As a small or medium enterprise (SME) owner in Australia, you may be considering equipment financing to help your business grow. But what does it take to be eligible for this type of financing?
Let’s explore the criteria you need to meet and what lenders typically look for when assessing equipment finance applications.
Basic eligibility requirements
Most lenders in Australia have some standard criteria for equipment financing eligibility:
- Age: You must be at least 18 years old.
- Work status: You need to be eligible to work in Australia.
- Business structure: You can apply as an individual, sole trader, sole owner of your company or someone authorised to apply for finance and credit for a business.
- Equipment use: The equipment you’re seeking to finance must be used primarily (or entirely) for business purposes.
Business history and financial health
Lenders typically prefer businesses with a proven track record:
Trading history: Many lenders require that your business has been trading for at least 12 months.
Credit rating: A good credit rating is essential. Lenders will be wary if your business is going through bankruptcy proceedings.
ABN history and time in business are really important. There are options for start-up businesses, however there are fewer.
Industry specific considerations
Some industries may have additional criteria or may be viewed more favourably by lenders. Equipment financing isn’t limited to traditional business entities.
Asset type and value
The type of asset you’re looking to finance can also affect your eligibility:
- Primary assets (eg vehicles, trucks, motorised equipment) are often easier to finance.
- Secondary assets (eg agricultural implements, large non-motorised equipment) may have different terms.
- Tertiary assets (eg hospitality equipment, smaller appliances) might be bundled together for financing.
Financial documentation
While specific requirements can vary by lender, you’ll typically need to provide:
- Financial statements (profit and loss, balance sheet)
- Tax returns
- Bank statements
- Business plan (especially for newer businesses)
GST registration
While not always a strict requirement, being registered for GST can be beneficial when applying for equipment finance. It demonstrates that your business has reached a certain turnover threshold ($75,000 for most businesses) or expects to do so soon.
Tips for improving your eligibility
- Build your credit score
Maintain a good credit history by paying bills on time and managing existing debts responsibly. - Prepare a solid business case
Clearly explain how the equipment will benefit your business and improve profitability. - Consider a deposit
Having some cash to put towards the equipment can improve your chances of approval. - Seek professional advice
Our asset finance team can help you understand your options and find lenders suited to your situation. - Be transparent
Provide accurate and complete information to lenders to build trust and avoid complications.
EXAMPLE CASE STUDY
A small landscaping business wants to expand its operations. The owner needs new equipment to take on larger projects.
They are considering:
- A new ride on mower (primary asset)
- A wood chipper (secondary asset)
- Various handheld tools such as hedge trimmers and leaf blowers (tertiary assets)
The client approached our asset finance team to discuss their options.
Our broker explained that they could potentially finance these items through:
- Chattel mortgage for the ride-on mower
- Equipment loan for the wood chipper
- A small business loan or lease agreement for the handheld tools
To be eligible for this financing, the landscaping business would typically need to meet criteria such as:
- Having an ABN and being in business for at least 12 months
- Demonstrating a good credit history
- Providing financial statements showing the business can afford the repayments
- Using the equipment primarily for business purposes
As their finance specialist we might also look at bundling the purchases to potentially lead to better terms or rates.
Remember, eligibility criteria can vary between lenders and there may be options available even if you don’t meet all the standard requirements.
As your finance representative, we can identify your company’s current point in the business lifecycle and if there are options for you.
By understanding these criteria and preparing accordingly, we’ll present your application in a better position to secure the equipment financing your SME needs to thrive and grow.