A Guide To Machinery Loans to Improve Business Finance


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At Dark Horse Financial we’ve helped manufacturers, engineers, construction business owners, even robotics businesses and many more purchase machinery for their business using machinery loans. The benefits of owning the machinery your business uses on a regular basis are significant.  Machinery can bring in an income and create operating efficiencies. Owning machinery is cheaper than frequently used rental equipment. You can engineer machinery to your specific production requirements, you can build equity on the balance sheet and the list goes on. 

However, machinery finance isn’t always as straightforward as say getting finance for a vehicle. Many lenders demonstrate a preference for financing assets with wheels and their policies often don’t extend to the specialised machinery that many business owners need. As well as this, many lenders won’t provide finance for second hand or older equipment, even when it has lots of useful life still in it.  

The purpose of this article is to provide a guide to machinery loans for business owners in Australia. We’ll explain how machinery loans differ from other business finance, cover the differences between primary, secondary and tertiary equipment, and the importance of lender selection for financing second hand equipment, specialised equipment and older equipment.

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Key Takeouts:  

  • Machinery Loans are a form of equipment finance – commonly a chattel mortgage.
  • The benefit of a machinery loan is the cost of the asset is split up over time in equal payments.
  • Applications can be no-doc up to $500,000, full-doc applications can be many times this amount
  • Some lenders prefer vehicles and won’t finance machinery so choose your lender carefully 
  • You can finance older equipment, secondhand equipment and specialised machinery 
  • Startup businesses can finance machinery loans (despite what a bank may have told you)
  • There are bad credit machinery loan solutions if your credit is less than ideal

What is a machinery loan?

A machinery loan is a loan used to purchase machinery under a chattel mortgage which is the finance term applicable to most machinery loans. The machinery asset is normally security for the loan making them a secured form of business finance. Because machinery loans are a type of secured business loan they typically have lower rates than unsecured loans. For this reason, it’s important to use a lender who offers equipment finance and not just unsecured loans when acquiring assets so you don’t pay more interest than you need to.

Because the machinery is used as security for your loan, property security isn’t required for machinery loans like it is with other forms of commercial lending.  Loan terms typically extend to 5 or 7 years making monthly repayments lower and more easy to manage than loans with shorter terms, like what you might find in private lending including second mortgages.

The benefit of a machinery loan to business owners is they allow you to pay off your machine over a number of years in equal instalments.  Spreading the purchase cost of your machinery over time enables you to earn income from your machine or gain the benefit of the operating efficiency it provides which in turn helps your business to grow and become more productive.

Chattel mortgages are a common form of finance for purchasing assets, particularly cars, trucks and trailers. Many equipment finance lenders prefer vehicles as they see them as lower risk and they might not have the knowledge to understand machinery. For this reason, selecting the right lender for your machinery loan is an important part of getting approved. In addition to having asset preferences, lenders also have industry preferences.  To have the best chance of a loan approval make sure your chosen lender supports your industry and has a track record of approving loans for machines that you’re interested in.

Machinery Loan Application Process

The machinery loan application process depends on which lender you match up with the best. If you’ve been in business for more than 2 years and your credit score is in reasonable shape, we have no doc application machinery loan solutions for finance up to $500,000. This kind of assessment is normally completed by a read only assessment of bank data which makes an approval outcome possible within hours, rather than days or weeks.  

If you’re a startup business or applying for a larger limit, applications are likely to be a full-doc application process that involve providing financials, ATO portal information and a cash flow forecast. For startup businesses the cash flow forecast is particularly important as the cash flow forecast demonstrates your ability to service the loan.

Once approved, settlement for machinery loans can occur very quickly so you can have your machine working for your business fast.

Machinery Loans For Second Hand Equipment and Older Machinery 

Lenders have different policies related to financing assets for your business – some lenders are only interested in financing vehicles or assets that are new, or purchased from a dealer. For this reason, if you’re seeking a loan for second hand equipment or older machinery it’s important to know your chosen lender supports applications of this type. An experienced machinery loan expert can guide you to the lenders who support finance applications for older equipment.

Machinery Loans For Specialised Assets

Lenders often split up assets being financed into categories of primary assets, secondary assets or tertiary assets.  Primary assets will typically be identifiable by vin and engine numbers and have broad resale value. Some examples of primary assets include vehicles, trucks, forklifts and earthmoving equipment. Secondary and tertiary assets are considered more specialised and won’t always have serial numbers. Examples of secondary and tertiary assets include manufacturing machines, engineering and tool making equipment, earth moving attachments and pallet racking. The lenders who support machinery loans like specialised equipment defined as secondary and tertiary equipment often focus on finance for B2B industries and also offer invoice finance and trade finance lines of credit. We’ve had success funding specialised machinery with these lenders even after banks have said no.

Equipment finance bad credit solutions can also often be found with these lenders who provide finance for specialised industry machinery.

Work With An Expert Machinery Loan Broker And Gain A Competitive Advantage

Understanding machinery loans can assist a strategic approach to business growth and efficiency with adopting asset financing solutions. These loans offer a viable avenue for businesses to acquire essential machinery, including specialised equipment, that may not otherwise be within immediate financial reach. As we’ve noted, factors like lenders’ preferences for certain types of assets, age of equipment, and the state of your credit are all important factors in choosing the right provider for your machinery loan. 

With careful lender selection and the right guidance with asset financing solutions, even startups or businesses with less than ideal credit can be approved for their machinery loan. By spreading the cost over time, machinery loans can unlock operational efficiencies and income generation, allowing businesses to focus on their core operations and long-term strategies. Ultimately, machinery loans are not just about business equipment financing; they’re also about fueling the engine of your business growth and competitive advantage.

To get a competitive advantage with your machinery loan with effective business equipment financing advice by getting in contact with an expert at darkhorsefinancial.com.au here.

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