022

Plant and machinery finance allows you to purchase the large items such as a business vehicle, you need to run your business efficiently - without putting a strain on your cash flow. Fast approval and manageable repayment terms make it a cost effective way to budget for your new equipment, leaving you with cash to cover inventory and other operating expenses including marketing.

So what is Plant and Machinery Finance?

Plant and machinery finance is a loan that can be used to finance large items such as vehicles, machinery or equipment. This type of finance can be useful for business owners who need to make a purchase but don't have the cash on hand to do so.

What are the benefits of Plant and Machinery Finance?

One of the benefits of machinery finance is that it can help you save your cash flow. When you take out a loan to finance your machinery purchase, you can use your cash flow to cover other expenses such as inventory or marketing. This can help your business run more smoothly and efficiently.

Another benefit of machinery finance is that it can help you get the equipment you need quickly. If you're in a time crunch and need to purchase equipment right away, financing can be a great option. This type of finance can also help you avoid having to put down a large down payment, which can free up some cash flow for other expenses.

Which industries can benefit from plant and machinery finance?

  • small and large business
  • farming industry
  • manufacturing industry
  • construction industry
  • mining industry
  • transport business

What commercial finance options are available for my business?

Lenders have a range of commercial finance options available to finance your plant and machinery purchases. Here's a quick rundown of the three main equipment loans available:

A chattel mortgage (or a secured loan):

When you're looking to finance the purchase of new or used plant and machinery, a secured loan (commonly known as a chattel mortgage) can be a great option. The lender uses the equipment as security for the amount you borrow, similar to a regular property mortgage. You will make regular monthly repayments for a fixed term, agreed during the application process.

Unlike a regular loan, you have some flexibility when it comes to repayments. To keep them more affordable, you may agree to pay a residual or balloon payment at the end of the loan term. This can be a great way to reduce your monthly spend. However, you should consider the implications to your cash flow when the term of the equipment or vehicle finance ends.

If you agree to a balloon payment, you still have options:

  • Make the balloon payment from the businesses available capital
  • If you no longer have use for the equipment, you could sell and use the funds to cover the balloon payment.
  • If you want to upgrade the equipment, trade it in and pay out the balance owing. You can then enter into a new arrangement on an upgraded item.
  • Subject to approval, refinance the equipment loan to extend the repayment term. This allows you to spread out the balloon payment.

Commercial hire purchase:

Commercial hire purchases are a popular finance option for business owners looking to spread the cost of new plant and machinery over an agreed period. With fixed monthly repayments, it can be a great way to manage cash flow and ensure you have the equipment you need when you need it.

However, be sure to consider all the implications of this type of finance agreement before signing on the dotted line. Ownership of the equipment doesn't transfer to you until the final payment is made so there may be limitations on how you can use the equipment.


Like any loan, lending criteria apply when it comes to equipment finance. If your business is new or your industry requires you to update your plant and machinery regularly, a lease may be a great solution. Your business effectively 'rents' the equipment from the lender for an agreed term and make regular repayments.

At the end of the lease, you may have the option to purchase the equipment, return it, or renew the lease. However, it's important to remember that ownership doesn't transfer to your business with a lease. So, there may be limitations on how you can use the equipment. For example, your leased business vehicle, may have restrictions on the number of kilometres it can travel. If you exceed these kilometres, you may be subject to a monetary penalty.

What are the benefits of plant and machinery finance?

There are many cost-saving advantages to using an equipment loan rather than buying outright. Some of the key advantages include:

1. Free up your cash flow: As we discussed earlier, one of the finance solutions of machinery financing is that it helps you preserve your cash flow. This is especially important for small businesses who may not have the luxury of spare cash on hand to make big purchases.

2. Get the equipment you need to run your business efficiently: Equipment can be expensive especially when you are considering manufacturing, construction and mining machinery, Equipment and vehicle finance gives you the option of purchasing the most up to date, fit-for-purpose and energy efficient equipment.

3. Flexible repayment terms: The finance options we discussed earlier all come with fixed monthly repayments allowing you to take control of your budget. Lenders can offer you a deal that suits your cash flow.

4. Tax benefits: You may be able to claim a deduction for the interest portion of your repayments. Currently, there are also incentives available through the Australian Government such as the Instant Asset Write Off for eligible businesses. You will need to run this one by your accountant to see if you are eligible.

5. Flexibility: Whatever option you choose, you may have some flexibility when it comes to choosing lenders and a deal that meets your needs. This includes payment terms and even ownership of the equipment. This can be a great way to manage your cash flow and keep your business running smoothly.

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So, what should I consider when it comes to finance and my cash flow?

If you're thinking about borrowing to finance your machinery, here are a few things to keep in mind when considering the range of products available:

  1. Consider the terms of the deal carefully. A shorter term with a lower interest rate will mean that you'll have to make higher monthly payments. However, a longer term, with a higher interest rate will mean you will pay more interest in the long run. If you can afford to stretch the budget, a shorter-term can save you money!
  2. Make sure you understand the applicable fees and charges before applying for finance. Lenders may charge origination fees or other closing costs, so you should compare these before you agree to the equipment finance.
  3. Will you need to pay a residual or balloon payment? Consider if your cash flow can cope with a higher monthly payment. If not, make sure you have a plan in place to pay the balance at the end of the finance term. This can be done by entering a deal to refinance the balance owing, selling the machinery, or using your business's cash flow.
  4. The lender will have the right to repossess the goods if you default on any of the above finance options. This could seriously disrupt your businesses operations. So make sure your business can comfortably manage the repayments before agreeing to the equipment finance.

How do I decide which machinery finance option is right for my cash flow?

The best financing option for your businesses cash flow will depend on the amount you need to finance. The cost of the equipment, it's purpose and your own financial circumstances may also impact on the right option. You will also need to consider the lending criteria applicable to the equipment finance you apply for.

With the range of lenders and products available, plant and machinery finance can be difficult to navigate. Especially as each businesses circumstances are different. That's why it's important to speak to specialists who have a good understanding of your industry, Firstly, speak with your accountant, who can guide you on the best tax solution for your business. Secondly, speak with a finance broker who specialises in business finance.

Speak with the experienced team at Finance Brokers Tasmania!

At Finance Brokers Tasmania, we understand that when you are running your own business, you don't have the time or energy to organise finance - and why should you? Leave that to our highly experienced team of equipment finance specialists! We will take care of the application details and find you the right solution to meet your needs.

Established over 36 years ago, we are industry leaders in equipment finance. We work with large and small business (including sole traders) across a multitude of industries including retail, hospitality, mining, manufacturing and construction.

Call us today and find out how we can help you with plant, machinery and vehicle finance without blowing your cash flow!