Understanding the Basics of Kitchen Equipment Finance

If you run a cafe, takeaway or restaurant in Safety Bay, you can spread the cost of new kitchen equipment over a set term instead of paying it all upfront. That keeps your cash in the business for wages, stock and the quiet weeks.

At Clearwater Finance, we like to get to know your business first, because the right setup depends on where you are heading, not just what you need to buy this month.

How Does Commercial Kitchen Equipment Finance Work?

Commercial kitchen equipment finance is a loan or lease where a lender pays for the equipment and you repay it in regular instalments over an agreed term. The equipment itself is usually used as security, which can make it easier to access than an unsecured loan, depending on the lender.

This suits items such as combi ovens, commercial fridges, exhaust systems, dishwashers and coffee machines. Many lenders will also fund a package of several items from one or more suppliers. Our equipment finance page covers the range of structures we can look at with you.

The main trade-off is cost. You pay interest and fees on top of the purchase price, so the total you repay is higher than paying cash. In return, you keep working capital available.

What Can You Finance for a Restaurant Kitchen?

Most new and some used commercial kitchen items can be financed, as long as the lender is comfortable with the equipment, the supplier and your business. Lenders often look more closely at used equipment and private sales, so ask early.

Things worth raising with us before you sign a supplier quote:

• Whether delivery and installation can be included in the amount financed
• Whether a used item bought privately will be accepted
• Whether a lender will fund a mix of equipment from different suppliers

The same lending approach sits behind broader asset finance, so if you later add a van or other vehicle for catering, we can look at it as part of the same relationship.

What Might Repayments Look Like? A Worked Example

Repayments depend on the amount, term, rate and any final payment, so a worked example is the quickest way to see the shape of it.

Consider a Safety Bay cafe owner who wants to replace an ageing oven, undercounter fridges and a dishwasher. The quotes come to $60,000. Paying cash would drain most of the account, leaving little for a slow winter.

They ask us to compare options. We look at a five-year term with no deposit and no final payment. Using an illustrative rate of 6.75% p.a., the repayment comes to roughly $1,181 a month. Your actual rate will depend on your business, the equipment and the lender.

The owner checks that figure against their weekly takings and finds it sits comfortably within their budget, with room to spare in quieter months. They go ahead and keep their cash reserve.

The trade-off here is that they will repay more than $60,000 in total over the five years. You can test your own numbers with our asset finance repayments tools.

Should You Choose a Loan or a Lease?

A loan generally leads to you owning the equipment, while a lease usually means you rent it and may have options at the end of the term. Which suits you depends on how long you expect to use the equipment and how quickly it might date.

A loan tends to suit items you will use for many years, like ovens and cool rooms. A lease may suit items that change quickly or that you like to upgrade, such as some coffee and point-of-sale gear. The cost is that a lease might leave you without an asset at the end unless you pay a final amount. Both a loan and a lease commit you to repayments for the full term even if business slows, and early exit costs can apply to either.

The tax treatment of each can differ, and it depends on your business structure. Talk to your accountant before choosing, and we are happy to work alongside them.

Buying Equipment for Business: Tax Questions to Ask Your Accountant

Buying equipment for your business can affect your tax position, but the outcome depends on your circumstances, so your accountant should confirm how it applies to you. Do this before you commit, not after.

Good questions to take to that conversation include how the purchase will be treated, whether the structure of the finance changes anything, and how repayments fit your cash flow across the year. How repayments are treated for tax depends on the structure. With a loan such as a chattel mortgage or hire purchase, the interest is generally deductible and the equipment may be depreciated or written off. With a lease, the lease payments are generally deductible. GST treatment also differs. Your accountant can confirm what applies to you.

Do You Need a Broker, or Can You Go Direct to the Supplier?

You can take finance offered by a supplier, but a broker can compare several lenders for you, which may matter if your business is newer or your situation is not standard. The supplier option can be quicker at the counter, but a supplier may offer finance from only one lender or a limited panel.

We look at how long you have been trading, your financials and the equipment, then match you with lenders who are comfortable with that picture. If your business has self-employed or irregular income, our business loans and self employed loans pages explain other ways we can help. Being local to the Rockingham area, our Safety Bay mortgage broker team can also meet face to face, and we stay in touch as your business grows.

Questions to Ask Before You Sign

Before you sign, ask what the total cost will be, whether a final payment applies, and what happens if you want to pay out early. These three answers show you the real commitment.

It is also worth asking what fees apply, whether the rate is fixed for the whole term, and how the lender treats late or missed repayments. If any answer is unclear, we will go through it with you in plain language until it makes sense.

When you are ready, call one of our team or book an appointment at a time that works for you. We will go through your quotes, explain your options clearly and stay with you as your kitchen, and your business, grows.

Frequently Asked Questions