The Complete Guide to Machinery Finance

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From civil engineering to construction, transport to trades, and all industries in between, having the right machinery and equipment to service client demand is essential for business success. It’s no secret that purchasing or upgrading machinery can be a significant financial investment for any company. This is where machinery finance comes into play.  

Plant and machinery finance provides businesses with the necessary funds needed to acquire the right equipment without putting a significant strain on cash flow. As one of Perth’s leading business loan brokers, Finance 48 understands what it takes to get you the ideal site specific equipment to meet on-site deliverables.  

In this comprehensive guide, we will explore the ins and outs of machinery finance, its benefits, and how to navigate the process effectively. 

Section 1: Understanding Machinery Finance 

Machinery finance refers to the various financing options available to businesses to acquire machinery and equipment. It allows businesses to keep their working capital ie keep the existing funds to pay their every day bills. There are different types of machinery finance, including leasing, hire purchase, and chattel mortgage. 

Leasing: The two main leasing options are finance leases and operating leases. A finance lease is another way another way to buy your equipment, and this includes a balloon payment at the end of the leasing period. The leasing company retains ownership, and the business pays regular lease payments for the duration of the lease term. At the end of the lease term, the business can choose to purchase the equipment by paying off the balloon payment or return it or upgrade to newer machinery.  Under the operating lease, you lease the equipment for the period required and return this to the lessor at the end of the leasing period, with no further obligations. 

Chattel Mortgage: This is also known as Equipment loan/finance. The lender provides the funds necessary to acquire the machinery.  The ownership of the equipment passes on to the owner right away.  However, the lender uses this as the security for the loan. The business repays the loan including interest over a specified period. 

Hire Purchase: Hire purchase (quite similar to finance leasing) allows a business to acquire machinery through monthly installments. The business becomes the owner of the equipment once the final payment is made. 

Section 2: Benefits of Machinery Finance 

Preserves Cash Flow: Machinery finance allows businesses to conserve their cash flow by spreading the cost of equipment over time. This enables them to allocate their available capital to other crucial areas of their operations, such as everyday outgoings, marketing, inventory and staff costs.

Up-to-Date Equipment: Technology is constantly evolving, and machinery can quickly become outdated. With the different type of machinery finance available, businesses can regularly upgrade their equipment to stay competitive in the market without incurring a large upfront cost. 

Tax Advantages: Different tax benefits apply to the different types of machinery finance, and it is strongly advised to discuss the options with your accountant. Interest components only, are deductible in the chattel mortgage and hire purchase repayments, whereas the whole lease repayment is deductible in the case of leasing. Depreciation is another benefit to discuss with your accountant. That is, you can depreciate the asset financed under a chattel mortgage, but no depreciation is available under operating leases.   

Flexibility: Machinery finance provides flexibility in terms of repayment options, lease terms, and end-of-lease decisions including residuals/ balloons.  

This flexibility allows businesses to align their financing arrangements with their specific needs and cash flow projections. 

Section 3: Navigating the Machinery Finance Process 

The steps below are necessary for the processing to obtain finance for your required equipment.  However, when you use a specialist broker like Finance 48, these steps will all be performed on your behalf by our specialised team: 

Assess Your Needs: Begin by assessing your equipment requirements and determining the type of machinery that will best meet your business needs. Consider factors such as functionality, capacity, durability, return on investment and potential for growth. 

Research Lenders: Research and compare different lenders or leasing companies that specialise in machinery finance. Look for reputable institutions, or experienced brokers like Finance 48 to help establish favourable terms. 

Prepare Documentation: Gather the necessary documents for the machinery finance application process. This may include financial statements, projections, tax returns, business plans, and equipment quotes. 

Evaluate Financing Options: Discuss your financing options with a Perth finance broker like Finance 48 to understand the terms, interest rates, repayment schedules, and any additional fees involved. Compare the offers available to you and select the most suitable option for your business. 

Submit Application: Complete the application process by submitting the required documentation and fulfilling any additional requirements from the lender or let a specialist broker like Finance 48 do it all for you. Provide accurate information to your commercial loan broker at Finance 48 to expedite the approval process. 


When financing machinery, plant and equipment in Australia, businesses may be eligible for several tax benefits, and it’s important to consult with a qualified accountant or tax advisor to understand how these benefits apply to your specific situation. Here are some common tax benefits that businesses may potentially take advantage of: 

Deductions for Lease or Loan Payments: 

Lease rentals/repayments made for machinery and plant equipment financing are generally tax-deductible as operating expenses. This means that businesses can reduce their taxable income by deducting the payments they make during the financial year. Only the Interest portion of repayments Hire Purchase or Chattel mortgages are available as tax deductions.

Depreciation Deductions: There are different depreciation rules.  These include the general depreciation rule or if eligible,  “simplified depreciation” which include pooling and the instant asset write-off.  

Instant Asset Write-Off: In response to the economic challenges posed by the COVID-19 pandemic, the Australian government introduced the Temporary Full Expensing (TPE) measure, which replaced the instant write off. Prior to TPE, the instant write-off threshold was temporarily increased to $150,000, up from the previous limit of $30,000. The new threshold as of July 1 2023 is $20,000. 

What happens if I want to sell machinery that has been financed? 

When you decide to sell machinery that has been financed in Australia, there are specific steps and considerations to keep in mind. The process can vary depending on the financing arrangement and the terms and conditions of the agreement. Here’s a general overview of what typically happens: 

(If you have used a specialist broker like Finance 48, most of the following will be completed by the broker on your behalf) 

Notify the Lender: Inform your lender or leasing company about your intention to sell the financed machinery. Provide them with details about the potential buyer, the selling price, and any other relevant information. This allows the lender to work with you to facilitate the transfer of ownership and manage the payoff process. 

Obtain a Payout Figure: Contact your lender or lessor to obtain a payout figure. The payout figure is the remaining balance on your financing agreement, including the principal amount, any accrued interest, and potential fees. The lender will calculate this amount based on the outstanding balance at the time of the sale. 

Settle the Outstanding Debt: Before completing the sale, you need to settle the outstanding debt with the lender or lessor. This involves paying off the agreed-upon payout figure using the proceeds from the sale. The lender will provide instructions on how to make the payment and clear the debt. Ensure that the payment is made promptly to avoid any potential penalties or further interest charges. 

Transfer of Ownership: Once the outstanding debt is settled, the lender or lessor will release the financial encumbrance or security interest they held on the machinery. They will provide you with the necessary paperwork, such as a release of interest or satisfaction of mortgage, to acknowledge that the financing obligation has been fulfilled. This documentation is crucial for transferring ownership to the buyer. 

Negotiate with the Buyer: When selling financed machinery, you will need to disclose the existing financing arrangement to potential buyers. Discuss the situation with the buyer and negotiate the terms of the sale, including whether they will assume the existing financing or arrange new financing. If the buyer decides to assume the existing financing, they will need to meet the lender’s credit requirements and complete the necessary paperwork. 

Transfer of Title: Once the sale is finalised, you will transfer the title and ownership of the machinery to the buyer. This typically involves signing over the necessary transfer documents, such as a Bill of Sale or Transfer of Ownership form. Provide the buyer with all relevant documentation, including proof of purchase, maintenance records, and warranties, if applicable. 

It’s essential to communicate openly with both the lender and the buyer throughout the process to ensure a smooth transition and proper handling of the financing arrangements. Additionally, consult with your accountant, tax advisor, or legal counsel to understand the specific requirements and obligations related to selling financed machinery in Australia. 


Whilst there are a number of factors to consider when buying and selling machinery for your business, Finance 48 can help you navigate the challenges and provide you with the answers you need to make an informed decision on what is right for your business. To find out more about your options, contact the number one finance broker in Perth right here.

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