Smart Ways to Approach Earthmoving Equipment Finance

Buying an excavator is a big call, and the loan structure matters nearly as much as the machine. The right setup lines your repayments up with the work the machine earns, so it pays its own way instead of squeezing your cash flow.

This guide is for Brisbane and national owner-operators and small contractors who have a machine in mind and want to choose how to fund it.

How Does Earthmoving Equipment Finance Work?

Earthmoving equipment finance is a loan or lease where the lender funds the machine and holds it as security while you repay over an agreed term. The machine itself usually backs the loan, so you often don't need to put property up as security.

Most lenders look at the age and type of the machine, your time in business, your ABN history and how your repayments fit your income. Newer machines from well-known brands are generally easier to fund than older or specialised units. Our construction and earthmoving loans page covers the main options in more detail.

The common structures are:

• Chattel mortgage: you own the machine from day one and the lender holds a security interest over it.
• Finance lease: the lender owns the machine and you make payments to use it, often with a residual at the end.
• Hire purchase: you pay off the machine over the term and take ownership at the end.

The trade-off is that each structure treats ownership, GST and end-of-term payments differently. Ask your accountant which one suits your business before you commit.

Excavator Finance: A Worked Example

Excavator finance repayments depend on the amount borrowed, the term and the rate, so it helps to run the numbers before you visit a dealer. This example uses an illustrative rate of 6.75% p.a. Your actual rate will depend on your lender, your deposit and your business profile.

Consider a Brisbane contractor who needs to borrow $100,000 for a used excavator over five years. At 6.75% p.a., the repayment comes to about $1,968 a month. Over the five years that totals around $118,100, which includes about $18,100 in interest.

Now say the contractor lands a steady subcontract that brings in more than the repayment each month. The machine covers its own cost and leaves room for fuel, servicing and insurance. If work dried up, though, the $1,968 would still be due. That is the main risk of any equipment loan, so it pays to be honest about how much work is secured before you sign.

Try a longer term and the monthly figure drops, but you pay more interest overall. You can test different terms on a business loans calculator or ask us to run the comparison.

Should You Choose a Balloon or Residual Payment?

A balloon or residual payment is a lump sum due at the end of the term, which lowers your regular repayments. The trade-off is that you must pay, refinance or sell the machine to clear it.

It can suit a machine that holds its value well and that you plan to upgrade. It suits you less if you plan to keep the machine for a decade, because you still face that final bill. A residual set too high can also leave you owing more than the machine is worth if the market softens.

What Will Lenders Look at When You Apply?

Lenders mainly want proof that your business can afford the repayments. That usually comes down to your ABN history, recent income evidence and how the machine will earn work.

If you are newer in business or your paperwork is thin, some lenders offer low-doc options, usually with a higher rate or a bigger deposit. A broker can match your situation to a lender that is comfortable with it, rather than you applying at several places and leaving multiple credit enquiries on your file.

Buying Earthmoving Machines Alongside Trucks and Trailers

Many operators need a truck or float to move the machine between sites, and financing both together can keep things organised. If that is you, see our pages on truck and big rig loans and heavy vehicle finance.

The trade-off is that stacking several loans raises your total commitments, which can limit how much a lender will approve next time. Planning the purchases in order helps.

Can You Refinance Existing Machinery Loans?

Yes, you can refinance an existing equipment loan, and doing so may free up cash flow or tidy up several loans. Costs such as early exit fees and new establishment fees can outweigh the benefit, so check the numbers first.

If you already have a few loans and want to review them, our business refinance loans page is a good starting point.

Equipment Finance and Tax: What to Ask Your Accountant

Deductibility depends on your structure. With a chattel mortgage or hire purchase, the principal portion of your repayments is not deductible, but interest and depreciation generally are. With a lease, payments may be deductible, depending on how the lease is classified. Whether any of this applies to you is a question for your accountant or the ATO, and no outcome is certain.

Ask your accountant about your structure before you sign, not after the machine arrives.

Call one of our team or book an appointment at a time that works for you. We will compare options from our lender panel and work out a structure that suits your machine, your work and your budget. You can also start on our application page.

Frequently Asked Questions