Beginner's Guide to Restaurant Equipment Finance

Restaurant equipment is expensive, and paying cash upfront leaves most Melbourne operators with no buffer for slow weeks or unexpected repairs.

Commercial equipment finance lets you spread the cost of ovens, fridges, dishwashers, coffee machines, and fit-outs over monthly repayments instead of writing a single large cheque. You keep working capital intact while getting the gear you need to open, expand, or upgrade your kitchen.

How Commercial Equipment Finance Works for Hospitality Businesses

You choose the equipment, the lender advances the funds to pay for it, and you repay the loan amount through fixed monthly repayments over an agreed term. The equipment itself usually acts as collateral, which means you don't need to put up your home or other assets. Most terms run between two and five years depending on the lifespan of what you're buying.

Consider a cafe owner in Fitzroy upgrading to a three-group espresso machine and grinder. The equipment costs around $18,000. Instead of depleting their operating account, they finance it over four years at a fixed rate. Monthly repayments sit around $420, and the machine starts generating revenue from day one. The business maintains enough cash to cover stock, wages, and rent without interruption.

What Equipment You Can Finance in a Restaurant Setting

Most lenders will fund anything that's essential to running your venue. That includes cooking equipment like combi ovens, grills, fryers, and ranges. Refrigeration such as walk-in coolrooms, display fridges, and under-bench units. Dishwashers, prep benches, sinks, and exhaust systems. Even dining furniture, point-of-sale systems, and coffee machines qualify.

Specialised machinery also fits the brief. If you're running a bakery, dough mixers and proof cabinets are covered. Food trucks can finance mobile kitchen fit-outs and generators. Breweries and distilleries can fund fermentation tanks and bottling lines. If it's used in your business and has a clear value, it's likely financeable through equipment finance.

Chattel Mortgage vs Hire Purchase for Buying New Equipment

A chattel mortgage means you own the equipment from day one and use it as security for the loan. You claim depreciation and the interest portion of repayments as tax deductible expenses. GST on the purchase price is usually claimable upfront if you're registered. This structure suits established businesses with steady turnover.

Hire Purchase means the lender owns the equipment until the final payment, then ownership transfers to you. Repayments are typically structured to include GST, so you claim it progressively rather than upfront. This can help manage cashflow if you're just starting out or running on thin margins. Both options deliver fixed monthly repayments, but the tax treatment differs depending on your structure and accountant's advice.

Why Fixed Repayments Matter When You're Managing Cashflow

Restaurants deal with seasonal trade, weekend peaks, and quiet Tuesdays. A variable rate loan tied to the cash rate adds uncertainty when you're already juggling supplier payments and wage costs. Fixed monthly repayments let you lock in what you'll pay for the life of the lease or loan term, which makes budgeting predictable.

In a scenario like this: a Richmond restaurant finances $50,000 worth of kitchen equipment over five years with a fixed interest rate. The repayment is $980 per month, every month, regardless of what the Reserve Bank does. The owner can plan around that figure and know exactly what's coming out of the account. That predictability matters more in hospitality than in most other industries.

Upgrading Existing Equipment Without Draining Your Cash Buffer

Most Melbourne venues need to replace or upgrade equipment every few years. An old combi oven loses efficiency, a fridge stops holding temperature, or you outgrow your existing setup and need something bigger. Paying cash means pulling $10,000 to $30,000 out of your operating account at once, which leaves you exposed if trade drops or a supplier invoice lands early.

Financing the upgrade keeps that cash available. You're not borrowing to cover a shortfall, you're borrowing to acquire an asset that improves business efficiency and keeps the kitchen running. The monthly cost is manageable, and the equipment pays for itself through reliability and output. If you're also looking at automation equipment or robotics financing for food prep lines, the same principle applies. Spread the cost, keep the buffer, and avoid the cash crunch.

How Tax Effective Equipment Finance Works in Practice

Under a chattel mortgage, you can claim the interest component of each repayment as a business expense. You also claim depreciation on the equipment itself, which reduces your taxable income. If the equipment qualifies for instant asset write-off provisions, you might be able to deduct the full value in the year you purchase it, depending on current thresholds and your business structure.

Hire Purchase works differently. You claim the full repayment amount as a tax deduction over the life of the lease, but you don't claim depreciation because you don't technically own the asset until the final payment. For some businesses, this approach smooths out the deductions and aligns better with their cash position. Talk to your accountant before you commit, because the right structure depends on your turnover, entity type, and how you want to manage your tax position.

Accessing Equipment Finance Options from Banks and Lenders

You're not limited to one lender. Banks, specialist equipment financiers, and alternative lenders all offer finance options for hospitality businesses. Rates, terms, and approval criteria vary, and some lenders are more familiar with the restaurant sector than others. A broker can access equipment finance options from banks and lenders across Australia, which means you're comparing what's available rather than taking the first offer.

Some lenders want to see two years of financials and a strong credit file. Others will work with newer businesses or those with less conventional income structures, especially if the equipment has strong resale value and you've got a deposit. If you're buying new equipment, approval is usually faster because the lender can verify the supplier and the asset value without ambiguity.

What Lenders Look at When You Apply

Your ABN, time in business, turnover, and credit history all factor in. Lenders want to know you can service the repayments without stretching yourself too thin. If you're applying for a chattel mortgage, they'll also check whether you're registered for GST and how your business is structured. Sole traders, partnerships, companies, and trusts are all treated slightly differently.

The equipment itself matters too. A commercial oven from a known manufacturer with clear resale value is lower risk than a custom-built fit-out with no secondary market. If you're buying used gear, the lender will want proof of condition and sometimes an independent valuation. The stronger the collateral, the more confident the lender, and the less they'll ask for in terms of additional security or guarantees.

When to Finance and When to Pay Cash

If you've got $15,000 sitting in the bank and you need a $12,000 dishwasher, paying cash might sound sensible. But if that $15,000 is your only buffer and trade drops next month, you've left yourself exposed. Financing the dishwasher over three years costs you interest, but it also means you still have the cash to cover wages, rent, and stock when you need it.

On the other hand, if you're buying small items like a $2,000 benchtop mixer or a $1,500 food processor, the admin cost and interest on a loan might outweigh the benefit. The threshold depends on your cashflow and risk tolerance. For anything over $5,000 to $10,000, financing is usually worth considering. For anything under that, it's a judgement call based on how tight your margins are and whether you've got cash to spare.

Treadgold Finance works with Melbourne hospitality businesses to secure commercial equipment finance that fits your setup and your cashflow. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions