Simple hacks to finance generators for your business

Why businesses finance generators instead of paying cash

Paying cash for a generator ties up capital that could cover wages, materials, or unexpected costs. Asset finance spreads the purchase across fixed monthly repayments, so your working capital stays liquid.

A construction firm operating across Melbourne's Eastern Suburbs needed a 200kVA diesel generator for a commercial build in Hawthorn. The unit cost $85,000. Instead of using cash reserves, they structured a chattel mortgage with a 20% deposit and 60-month term. Monthly repayments sat at around $1,400, which aligned with their project cashflow. They claimed depreciation on the full purchase price and deducted interest as an expense. The deposit and upfront costs came to $18,000, leaving the rest of their capital available for materials and subcontractor payments.

This approach works whether you're buying a standby unit for a medical facility or a trailer-mounted generator for events. The loan amount is secured against the equipment itself, so lenders treat it as collateral. You own the asset from the start, which matters for depreciation claims.

Chattel mortgage vs hire purchase for generator funding

A chattel mortgage gives you immediate ownership and lets you claim tax benefits from day one. Hire purchase delays ownership until the final payment, but it can suit businesses that prefer a different GST treatment or want to avoid upfront balloon payment decisions.

Under a chattel mortgage, you pay GST upfront and claim it back in your next business activity statement. Depreciation starts immediately. A hire purchase spreads GST across each payment, which can help if you're managing cashflow tightly. The interest rate on both structures is typically similar, but the timing of tax deductions differs.

For a $60,000 portable generator, a chattel mortgage requires you to fund the GST component at settlement. That's $6,000 upfront, which you claim back within weeks if you're GST-registered. Hire purchase includes GST in each monthly payment, so the upfront cost is lower but the total loan amount is higher. If your business has consistent revenue and you want to maximise depreciation early, chattel mortgage usually delivers better tax outcomes. If you're in a growth phase and want to preserve capital in the first few months, hire purchase spreads the load.

How deposit size affects approval and repayments

Lenders typically want 10% to 20% of the purchase price as a deposit for generator finance. A larger deposit reduces the loan amount, lowers monthly repayments, and improves your approval chances if your business has limited trading history.

A landscaping business in Malvern needed a 30kVA towable generator for irrigation projects. The unit cost $22,000. They offered a 30% deposit, which brought the loan amount to $15,400. With a 48-month term, repayments dropped to $360 per month. The higher deposit meant the lender approved the application without requiring a director's guarantee, because the equipment value covered the outstanding balance from the start.

If you're buying new equipment from a dealer, some manufacturers offer vendor finance with lower deposit requirements. These arrangements can include discounted rates, but the terms are set by the manufacturer's finance arm rather than the open market. You'll still need to compare the effective interest rate and any fees against what a broker can access through other lenders.

Balloon payments and how they change your monthly cost

A balloon payment is a lump sum due at the end of the loan term. It reduces your monthly repayments but leaves a final payment of 10% to 40% of the original loan amount. You can refinance the balloon, trade in the equipment, or pay it out.

Consider a hospitality business financing a 15kVA backup generator for a venue in Toorak. The generator costs $18,000. With no balloon, monthly repayments over 60 months are around $340. With a 30% balloon, monthly repayments drop to $260, but a $5,400 payment is due at the end of year five. If the generator is still in use and the business wants to keep it, they can refinance the balloon over another 24 months. If they've upgraded to a larger unit, they can sell the old generator and use the proceeds to clear the balloon.

Balloon payments work when you expect the equipment to retain value or when you plan to upgrade within a set cycle. They don't suit assets that depreciate quickly or businesses that can't fund or refinance the final payment. Generators hold value well if they're maintained, so a balloon structure is common. Just factor in the final payment when you model your cashflow.

Tax deductions and depreciation for generator purchases

Generators are depreciable assets. Under instant asset write-off rules, businesses with turnover below the threshold can claim the full purchase price in the year of acquisition. Above that threshold, you depreciate the asset over its effective life, which the ATO sets at around 10 to 15 years for generators depending on type and use.

If you purchase a $50,000 generator under a chattel mortgage, you claim depreciation on the full $50,000. Interest payments on the loan are deductible as a business expense each year. That means the effective cost of the equipment is lower than the purchase price once tax benefits are applied. If your business sits in the 25% tax bracket, a $50,000 write-off saves $12,500 in tax. Spread over five years, that's $2,500 annually if you're using the diminishing value method.

Hire purchase and finance leases handle depreciation differently. Under hire purchase, you claim depreciation once the asset transfers to your name at the end of the term. Under a finance lease, the lessor owns the equipment, so you can't claim depreciation, but your lease payments are usually fully deductible. The right structure depends on your trading position, turnover, and how you want to manage tax deductions. Talk to your accountant before signing, because the tax treatment changes the real cost of the loan.

What lenders look for when approving generator finance

Lenders assess your trading history, current debt levels, and the equipment's resale value. Most want to see at least six months of business bank statements and recent financials. If you're a newer business, a larger deposit or director's guarantee may be required.

Generators have strong resale value because they're used across industries. A well-maintained diesel unit from a known brand holds 50% to 60% of its original value after five years. That makes them lower risk for lenders compared to specialised machinery with a narrow market. If you're financing a unit from a recognised manufacturer like Cummins, Perkins, or Caterpillar, approval is usually straightforward. If you're buying a lesser-known brand or a secondhand unit without service history, expect tighter lending criteria.

Your business turnover matters. Lenders typically cap monthly repayments at 10% to 15% of your average monthly revenue. If you're turning over $30,000 per month, they'll approve repayments of around $3,000 to $4,500. That limits the loan amount unless you increase your deposit or extend the term. If your turnover is seasonal, provide a full year of statements so the lender can assess your average position rather than a single quiet month.

Financing secondhand generators vs new units

New generators attract longer loan terms and lower rates because they carry warranties and have predictable lifespans. Secondhand units are cheaper upfront but may require a larger deposit and shorter term, especially if the equipment is more than five years old.

A hire company in Camberwell wanted to add three secondhand 40kVA generators to their fleet. Each unit was four years old and priced at $28,000. The lender approved a 36-month term with a 25% deposit, compared to the 60-month term available for new equipment. The shorter term meant higher monthly repayments, but the lower purchase price offset the difference. Total repayments over three years were still lower than financing new units over five years.

Secondhand equipment needs a clear service history and a recent inspection report. Lenders want to know the unit has been maintained and is likely to hold its value through the loan term. If the generator has been used in harsh conditions or doesn't have documented servicing, expect the lender to reduce the approved loan amount or decline the application. The collateral value is the lender's fallback if you default, so they won't fund equipment that's hard to resell.

New generators also qualify for vendor finance programs, which can include interest rate subsidies or deferred payment periods. These deals are worth comparing, but make sure the effective rate is lower than what's available through other lenders. Dealers sometimes inflate the purchase price to offset the discounted rate, so check the cash price separately.

How to structure finance for multiple generators or fleet purchases

If you're buying several generators at once, you can bundle them into a single loan or structure separate agreements for each unit. A single loan simplifies administration but locks all equipment into the same term and rate. Separate loans let you tailor terms to each asset's expected use.

An events business needed five generators ranging from 10kVA to 100kVA. Total cost was $180,000. They split the purchase into two agreements. The three smaller units went on a 36-month hire purchase with no balloon, because they'd be cycled out within three years. The two larger units went on a 60-month chattel mortgage with a 20% balloon, because they'd stay in the fleet longer. This approach matched repayment terms to the actual upgrade cycle for each asset type and kept monthly costs at $4,200 across both loans.

Bundling works if you're planning to keep all equipment for the same period and want a single monthly payment. It also simplifies your accounting and reduces the number of agreements to track. Just make sure the term suits every unit in the package. Financing a trailer-mounted 15kVA generator over 60 months when you'll replace it after three years leaves you paying for equipment you no longer own.

When to use an asset finance broker for generator purchases

Brokers access multiple lenders and can structure deals that match your cashflow and tax position. They compare rates, fees, and terms across banks and specialist lenders, which is particularly useful if your business has limited trading history or you're buying secondhand equipment.

If you're buying from a dealer and they offer vendor finance, you can still ask a broker to compare it. Vendor finance can be cheaper if the manufacturer is subsidising the rate, but sometimes the dealer's margin is built into the price. A broker can tell you whether the dealer's offer is actually lower than market rates once all fees are included. They can also structure the loan to suit your tax position, like timing settlement to fall in a specific financial year or adjusting the balloon payment to align with your planned upgrade cycle.

Brokers charge either a flat fee or receive commission from the lender. Most pass on the lender commission at no cost to you, so there's no upfront fee. They'll also handle the paperwork and liaise with the lender, which saves you time if you're running a business and don't want to chase approvals. If you're financing a generator alongside other plant and machinery or vehicle finance, a broker can bundle the applications and negotiate better terms based on the total value.

Need to fund a generator purchase? Call one of our team or book an appointment at a time that works for you.

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