Buying commercial kitchen equipment often means choosing between draining your cash reserves or finding a finance option that keeps your business moving.
Whether you're fitting out a new cafe near Colleges Crossing or upgrading an aging cool room in an established Karalee restaurant, the equipment you need can run anywhere from $20,000 for a basic fit-out to well over $150,000 for a full commercial kitchen. Paying cash for that upfront leaves little room for stock, wages, or the inevitable repairs that come with running a hospitality business. Equipment finance spreads the cost across the working life of the assets and, depending on the structure you choose, can deliver tax benefits that reduce the net cost.
How Equipment Finance Works for Commercial Kitchens
Equipment finance lets you acquire ovens, fridges, dishwashers, and prep benches by paying fixed monthly repayments over an agreed term, typically between one and seven years. The lender holds security over the equipment until the loan is repaid. You choose the structure based on how you want to manage ownership, tax deductions, and cashflow.
A chattel mortgage is a common choice for cafes and restaurants purchasing new or used equipment. You own the equipment from day one, claim depreciation and the interest portion of repayments as tax deductions, and pay GST upfront. At the end of the term, the equipment is yours. In a scenario where a Karalee cafe owner purchases a $60,000 combi oven and benchtop equipment under a chattel mortgage with a 20% balloon payment, the monthly repayment is lower during the term, and the balloon is paid at the end either from savings or by refinancing. The depreciation deduction each year reduces taxable income, and the business retains full control of the equipment throughout.
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A finance lease works differently. The lender owns the equipment during the lease term, and you make regular lease payments that are fully tax-deductible. At the end of the lease, you can upgrade to new equipment, purchase the asset at market value, or refinance the residual. This structure suits businesses that want to stay current with technology or those that prefer not to own aging equipment. GST on the purchase is claimed back through your BAS over the life of the lease, which helps manage cashflow in the early months.
What Lenders Look for When Assessing Kitchen Equipment Applications
Lenders assess your ability to service the repayments without putting the business at risk. They review recent BAS statements, profit and loss reports, and business bank account statements to understand your turnover and margin. If the business has been trading for less than two years, expect closer scrutiny. Some lenders will require a director's guarantee or additional security, particularly if the equipment is specialised and would have limited resale value.
Consider a scenario where a new takeaway business in Karalee applies for finance to purchase $40,000 in refrigeration and cooking equipment. The business has been operating for six months with consistent weekly revenue. The lender reviews three months of recent bank statements and a BAS showing regular GST remittance. Because the business is still new, the lender offers approval with a slightly higher interest rate and asks for a personal guarantee from the director. The business accepts, knowing that refinancing to a lower rate is possible once trading history extends beyond 12 months.
Structuring Repayments and Balloon Payments to Match Cashflow
Fixed monthly repayments make budgeting straightforward, but the structure beneath those repayments can change depending on whether you include a balloon payment. A balloon is a lump sum due at the end of the term, typically between 10% and 40% of the loan amount. It reduces the monthly repayment during the term, freeing up cashflow for day-to-day expenses. At the end of the term, you either pay the balloon from retained earnings, trade in the equipment, or refinance the residual into a new agreement.
Balloons work when you expect revenue to increase over the term or when you plan to sell or upgrade the equipment before it depreciates fully. They do not work if your cashflow is inconsistent or if the equipment has little resale value at the end of the term. The wrong balloon percentage can leave you stuck with a payment you cannot cover and equipment you cannot sell.
Tax Treatment and Depreciation for Kitchen Equipment
The Australian Tax Office allows businesses to claim depreciation on commercial kitchen equipment as a deduction against taxable income. The depreciation rate depends on the asset class. Most kitchen equipment falls into a category that allows depreciation over five to ten years, though instant asset write-off provisions may apply if the equipment cost falls below the current threshold and your business meets the eligibility criteria.
Under a chattel mortgage, you claim both the depreciation of the equipment and the interest component of each repayment. Under a finance lease, the lease payment itself is fully deductible, but you do not claim depreciation because you do not own the asset. The net tax benefit depends on your business structure, turnover, and the marginal tax rate that applies. Your accountant should model both options before you commit, because the difference in after-tax cost can be several thousand dollars over a five-year term.
When to Use Asset Finance Instead of a Business Loan
Asset finance is secured against the equipment itself, which generally makes it easier to obtain and less expensive than an unsecured business loan. If the equipment has clear resale value and you can demonstrate serviceability, lenders will assess the application based on the asset and your capacity to repay, rather than requiring a full review of your business balance sheet.
Unsecured business loans offer more flexibility in how funds are used, but they come with higher interest rates and shorter terms. If you are purchasing a specific piece of equipment with a known lifespan and resale value, asset finance almost always delivers a lower cost of funds. If you need to cover a mix of equipment, fit-out, and working capital in one transaction, a business loan or commercial facility might be more appropriate.
Vendor Finance and Dealer Finance for Kitchen Equipment Suppliers
Some equipment suppliers offer vendor finance or dealer finance as part of the sale. The supplier arranges the funding, often through a panel lender, and you sign the finance agreement at the point of purchase. It can be convenient, but it is not always the most suitable option.
Vendor finance interest rates are sometimes higher than what you could access through a broker who compares offers from multiple lenders. The approval might also be conditional on purchasing specific equipment or taking a package deal that includes items you do not need. Before signing, ask for a copy of the finance terms and compare the interest rate, fees, and total repayable amount with what is available elsewhere. If the rate is within 1% of a comparable offer and the convenience is worth it, vendor finance can work. If the rate is higher and the term is inflexible, it is worth arranging your own funding.
How Long It Takes to Get Approval and Receive Funds
Most equipment finance applications are assessed within 24 to 48 hours if the documentation is complete. You will need recent BAS statements, business bank statements covering the last three months, a quote or invoice for the equipment, and identification for each director or guarantor. If the business is newly established or if the equipment is unusual, the lender may request additional information or a valuation.
Once approved, the lender issues a formal offer. You sign the agreement, and the funds are sent directly to the supplier or depositor account, depending on the arrangement. The equipment can be delivered as soon as the supplier confirms payment. In time-sensitive situations, such as replacing a failed cool room or meeting a deadline for a new venue opening, having your documentation ready before you request a quote will shorten the approval process.
If you are a Karalee business owner looking to purchase or upgrade kitchen equipment, call one of our team or book an appointment at a time that works for you. We work with lenders who understand hospitality and can structure repayments to suit your cashflow and tax position.
Frequently Asked Questions
What is the difference between a chattel mortgage and a finance lease for kitchen equipment?
A chattel mortgage means you own the equipment from day one and claim depreciation plus interest as tax deductions. A finance lease means the lender owns the equipment during the term, and your lease payments are fully tax-deductible, with the option to purchase or upgrade at the end.
Can I finance used commercial kitchen equipment?
Yes, most lenders will finance used kitchen equipment provided it has sufficient remaining useful life and resale value. The age and condition of the equipment will affect the term and interest rate offered.
How much deposit do I need for commercial kitchen equipment finance?
Many equipment finance agreements require little to no deposit, particularly if the equipment is new and has strong resale value. Some lenders may ask for a deposit if the business is newly established or the equipment is specialised.
What happens if I want to upgrade equipment before the finance term ends?
You can refinance the remaining balance, trade in the equipment and roll the residual into a new agreement, or pay out the loan early if your agreement allows it. Some finance leases include upgrade options at set intervals.
Is vendor finance through a kitchen equipment supplier a good option?
Vendor finance can be convenient, but the interest rate and terms may not be as suitable as what you could access by comparing lenders independently. Always compare the rate, fees, and total cost before accepting a vendor finance offer.
