What Equipment Finance Means for Restaurant Owners
Commercial equipment finance lets you acquire ovens, fridges, dishwashers, and other kitchen assets by spreading the cost across fixed monthly repayments rather than paying upfront. You keep your working capital for stock, wages, and rent while the equipment starts earning revenue from day one.
Restaurant margins are tight. A $45,000 combi oven or $22,000 blast chiller can transform output and consistency, but pulling that cash from your business account often means short-staffing the floor or delaying a menu update. Finance turns a lump sum into a predictable monthly expense, and because the equipment itself usually acts as collateral, approval criteria tend to focus more on the asset's value and your trading history than a spotless credit file.
Chattel Mortgage: Ownership From Day One
A chattel mortgage gives you immediate ownership of the equipment while the lender holds a mortgage over it until you've paid the loan amount in full. You claim the GST upfront if you're registered, depreciate the asset, and deduct the interest portion of each repayment.
Consider a cafe owner replacing a three-group espresso machine and grinder for $18,000. Under a chattel mortgage, she pays GST on the invoice, claims that GST back in her next BAS, then depreciates the equipment over its effective life and writes off the interest each month. She owns the machine outright, which matters when the lease on her premises renews and the landlord wants proof of fit-out ownership. The structure suits operators with steady turnover who want to maximise tax deductions and build equity in their equipment.
Hire Purchase: Lower Risk, Higher Flexibility
With a hire purchase agreement, the lender owns the equipment until the final payment clears. You use it, maintain it, and make fixed repayments, but legal title transfers only when the contract ends. Because the lender retains ownership, approval can be more straightforward if your trading history is short or uneven.
This structure works well for seasonal venues or operators trialling a new concept. A regional pub adding a commercial smoker and char grill for $28,000 might prefer hire purchase because the lender's ownership reduces the deposit requirement and the monthly repayment sits below what a chattel mortgage would demand. Tax treatment differs slightly: you can't claim the GST upfront, but the repayments remain tax deductible, and you still depreciate the asset as if you owned it. Once the contract ends and the equipment transfers to your name, there's often a nominal final payment.
Equipment Leasing: Preserve Cash, Upgrade Often
Leasing means you never own the equipment. You pay for the right to use it over an agreed term, then either return it, upgrade to newer models, or buy it out at market value. Monthly payments are fully tax deductible as an operating expense, and because there's no ownership, the equipment doesn't appear as a liability on your balance sheet.
A ghost kitchen running multiple brands from one premises might lease a suite of induction cooktops, speed ovens, and refrigerated prep tables worth $65,000. Technology in commercial kitchens moves quickly, especially in automation and energy efficiency. Leasing lets the operator upgrade every three years without the hassle of selling used equipment or writing off depreciation. The trade-off is that total payments over the life of the lease usually exceed what a chattel mortgage or hire purchase would cost, and you walk away with no asset at the end unless you negotiate a buyout.
What Lenders Look for When You Apply
Lenders want evidence that your business generates enough income to cover the repayments and that the equipment holds resale value if things go wrong. For self-employed applicants, that typically means recent BAS statements, bank statements showing trading activity, and an invoice or quote for the equipment you're financing. Some lenders also request tax returns, especially if you've been trading for less than two years.
The equipment itself acts as collateral, so condition and market demand matter. A Rational combi oven or a Hoshizaki ice machine will get approved faster than a custom-built pastry bench with limited resale appeal. If you're buying second-hand equipment, expect the lender to cap the loan-to-value ratio lower than they would for new stock, often around sixty to seventy per cent of the purchase price.
You'll also need an ABN, GST registration if your turnover exceeds the threshold, and in most cases, at least six months of trading history. Startups sometimes secure finance by offering a larger deposit or a director's guarantee, but that increases personal exposure if the venture doesn't perform.
Matching Finance Structure to Your Tax Position
The structure you choose should align with how your accountant manages depreciation and deductions. A chattel mortgage front-loads the tax benefit because you claim GST immediately and depreciate the full purchase price. Hire purchase spreads the benefit more evenly, while leasing delivers the highest annual deduction but no asset at the end.
In a scenario where a pizzeria operator is replacing a deck oven and dough mixer for $32,000, a chattel mortgage makes sense if the business is profitable and the owner wants to reduce taxable income this financial year. If cash is constrained and the operator prefers to keep the monthly cost low while retaining the option to upgrade in three years, leasing might suit better. The decision isn't purely financial; it also reflects how long you plan to use the equipment and whether you want the option to sell or trade it later.
Most equipment finance arrangements let you choose a term between twelve and sixty months. Longer terms lower the monthly repayment but increase total interest paid, while shorter terms build equity faster and cost less overall. Your accountant and broker should model both options so you can see the tax and cashflow impact side by side.
How Deposit Size Affects Approval and Cost
A larger deposit reduces the loan amount, which lowers monthly repayments and often unlocks a better rate. It also signals to the lender that you have skin in the game, which can speed up approval if your financials are borderline. Most lenders finance between seventy and one hundred per cent of the equipment cost, depending on the asset type and your trading history.
If you're purchasing a $50,000 blast freezer and cold room setup, putting down twenty per cent means you're financing $40,000 instead of the full amount. That might drop your monthly repayment by a couple of hundred dollars and reduce the total interest paid over a five-year term by several thousand. For operators with lumpy income or seasonal peaks, the lower repayment creates breathing room during quieter months.
Some lenders waive the deposit entirely for high-demand equipment or established businesses, but the trade-off is a higher rate or a requirement to add a director's guarantee. There's no universal rule; each application is assessed on the asset, the applicant, and the lender's appetite at the time.
Linking Equipment Finance to Broader Asset Needs
Restaurants rarely need just one piece of equipment. You might be financing kitchen fit-out, a new coolroom, and a delivery vehicle at the same time. Bundling those into a single facility can streamline approvals and give you more negotiating power on the rate, but it also means cross-collateralisation: if one asset underperforms, the lender has a claim over the others.
Separate agreements give you flexibility. You could finance the kitchen equipment under a chattel mortgage to maximise tax deductions, lease the vehicle to keep payments low, and fund the coolroom through hire purchase if you're not certain how long you'll stay in the premises. Each structure serves a different goal, and a broker who understands asset finance can map out the combinations that align with your cashflow and tax planning.
When to Refinance or Upgrade Mid-Term
If your business has grown or rates have dropped since you signed your original agreement, refinancing can lower your repayment or free up capital for other equipment. Some lenders allow you to roll the remaining balance into a new loan when you upgrade, so you're not stuck with outdated equipment just because the contract hasn't expired.
An operator who financed a $40,000 charcoal oven two years ago might want to add a wood-fired pizza oven now that the concept has proven successful. Refinancing the original loan and bundling the new equipment into one agreement can simplify repayments and, depending on the lender's current appetite, reduce the blended rate. The catch is that extending the term resets the clock, so you need to weigh the lower monthly cost against the additional interest over time.
Call one of our team or book an appointment at a time that works for you. We'll compare finance options from lenders across Australia, model the tax treatment under different structures, and handle the paperwork so you can focus on running your venue.
Frequently Asked Questions
What is the difference between a chattel mortgage and hire purchase for restaurant equipment?
A chattel mortgage gives you immediate ownership and lets you claim GST upfront, while hire purchase keeps legal ownership with the lender until the final payment. Both structures allow you to depreciate the equipment and deduct interest, but hire purchase often requires a lower deposit and can be approved more readily for newer businesses.
Can I finance second-hand kitchen equipment?
Yes, but lenders typically cap the loan-to-value ratio lower than for new equipment, often around sixty to seventy per cent of the purchase price. The equipment must hold resale value, so well-known brands and models are more likely to be approved than custom or niche items.
How much deposit do I need to finance commercial kitchen equipment?
Most lenders finance between seventy and one hundred per cent of the equipment cost, depending on the asset type and your trading history. A larger deposit reduces your loan amount and monthly repayment, and can improve your approval chances if your financials are borderline.
Is equipment leasing tax deductible for restaurants?
Yes, lease payments are fully tax deductible as an operating expense. However, you never own the equipment, so there's no asset to sell or depreciate at the end of the lease term unless you negotiate a buyout at market value.
What documents do lenders need for self-employed restaurant owners applying for equipment finance?
Lenders typically request recent BAS statements, bank statements showing trading activity, an invoice or quote for the equipment, and sometimes tax returns if you've been trading for less than two years. You'll also need an ABN and GST registration if your turnover exceeds the threshold.
