Manufacturing equipment finance funds the plant and machinery a manufacturer runs on, typically through a chattel mortgage or lease secured against the equipment itself. For most manufacturers, though, equipment finance alone solves only half the problem, because the other half of the capital is locked up in raw materials, work in progress and unpaid invoices.
Why manufacturing is a two-sided funding problem
A manufacturer buys materials, converts them over days or weeks, delivers, invoices, and then waits to be paid. Cash leaves the business at the start of that cycle and comes back at the end. The longer the production cycle, the more capital is permanently tied up simply to keep operating at the current volume.
Growth makes this worse, not better. A larger order requires more materials bought earlier, more labour through the conversion, and a larger invoice waiting longer. Profitable manufacturers routinely run short of cash while growing, which is a working capital problem masquerading as a success.
Equipment finance does nothing for this. It funds the machine, and the machine is not where the cash is trapped. What is working capital covers how to measure the size of the trap.
The equipment side
For plant with a long working life, a chattel mortgage is usually the default: you own the machine, the lender secures against it, and you claim depreciation and the interest component. Terms are generally longer than for vehicles, reflecting the working life of industrial plant.
Two manufacturing-specific points. Installation and commissioning on large plant can be a substantial share of the delivered cost and can run for months, so confirm what the lender will fund and when it settles. And imported machinery with long lead times often requires staged payments, which may need a progressive drawdown structure or short-term funding for the deposit.
Where the machine is being sold by the manufacturer with finance attached, it is worth comparing that offer against the broader market rather than accepting it as convenient. Vendor finance vs broker-arranged asset finance covers what the comparison usually shows.
The working capital side
Asset-based lending is a revolving facility secured against the current assets of the business: the debtor ledger, and often inventory and sometimes the plant as well. Availability moves with the underlying assets, so the facility grows as the business grows rather than requiring a fresh application each time.
That structure suits manufacturing better than a fixed-limit overdraft does, because the funding requirement genuinely does scale with volume. A facility sized for last year's turnover becomes the constraint on this year's.
Where the debtor ledger is the main asset and inventory is modest, straight invoice finance may be sufficient and is simpler to run. Where inventory and work in progress are substantial, a facility that lends against both is worth the extra reporting it demands.
Why combining them works
Kept separate, each facility is priced against its own security in isolation, and the working capital lender often has no visibility of the plant that underwrites the business's capacity to trade. Combined, a funder can look at the whole asset base and frequently offers more total availability than the two would separately.
The practical benefit is sequencing. A manufacturer winning a large contract needs the machine and the materials at roughly the same time. Two separate applications to two lenders on two timelines is how a business ends up with the plant arriving before the working capital to run it.
The trade-off is reporting. Asset-based facilities require regular reconciliation of the debtor ledger and periodic audits of inventory. A manufacturer whose stock system is approximate will find this uncomfortable, and should fix the system before seeking the facility rather than during it.
Used and imported plant
A large share of industrial plant in Australia is bought second-hand, at auction or through a dealer, and lenders treat it differently from new equipment. Available terms shorten as the machine ages, the advance against value is usually lower, and some lenders will not fund plant beyond a certain age at all.
Two checks are worth doing before you bid or sign. Search the Personal Property Securities Register to confirm the machine is not already encumbered by someone else's finance, because buying an asset with an existing registered interest attached is a problem you inherit. And get an independent valuation or inspection where the price is significant, since lenders will lend against assessed value rather than against what you agreed to pay.
Imported plant adds lead time and staged payments. A deposit at order and the balance at shipment, months apart, sits awkwardly with a facility that settles once on delivery, so tell the lender the payment schedule at the outset rather than discovering the mismatch when the deposit falls due.
What to have ready
Financial statements and a current debtor ageing. An inventory position you can stand behind, split between raw materials, work in progress and finished goods. The supplier quote for any equipment, including installation. And a clear view of your production cycle in days, because that number is what sizes the working capital requirement.
Where to from here
We arrange equipment finance and asset-based lending for manufacturers across our whole lender panel, and where it produces a better result we structure them together rather than separately. Our manufacturing pages cover the sector in full. There are no fees to clients; the lender pays us when the finance settles. Book a 20-minute brief.
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