Choosing earthmoving equipment finance on the lowest repayment alone can be a costly mistake. The right structure matches what the machine earns, how long it will work and how your business manages cashflow.
How Does Earthmoving Equipment Finance Work?
Earthmoving equipment finance is a loan or lease that lets your business buy or use a machine while paying it off over a set term. The machine usually acts as security for the lender. Approval still depends on the lender's assessment of your business and the asset.
That applies to excavators, skid steers, loaders, dozers, rollers and the trucks and trailers that move them. Loan-e arranges this through plant and machinery finance and wider equipment finance. If you also need to cart the machine around, truck and trailer loans can be arranged alongside it.
The trade-off is that the machine is tied to the loan. If repayments fall behind, the lender can act on that security, so the term and repayment need to suit your work pipeline.
Leasing vs Buying Earthmoving Equipment
With a loan you generally own the machine from the start, while with a lease the lender generally owns it during the term. The details depend on the product and the lender.
Owning gives you control over how the machine is used and sold. Leasing can suit operators who want to upgrade often, but it may limit what you can do with the asset and what you get at the end. The tax treatment differs between structures, so speak with your accountant before you choose. You can run your own numbers through the lease vs buy calculator and the tax savings calculator before that conversation.
Balloon Payments on an Excavator: A Worked Example
A balloon payment lowers your regular repayments by leaving a lump sum owing at the end of the term. The cost is that you carry more debt for longer and need a plan for that final amount.
As an example, consider an owner-operator financing a $200,000 excavator over five years. At an illustrative rate of 6.75% p.a., repayments with no balloon come to about $3,937 a month. If they set a balloon of 20% ($40,000), repayments drop to about $3,374 a month, roughly $563 less.
That lower repayment frees up cash for fuel, wages and maintenance in the first few years. At the end, they have three options: pay the $40,000 from savings, refinance it, or sell or trade the machine and use the proceeds. If the excavator has kept its value, any of these can work. If it has not, the balloon can be higher than the machine is worth. Because the balloon is still owing, the total interest paid is higher than with a fully paid-off loan. Your actual rate will depend on your lender, your business and the asset.
The asset finance repayment calculator lets you test different balloon sizes before you commit.
Matching Repayments to How Your Machines Earn
The repayment schedule should follow your income pattern. If your work comes in bursts, a flat monthly repayment can squeeze you in the quiet months.
Earthmoving income often rises and falls with weather, project timing and when councils and developers pay. Ask your broker about the term length, repayment frequency and whether a balloon suits your cashflow. A longer term lowers each repayment but means more interest overall. A shorter term costs more each month but clears the debt sooner. If cash is tight between jobs, cashflow solutions may suit you better than stretching a machine loan.
Where the machine is only one part of a bigger purchase, such as a second truck or trailer, financing them together can keep the structure tidy. Each asset still needs its own term that reflects how long it will realistically work.
What Do Lenders Look at for Equipment Finance?
Lenders assess your business's ability to repay and the asset offered as security. Criteria vary by lender and by deal.
The machine itself matters. Age, hours, make and whether it is new or used can all influence the terms on offer. Your business history, your existing debts and your deposit also shape the outcome. Having your recent business financials and a quote or invoice for the machine ready helps your broker present the deal clearly.
Refinancing a Machine You Already Own
If you already own earthmoving equipment under a loan that no longer suits, business refinancing may let you restructure it. This could mean a different term, a different repayment or a consolidation of several asset loans.
There can be costs, including exit fees on the old loan and new establishment fees, and a longer term can add to the interest you pay. Compare those costs with the cashflow benefit before you move.
If you are weighing up a purchase, a refinance or a balloon structure, call one of our team or book an appointment at a time that works for you. We will look at your machine, your work and your cashflow, then find a structure that fits.
Frequently Asked Questions
How does earthmoving equipment finance work?
It is a loan or lease that lets your business buy or use a machine while paying it off over a set term. The machine usually acts as security for the lender.
What is a balloon payment on equipment finance?
A balloon is a lump sum left owing at the end of the term, which lowers your regular repayments. The trade-off is more debt for longer and the need for a plan to pay it out.
Should I lease or buy earthmoving equipment?
It depends on whether you want to own the machine or upgrade often, and on your tax position. Check the numbers with a lease vs buy calculator and speak with your accountant.
Can I refinance an existing machine loan?
Often yes, through business refinancing. Weigh any exit and establishment fees, and the extra interest from a longer term, against the cashflow benefit.
