Unlock the secrets to financing restaurant kitchen equipment

Financing restaurant kitchen equipment without draining your capital

When you're fitting out a commercial kitchen, the equipment list adds up fast. A commercial oven runs $8,000 to $25,000, a blast chiller another $15,000, refrigeration systems anywhere from $5,000 to $30,000 depending on capacity, and that's before you factor in prep tables, dishwashers, extraction systems, and point-of-sale hardware. Paying cash ties up working capital you'll need for stock, wages, and the inevitable costs that surface in the first six months of trading.

Commercial equipment finance lets you spread the cost of kitchen fitouts over one to seven years, matching repayments to the working life of the equipment. You preserve cash for operations, claim tax deductions on repayments or lease payments depending on the structure, and get the equipment installed when you need it rather than when you've saved enough. For restaurants opening in high-rent areas like the Eastern Suburbs of Melbourne, that timing can be the difference between securing a lease and losing it to another tenant.

The structure you choose affects your tax position, ownership, and monthly cost. A chattel mortgage suits businesses that want to own the equipment outright and claim depreciation. A finance lease works if you prefer to upgrade equipment every few years without dealing with resale. Hire purchase sits somewhere in between. Each option has different implications for your balance sheet and tax return, so the choice depends on your business structure, profit forecast, and whether you're buying new or used equipment.

What you can finance in a commercial kitchen fitout

Most lenders will finance anything bolted to the floor or plugged into a wall, provided it has a resale value. That includes cooking equipment like ranges, ovens, grills, fryers, and salamanders. Refrigeration and cold storage, from under-bench fridges to walk-in coolrooms. Food prep equipment including mixers, slicers, processors, and vacuum sealers. Dishwashing and cleaning systems. Extraction and ventilation. Point-of-sale systems, though some lenders treat IT equipment separately.

Fitout costs like benches, sinks, and shelving can be included if they're part of a complete kitchen package, but standalone furniture or cosmetic upgrades usually don't qualify. If you're buying a food truck or mobile kitchen, that falls under vehicle finance rather than equipment finance, even though the kitchen equipment is built in.

Consider a cafe opening in Malvern that needs a three-group espresso machine, two grinders, an under-bench fridge, a display cabinet, and a commercial dishwasher. The total comes to around $45,000. The owner has $60,000 in working capital but wants to keep $40,000 available for the first three months of wages, stock, and rent. Financing the equipment over five years with a chattel mortgage means monthly repayments of roughly $900, depending on the rate and deposit. The business owns the equipment from day one, claims the interest as a tax deduction, and depreciates the asset over its effective life. The owner keeps $40,000 liquid and still gets the kitchen operational within the lease deadline.

Chattel mortgage or finance lease for restaurant equipment

A chattel mortgage is a secured loan where you own the equipment from the start and the lender holds a registered interest until the loan is repaid. You claim the interest on your tax return and depreciate the equipment according to ATO guidelines. At the end of the term, you own the equipment outright with no further payments. This structure suits established businesses with predictable cashflow and a preference for ownership.

A finance lease means the lender owns the equipment and you lease it for an agreed term. Lease payments are typically tax deductible as an operating expense, and the equipment sits off your balance sheet. At the end of the lease, you can return the equipment, upgrade to newer models, or purchase it for a residual value. This works well for businesses that want to stay current with technology or avoid holding depreciated assets.

Hire purchase is similar to a chattel mortgage but ownership transfers only after the final payment. Some lenders prefer this structure for higher-risk applicants or older equipment. The tax treatment is similar to a chattel mortgage, with interest deductible and depreciation claimable, but the equipment remains the lender's property until the contract ends.

How lenders assess restaurant equipment finance applications

Lenders look at your business trading history, cash flow, and the equipment's resale value. If you've been operating for two years or more, you'll need recent profit and loss statements, tax returns, and bank statements showing consistent deposits. Startups without trading history rely more heavily on personal financial position, director guarantees, and the strength of the business plan.

The equipment itself acts as security, so lenders favour well-known brands with strong secondhand markets. A Rational combi oven or a Skope fridge will get approved faster than a lesser-known import, even if the import is cheaper. New equipment is generally easier to finance than used, though quality used equipment from commercial kitchen suppliers can still qualify if it has verifiable service history and remaining useful life.

Deposits typically range from 10% to 30% depending on the lender, your business profile, and the equipment age. Some equipment finance lenders will fund 100% of the invoice for established businesses with strong financials, but that's less common in hospitality given the sector's higher failure rate. If you're also funding fitout works, signage, or other startup costs, some lenders will roll those into a single facility rather than separating equipment from other capital expenses.

Tax deductions and depreciation on commercial kitchen equipment

Under a chattel mortgage or hire purchase, you claim depreciation on the equipment and deduct the interest component of each repayment. The ATO's effective life guidelines classify most commercial cooking equipment at 10 to 15 years, refrigeration at 10 years, and IT equipment at 4 years. If the equipment cost is under the instant asset write-off threshold, you may be able to deduct the full amount in the year of purchase, depending on your business turnover and the rules in place when you buy.

Under a finance lease, the lease payments are generally deductible as an operating expense, which can simplify your accounting. You don't claim depreciation because you don't own the asset. The total tax benefit depends on your marginal rate, the lease term, and the residual value at the end of the lease.

In a scenario where a restaurant in Hawthorn finances $80,000 of kitchen equipment over five years with a chattel mortgage, the annual depreciation might be $8,000 if the equipment is classified with a 10-year effective life. The interest deduction in year one could be another $4,000, depending on the rate. That's $12,000 in deductions, worth $3,600 in tax savings if the business has a 30% tax rate. Those savings help offset the repayments, which in this case would be around $1,600 per month.

Structuring the loan term and repayments around your cashflow

Loan terms for restaurant equipment typically run from two to seven years. Shorter terms mean higher monthly repayments but less interest paid overall. Longer terms reduce the monthly cost but increase the total interest and risk that the equipment outlives the loan. Match the term to the equipment's working life and your revenue cycle. A high-volume pizza oven working 12 hours a day might need replacing in six years, so a five-year term aligns with its useful life. A blast chiller used twice a week could last 15 years, so a seven-year term is reasonable.

Fixed monthly repayments make budgeting predictable, which matters when you're managing thin margins and seasonal trade. Most commercial equipment finance uses fixed rates, particularly for loan amounts under $150,000. Some lenders offer seasonal repayment structures where payments are lower in the first year and increase as revenue builds, but those are less common in hospitality than in agriculture or tourism.

If you're financing multiple pieces of equipment at different times, you can either add to an existing facility or take out a separate loan for each purchase. Adding to an existing facility keeps your paperwork consolidated but may extend the term or alter your repayment amount. Separate loans give you more control over individual asset terms but create more administrative work. Talk through your expansion plans with your lender before committing to a structure.

Where equipment finance fits into your overall business funding

Equipment finance usually works alongside other funding, not as a replacement. You might use a business loan or line of credit for stock and working capital, asset finance for the kitchen equipment, and a commercial lease for the premises. Lenders generally prefer this separation because each facility is secured against a specific asset or cashflow source, which reduces their risk and can improve your approval odds.

If you're buying an existing restaurant, the equipment might be part of the business sale price. Some lenders will finance the equipment component separately from the goodwill, especially if the equipment is relatively new and separately valued in the contract. This can make the overall purchase more affordable because equipment finance rates are often lower than unsecured business loan rates.

For businesses operating across multiple sites, equipment finance can be structured as a single facility with equipment at different locations listed as security. This centralises your repayments and reporting but requires strong financials and a clear asset register. If one site underperforms, the lender can still assess your overall capacity to service the debt.

Upgrading or replacing equipment before the loan is paid off

Restaurants evolve, and the equipment you installed at opening might not suit your menu three years later. If you need to upgrade before the loan term ends, you have a few options. You can refinance the remaining balance into a new loan that includes the upgraded equipment. You can sell the old equipment, pay out the loan, and finance the replacement separately. Or you can keep the existing loan running and take out a second facility for the new equipment.

Refinancing works when the equipment you're replacing still has resale value and you can use that to reduce the new loan amount. Selling privately can get you a higher price than trading in, but it takes longer and you need to settle the existing loan before the lender releases their security interest. A second facility keeps things separate but increases your overall debt servicing and creates more paperwork.

Finance leases make upgrades simpler because you can return the equipment at the end of the lease term and start a new lease on the latest models. That's useful in kitchens where energy efficiency or food safety standards change, like refrigeration or ventilation systems. You're not locked into equipment that becomes obsolete or expensive to run.

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