Key Takeaways
- An equipment line of credit gives your business access to a pre approved funding limit that can be used for multiple equipment purchases over time.
- Unlike a standard equipment loan, you do not need to submit a new application every time you buy eligible equipment.
- Lenders only charge interest on the amount you have drawn, not the entire approved limit.
- Equipment lines can fund machinery, vehicles, technology and other equipment.
- The limit renews once the finance that has been taken out has been paid out fully.
- Once the limit has been approved, credit checks are no longer performed each time you draw down from the limit, protecting your credit file.
An equipment line of credit in Australia is a pre approved funding facility designed specifically for equipment purchases.
Rather than applying for a separate loan every time you need a vehicle, machine, piece of technology, or business asset, the lender approves a maximum borrowing limit upfront. You can then draw from that limit whenever you need to purchase eligible equipment.
The funding is intended for equipment related purchases rather than general working capital. Equipment lines are commonly used by businesses that regularly acquire new assets as part of their operations.
Examples include:
- Construction companies purchasing machinery throughout the year.
- Transport operators expanding vehicle fleets.
- Manufacturing businesses replacing equipment as it ages.
Instead of repeating the approval process every time a purchase arises, the facility is already in place and ready to use.
For businesses operating in fast moving industries, this can significantly reduce delays when equipment opportunities arise.
How It Differs from a Standard Equipment Loan
A standard equipment loan is generally structured around a single purchase.
For example, if you want to buy a $150,000 excavator, you submit an application, receive approval for that specific asset, and enter into a loan agreement for that purchase alone.
If six months later you want to buy another machine, you typically need to start another application.
An equipment line of credit works differently. The lender assesses your business and approves an overall funding limit. Rather than funding one asset, the facility supports multiple future purchases within the approved limit. Another major difference is that a credit check is not performed after the limit is approved, which protects the business owner’s credit file.
Standard Equipment Loan
- One asset purchase.
- One loan agreement.
- New application required for future purchases.
- Approval linked to a specific asset.
Equipment Finance Line of Credit
- Multiple asset purchases.
- Single approved facility.
- Draw funds when needed.
- No full reapplication for every purchase.
- Faster acquisition process.
Businesses with ongoing capital expenditure requirements often prefer an equipment facility because it reduces administration and allows them to respond quickly to opportunities.
A transport business adding vehicles throughout the year, for example, may find a revolving equipment facility far more practical than arranging ten separate loans.
Differences at a Glance
| Feature | Equipment Line of Credit | Standard Equipment Loan |
|---|---|---|
| Purpose | Finance multiple equipment purchases over time | Finance one specific equipment purchase |
| Approval | One pre approved facility with an agreed limit | Separate application for each asset purchase |
| Funding | Draw down funds as eligible equipment is purchased | Full loan amount is advanced for the approved asset |
| Available Limit | Reduced with each drawdown and restored once each individual finance contract is repaid in full | No ongoing facility once the loan is established |
| Interest | Paid only on the amount drawn for each financed asset | Paid on the full loan amount for that asset |
| Administration | Less paperwork for businesses making regular equipment purchases | New documentation and approval process for every purchase |
| Best Suited For | Businesses that regularly purchase or replace vehicles, machinery, technology, or other equipment | Businesses making a one off equipment purchase |
| Examples | Growing transport fleets, construction businesses, manufacturers, healthcare providers | Buying a single excavator, truck, machine, or piece of equipment |
How Drawdowns and Repayments Work
Once your equipment line of credit is approved, the lender provides a maximum facility limit that can be used for eligible equipment purchases.
For example, if your business is approved for a $500,000 pre approved equipment finance limit, you can utilise as much of the limit as you need as equipment is required rather than borrowing the full amount upfront.
Suppose you purchase $250,000 worth of vehicles. After settlement, your facility would look like this:
- Approved facility: $500,000
- Amount utilised: $250,000
- Remaining available limit: $250,000
You can continue to use the remaining $250,000 for future eligible equipment purchases without applying for a new facility, provided you remain within the approved limit.
Unlike a business overdraft or revolving line of credit, making your regular loan repayments does not immediately restore your available limit. The equipment finance associated with each drawdown is typically repaid over an agreed loan term, such as five to seven years.
Using the example above, if the $250,000 vehicle finance is repaid over five years, your available limit remains at $250,000 throughout that loan term. Once the financed assets have been repaid in full, that portion of the facility becomes available again, restoring the total available limit to $500,000, assuming the facility remains active and all lender conditions continue to be met.
This structure allows businesses to plan future equipment purchases while maintaining a long term funding facility, reducing the need to submit a new finance application every time additional equipment is required.
Why Drawdowns Are Valuable
Businesses rarely purchase all equipment at once. Growth often occurs in stages.
A company may buy:
- One truck this month.
- Two trailers next quarter.
- Additional machinery six months later.
A pre approved facility allows each purchase to occur as needed without repeatedly going through a full credit assessment. This can be useful when supplier discounts, auction opportunities, or urgent operational requirements arise.
What You Can and Can't Use an Equipment Line For
Eligible uses vary between lenders.
Most facilities are designed to fund assets with a serial number or VIN. Many non bank lenders also provide flexibility for broader business asset purchases.
Common Eligible Purchases
Vehicles
- Trucks
- Utes
- Vans
- Caravans
- Trailers
Machinery
- Excavators
- Loaders
- Cranes
- Telehandlers
- CNC Machines and other manufacturing equipment
Common Restrictions
Equipment lines are generally not intended for:
- General working capital.
- Paying wages.
- Tax debt repayment.
- Business acquisitions.
- Property purchases.
- Personal expenses.
The facility is designed primarily for equipment and business asset acquisition.
Who Benefits Most from a Pre Approved Equipment Facility?
Not every business needs an equipment line. A business making a single equipment purchase every five years may be better suited to a traditional equipment loan.
Businesses that acquire assets regularly often gain the greatest value.
Construction Businesses
Construction businesses frequently replace and add machinery as projects evolve.
An equipment facility can allow quick access to funding for:
- Excavators
- Loaders
- Generators
- Site vehicles
Transport Operators
Fleet expansion often occurs progressively rather than all at once.
Having a pre approved equipment finance limit allows operators to acquire additional vehicles without repeatedly applying for finance.
Manufacturing Businesses
Manufacturers regularly upgrade machinery to improve productivity and maintain competitiveness.
An equipment line allows purchases to align with production needs.
Growing Businesses
Businesses experiencing strong growth often encounter unexpected equipment needs.
Having a facility already approved means opportunities can be acted on quickly.
Advantages of an Equipment Line of Credit
An equipment line of credit gives businesses ongoing access to funding without the need to apply for a new loan every time additional equipment is required. This can make it easier to plan future purchases, respond quickly to growth opportunities, and reduce the administrative burden of arranging multiple finance applications. For businesses that regularly upgrade machinery, expand their fleet, or invest in new technology, a pre approved facility can provide valuable flexibility.
Some of the key benefits include:
- Faster access to finance: Once the facility is approved, future equipment purchases can often be processed much more quickly than submitting a new loan application.
- Reduced paperwork: One facility can support multiple equipment purchases over time, saving time and administrative effort.
- Greater purchasing flexibility: Acquire equipment when your business needs it rather than waiting until you’ve accumulated enough capital.
- Supports business growth: As your operations expand, you can continue using the available facility for eligible equipment purchases without renegotiating finance each time.
- Improved cash flow management: Spreading the cost of equipment over its useful life helps preserve working capital for other operating expenses.
Drawbacks of an Equipment Line of Credit
While an equipment line of credit offers flexibility, it is not the right solution for every business. Companies that only expect to make a single equipment purchase may find a traditional equipment loan more straightforward. It’s also important to understand how the facility operates, particularly how available credit is restored over time.
Some potential drawbacks include:
- Not a revolving facility like an overdraft: Regular repayments do not immediately restore your available limit. The borrowing capacity generally becomes available again only once the individual equipment finance contract has been repaid in full.
- Restricted use of funds: The facility is designed for eligible equipment purchases and, depending on the lender, may not be suitable for general working capital or other business expenses.
- Ongoing facility requirements: Some lenders may charge annual facility fees or require periodic reviews to keep the line of credit active.
- Credit limit constraints: If most of your approved limit has already been allocated to financed equipment, you may need to wait until loans are repaid or apply for a higher facility limit before making additional purchases.
How to Apply for an Equipment Line of Credit
The application process is usually straightforward when working with an experienced finance broker.
Step 1: Apply Through Our Website
Complete our online form to get started.
We will contact you to discuss your business, funding requirements, equipment purchasing plans, and future growth objectives. We then help identify lenders that offer equipment line facilities suitable for your needs and borrowing capacity.
Step 2: Application Submission
Once you select a lender and facility structure, we submit the application on your behalf.
For larger facilities, lenders may request financial statements, bank statements, asset registers, and other supporting documentation.
Step 3: Receive Funding
Once approved, the lender establishes your equipment line of credit.
You can then settle assets against the facility limit.
Future purchases can often be processed significantly faster than applying for separate equipment loans each time.
Talk to Dark Horse Financial About an Equipment Line of Credit Facility
Businesses that regularly purchase vehicles, machinery, or other business assets often find that an equipment facility provides greater flexibility than arranging separate loans for every acquisition.
A well structured equipment line of credit can reduce administration, speed up purchasing decisions, and provide access to capital when opportunities arise.
At Dark Horse Financial, we help businesses access equipment finance solutions ranging from individual equipment loans through to large scale pre approved equipment facilities. We work with banks, non bank lenders, and specialist equipment financiers to find funding solutions that align with your operational needs and growth plans.
Frequently Asked Questions
A standard equipment loan funds one specific purchase. An equipment line of credit provides a pre approved funding limit that can be used for multiple equipment purchases over time without requiring a full new application for every asset.
Most equipment line facilities only charge interest against the assets that are settled against the facility rather than the total approved limit, although other facility fees may apply depending on the lender.
No. Equipment lines of credit are typically used to fund business equipment like trucks, yellow goods, CNC machines, utes, and vans. Soft costs and fitouts are usually not covered. There are specific lending products like fitout finance to fund these costs.
You identify the equipment you wish to purchase and submit the details to the lender. Once the asset is approved under the facility terms, funds are applied to the purchase.
As balances are paid in full, available credit can be restored, allowing future equipment purchases within the approved limit. It does not work like a typical revolving line of credit where the limit resets even when you pay partially. Equipment must be fully paid before the limit resets.
Disclaimer: Loans and their accompanying benefits are available only to those who qualify for them and have been approved. Though we put a lot of care into writing this article, the information presented within is general and doesn’t consider your unique situation. It is not meant to serve as a substitute for professional advice, and you should not rely on it solely for any major financial decisions. You should always consult with a professional when you’re dealing with finance, tax, and accounting matters.
Speak to Dark Horse Financial About Equipment Line of Credit Solutions
If your business regularly purchases vehicles, machinery, technology, or other operational assets, an equipment line of credit can give you faster access to funding without the need to submit a new application every time you need equipment.
Contact Dark Horse Financial today to discuss an equipment line of credit tailored to your business.
