Construction is one of the most equipment-intensive industries in Australia. From the smallest residential builder running a single excavator to major civil contractors with fleets of earthmoving machinery, the capital cost of construction equipment is one of the biggest financial commitments a business will make.
Few construction businesses can afford to tie up hundreds of thousands of dollars in equipment purchases from their working capital. Equipment finance allows you to acquire the machinery you need, generate income from it immediately, and spread the cost over its productive life, all while claiming significant tax deductions.
At Mortgage & Finance Advisory, we’ve helped construction businesses across Geelong, the Surf Coast, Melbourne, and regional Victoria finance everything from mini excavators to tower cranes. This guide covers everything you need to know about financing heavy machinery for your construction business.
Virtually any tangible construction asset can be financed. Common equipment types include:
| Category | Equipment Examples | Typical Finance Range |
|---|---|---|
| Earthmoving | Excavators, backhoes, wheel loaders, skid steers, bulldozers | $50,000 to $800,000+ |
| Concrete & Paving | Concrete pumps, agitators, pavers, batch plants | $80,000 to $1,500,000 |
| Cranes & Lifting | Mobile cranes, tower cranes, telehandlers, EWPs | $100,000 to $2,000,000+ |
| Trucks & Transport | Tippers, flatbeds, water carts, site vehicles | $40,000 to $400,000 |
| Compaction & Road | Rollers, plate compactors, profilers, graders | $30,000 to $500,000 |
| Scaffolding & Access | Scaffolding systems, boom lifts, scissor lifts | $20,000 to $300,000 |
| Small Tools & Attachments | Compressors, generators, laser levels, power tools | $5,000 to $50,000 |
For most construction businesses, a chattel mortgage is the preferred finance structure. You take ownership of the equipment from day one, the lender holds a security interest until the loan is repaid, and you get immediate access to GST credits and depreciation deductions.
This is particularly advantageous for construction equipment because the upfront GST credit on a $220,000 excavator is $20,000, a significant cash flow benefit returned on your next BAS. You can also structure the loan with a balloon payment (residual) at the end of the term, which reduces monthly repayments and can be useful for equipment that holds its value well.
If your business regularly upgrades equipment (every 3-5 years), a finance lease offers flexibility. At the end of the lease, you can purchase the equipment for its residual value, upgrade to a newer model under a new lease, or return the equipment. This suits businesses that want to maintain a modern fleet without the burden of selling older machines.
Under hire purchase, the lender retains ownership during the term and transfers it to you upon final payment. This structure is less common for construction equipment than chattel mortgage but may be preferred for specific tax planning situations. Your accountant can advise.
Construction is an industry where quality used equipment is commonplace and can represent excellent value. Understanding the finance implications of new versus used is important.
| Factor | New Equipment | Used Equipment |
|---|---|---|
| Maximum Loan Term | Up to 7 years | Typically 3-5 years (age at end of term usually capped at 15-20 years) |
| Interest Rates | Best available rates | Typically 0.5% to 1.5% higher |
| LVR (Loan-to-Value) | Up to 100% financing | Usually up to 100%, may require valuation |
| Additional Requirements | Dealer quote/invoice | May need independent valuation, PPSR check, photos |
| Private Sale | N/A (always from dealer) | Possible: lender pays seller directly at settlement |
Construction businesses can access substantial tax deductions when financing equipment:
Instant Asset Write-Off: Small businesses (under $10M turnover) can immediately deduct the full cost of assets costing less than $20,000 each. This is particularly useful for smaller equipment purchases like generators, compressors, and power tools.
Division 40 Depreciation: For assets above the instant write-off threshold, you can claim depreciation using either the prime cost (straight-line) or diminishing value (accelerated) method. The diminishing value method provides larger deductions in the early years, which suits construction equipment that works hard and depreciates faster in its first few years.
GST Input Tax Credits: Under a chattel mortgage, claim the full GST component of the purchase price on your next BAS. For a $330,000 piece of equipment (including GST), that’s a $30,000 credit.
Interest Deductions: All interest paid on equipment finance is tax-deductible as a business expense, reducing the effective cost of borrowing.
What equipment, what’s it costing, new or used, dealer or private sale? We’ll assess your situation and recommend the best structure and lender.
Depending on the loan size: driver’s licence, ABN, equipment quote, and bank statements or financial statements. For no-doc loans under $150K, just your licence, ABN, and the quote.
We submit to the most suitable lender from our panel. Construction equipment applications are generally simple for established businesses due to the strong resale value of the assets.
Funds go directly to the dealer or seller. You take delivery of your equipment and start earning from it immediately.
Buying construction equipment at auction can deliver significant savings, but the finance process needs to be handled differently. Auction purchases typically require payment within 24-48 hours of the hammer falling, so you can’t wait until you’ve won the lot to arrange finance.
The solution is to arrange pre-approval before the auction. We can set up a pre-approved facility based on the type of equipment you’re targeting and a maximum purchase price. This gives you confidence to bid knowing your finance is in place, and allows us to arrange settlement within the auction’s payment timeframe.
The construction industry relies on a diverse range of equipment, and virtually all of it can be financed through the right product. Earth-moving equipment such as excavators, bulldozers, and graders represent the most common construction finance applications we process at Mortgage & Finance Advisory. These assets typically hold their value well, which means lenders offer competitive rates, often between 5.5% and 7.5% depending on the age and brand of the equipment. Caterpillar, Komatsu, and Volvo machines tend to attract the best rates due to strong resale markets.
Beyond earth-moving machinery, construction businesses across Geelong, Melbourne, and regional Victoria regularly finance concrete equipment (pumps, mixers, batch plants), scaffolding systems, tower cranes, mobile cranes, generators, compressors, and site vehicles. Specialised equipment like piling rigs, tunnel boring machines, and asphalt plants can also be financed, though these typically require larger deposits and more detailed business plans due to their niche markets and higher values. We also arrange finance for construction technology including GPS machine control systems, drones, and 3D scanning equipment.
The decision between financing new or used construction equipment involves several factors beyond just the purchase price. New equipment comes with manufacturer warranties (typically 2-5 years), the latest emissions compliance standards, improved fuel efficiency, and access to technology features like telematics and GPS guidance. Lenders generally offer lower interest rates on new equipment (sometimes 1-2% less than comparable used equipment) and longer finance terms of up to 7 years, reducing monthly repayments.
Used equipment offers lower purchase prices and can represent excellent value, particularly when buying from reputable dealers who offer inspections and limited warranties. However, lenders apply stricter criteria to used equipment finance. Most lenders cap the age of equipment at settlement at 15-20 years, and the finance term plus the equipment’s age typically cannot exceed 20 years. For example, a 10-year-old excavator might only qualify for a 7-year finance term. Interest rates on used equipment are generally 0.5-2% higher than new, and some lenders require a larger deposit: typically 10-20% versus as low as 0% for new equipment with strong applicants.
Client Example: New vs Used Equipment Decision
A Geelong civil contractor was choosing between a new Komatsu PC200 excavator at $285,000 and a 4-year-old equivalent at $185,000. We modelled both scenarios: the new machine qualified for 5.9% over 5 years with $0 deposit ($5,497/month), while the used machine came at 7.2% over 5 years with a 10% deposit ($3,241/month plus the $18,500 deposit). After factoring in the Instant Asset Write-Off, lower fuel costs, and the warranty savings on the new machine, the total cost of ownership difference over 5 years was only $22,000, much less than the $100,000 sticker price gap suggested.
Construction businesses face unique cash flow challenges that affect equipment finance decisions. Progress payment structures mean you may not receive payment for 30-60 days after completing work stages, while equipment finance repayments are due monthly regardless of your payment cycle. Many of our construction clients across Geelong and the Surf Coast manage this through structured balloon payments: making lower monthly repayments during the term with a larger final payment that can be refinanced or paid from retained earnings.
Seasonal fluctuations also affect construction businesses, particularly those involved in residential building and outdoor civil works. Some lenders offer seasonal payment structures where repayments are reduced during quieter winter months and increased during the busy summer period. We also recommend maintaining an equipment finance facility that allows you to draw down funds as needed rather than financing each piece individually. This reduces paperwork and gives you the flexibility to acquire equipment quickly when project opportunities arise.
All financed construction equipment must be comprehensively insured for the duration of the finance term. This is a non-negotiable lender requirement, and the finance provider must be noted as an interested party on the insurance policy. Construction equipment insurance costs vary significantly based on the equipment type, value, storage location, and usage. Expect to pay between 1.5% and 4% of the asset value annually. High-risk equipment like cranes and piling rigs attract higher premiums than standard excavators or loaders.
Beyond standard comprehensive insurance, construction businesses should consider breakdown insurance (covering mechanical failures outside warranty), transit insurance (for equipment moving between sites), and public liability coverage that specifically includes equipment operations. Plant and equipment floater policies can cover your entire fleet under one policy, often at a lower per-unit cost than individual policies. We work with insurance brokers across Victoria who specialise in construction equipment coverage and can help you secure competitive premiums that meet lender requirements.
Yes, attachments can be financed either as part of a package with the base machine or separately. Most lenders will finance attachments as stand-alone items, though very small purchases (under $5,000) may not be cost-effective to finance individually. Consider bundling multiple items together.
Most lenders cap the total age of equipment at the end of the finance term at 15-20 years. So a 10-year-old excavator could typically be financed for up to 5-10 years. Some specialist lenders are more flexible, particularly for well-maintained equipment from premium brands like Caterpillar, Komatsu, and Volvo.
Not necessarily for established businesses with clean credit. Many lenders offer 100% financing of the purchase price. For newer businesses or those with credit issues, a 10-30% deposit is typically required and will improve your rate.
Yes, multiple items can be financed under a single agreement or separate agreements. A single agreement simplifies administration, while separate agreements give you flexibility to trade in or sell individual machines independently.
Lenders require comprehensive insurance covering the equipment for its full replacement value, with the lender noted as an interested party. Most construction businesses carry plant and equipment insurance through their existing business insurance policy. Check that your policy covers the specific assets being financed.
Whether it’s a $30,000 mini excavator or a $2 million crane, we’ll find the right finance solution from our panel of 60+ specialist lenders.
Call 03 9020 2699
With strong connections across specialist construction finance lenders, Melanie helps builders, contractors, and earthmoving businesses access competitive equipment finance quickly.
Our experienced brokers compare options across 60+ lenders to find the right solution for your situation.
Director & Senior Finance Broker
With years of experience in mortgage broking and finance, Melanie helps clients across Geelong, the Surf Coast, Melbourne and regional Victoria navigate the complexities of home loans and business finance. Contact our team on 03 9020 2699.
