When your business requires new machinery, vehicles, or equipment, understanding the equipment finance approval process can make all the difference in securing the right funding solution. Whether you're based in Broadmeadows or anywhere across Victoria, knowing what to expect when applying for equipment finance will help you prepare effectively and improve your chances of approval.
What is Equipment Finance?
Equipment finance is a specialised lending solution that allows businesses to purchase or lease essential equipment without paying the full amount upfront. This type of financing covers a wide range of assets, from office equipment and work vehicles to specialised machinery like excavators, tractors, graders, cranes, and dozers. Commercial equipment finance provides businesses with the flexibility to acquire necessary assets while preserving working capital for other operational needs.
The finance options available typically include chattel mortgages, hire purchase agreements, and equipment leases, each offering different benefits depending on your business needs and financial circumstances.
Understanding the Equipment Finance Approval Process
The approval process for equipment finance involves several key stages that lenders use to assess your application and determine your eligibility.
Initial Application Assessment
When you submit your application, lenders will first review your basic business information, including:
• Business registration and ABN details
• Years in operation
• Annual turnover figures
• The type and value of equipment being financed
• Loan amount requested
This initial screening helps lenders determine whether your application meets their basic lending criteria before proceeding to a more detailed assessment.
Financial Documentation Review
Lenders require comprehensive financial documentation to evaluate your business's ability to service the proposed loan. Required documents typically include:
• Business financial statements (profit and loss, balance sheet)
• Tax returns for the business and directors
• Bank statements (usually 3-6 months)
• GST statements
• Management accounts for newer businesses
The quality and completeness of your financial documentation can significantly impact both the speed of the approval process and the interest rate offered.
Credit Assessment and Risk Evaluation
Lenders conduct thorough credit checks on both the business and its directors or guarantors. This assessment examines:
• Credit history and payment patterns
• Existing debt obligations
• Previous defaults or judgements
• Overall creditworthiness
The equipment itself often serves as collateral for the loan, which can help mitigate the lender's risk and potentially result in more favourable terms.
Types of Equipment Finance Structures
Chattel Mortgage
A chattel mortgage is a popular option for businesses purchasing equipment outright. Under this arrangement, you own the equipment from the outset while the lender holds security over the asset. This structure often provides tax benefits through depreciation claims and GST input credits on the full purchase price.
Hire Purchase
With hire purchase agreements, you make fixed monthly repayments over the life of the lease until the equipment is fully paid off. Ownership transfers to you once all payments are completed. This option provides predictable repayment schedules that help manage cashflow effectively.
Equipment Lease
Leasing arrangements allow you to use equipment for a specified period while making regular lease payments. At the end of the lease term, you may have options to purchase the equipment, upgrade to newer models, or return the asset.
Factors Affecting Equipment Finance Approval
Several key factors influence whether your equipment finance application will be approved:
Business Financial Health
Lenders assess your business's profitability, cashflow, and overall financial stability. Strong financial performance increases your chances of approval and may result in more favourable interest rates.
Equipment Type and Value
The type of equipment being financed affects the approval process. Standard commercial equipment like trucks, trailers, and factory machinery typically have established resale values, making them attractive to lenders. Specialised equipment may require additional assessment.
Deposit and Loan-to-Value Ratio
Most equipment finance arrangements require a deposit, typically ranging from 10% to 30% of the equipment value. A larger deposit reduces the lender's risk and can improve your approval prospects.
Working with Northern Lending Solutions
As experienced finance brokers, Northern Lending Solutions can access equipment finance options from banks and lenders across Australia. This broad network allows us to compare various loan options and find solutions that align with your specific business needs.
Our streamlined application process involves:
- Initial consultation to understand your equipment requirements
- Assessment of your financial position and borrowing capacity
- Preparation and submission of your application to suitable lenders
- Negotiation of terms and interest rates on your behalf
- Coordination of settlement and equipment delivery
Whether you're buying new equipment, upgrading existing equipment, or expanding your fleet of vehicles, we work with you throughout the entire approval process.
Preparing Your Application
To improve your chances of approval and expedite the process:
• Ensure all financial records are current and accurate
• Obtain quotes for the equipment you wish to purchase
• Prepare a clear business case explaining how the equipment will benefit your operations
• Consider your preferred repayment structure and loan term
• Review your borrowing capacity to understand realistic loan amounts
For businesses looking at broader financing solutions, equipment finance can often complement other funding options like business loans or commercial loans to create a comprehensive financing package.
Understanding the equipment finance approval process empowers you to make informed decisions about your business's equipment needs. With proper preparation and professional guidance, you can secure the funding required to acquire essential equipment while maintaining healthy cashflow.
Call one of our team or book an appointment at a time that works for you to discuss your equipment finance requirements.