Your finance broker Corey Marino Founder & Finance Broker, FBAA member M-354085 · Diploma-qualified finance broker
The short answer
A larger equipment deposit reduces borrowing, but also uses cash the business may need for wages, materials and running costs. Compare the repayment saving with the cash left after settlement. X Lend can model different contributions around your operating needs.
A cash contribution can reduce the amount financed, but using every available dollar as a deposit can leave the business unable to transport, install, insure or operate the equipment. The right contribution is the amount that improves the transaction without creating a new working-capital gap.
Calculate the complete project cost
Start with the equipment invoice, then add the costs required before it earns revenue:
- buyer premiums or supplier deposits;
- freight and permits;
- installation and commissioning;
- attachments, tooling or software;
- insurance and registration;
- training and compliance work;
- immediate repairs or servicing; and
- wages, fuel, stock or materials for the first operating cycle.
Label which costs are included in the asset-finance request and which must be paid from business cash. A lender may not finance every project component simply because it appears on one supplier invoice.
Protect the operating buffer
After the proposed contribution, project the bank balance through delivery and the first few repayment dates. The business should still be able to meet wages, suppliers, tax and existing finance. The Australian Government's cash-flow guidance recommends forecasting future receipts and costs to identify shortages before they occur.
When a contribution can help
A contribution may reduce the lender's exposure, cover non-financeable costs, address the relationship between purchase price and assessed value, or support an older or specialised asset. It can also reduce repayments and total interest because less principal is borrowed.
The reason for the contribution matters. Ask whether it is a lender condition, a way to improve the economics or simply an assumption in the quote.
Compare two deposits, then test the balloon separately
First compare a higher and lower cash contribution on the same rate, term and balloon. Record:
| Measure | Higher cash contribution | Lower cash contribution |
|---|---|---|
| Cash retained after settlement | ||
| Amount financed | ||
| Regular repayment | ||
| Balloon or residual | ||
| Total scheduled repayments | ||
| Lowest forecast cash balance |
This stops the decision being reduced to “lowest repayment”. A business may rationally pay a little more over the term to preserve enough cash for a contracted job, but that trade-off should be deliberate and affordable.
Cash left after the project starts
Illustration only: an $80,000 machine, $35,000 starting cash, $5,000 installation paid from cash and $10,000 needed for the first operating cycle. Assume no other costs, trade-in or finance fees, and no balloon in either option.
| Measure | $20,000 deposit | $10,000 deposit |
|---|---|---|
| Machine finance requested | $60,000 | $70,000 |
| Cash after deposit and installation | $10,000 | $20,000 |
| Cash after the first operating cycle | $0 | $10,000 |
The larger deposit reduces debt but uses the operating buffer in this example. Compare actual repayments and fees before choosing. Then test any balloon as a separate change: it lowers regular repayments by leaving principal owing at the end, adds its own cost effect and does not create extra cash for the deposit.
Trade-ins and existing payouts
For replacement equipment, subtract the current finance payout from the trade-in or sale value to calculate net equity. Keep the payout letter, asset identifiers and trade-in offer together. If the payout exceeds the trade-in value, show the shortfall separately rather than burying it in the new amount.
Questions for the broker and accountant
Ask the broker which costs the proposed lender can finance, whether a deposit is compulsory, how a balloon affects the term and what settlement evidence remains outstanding. Ask the accountant about GST, depreciation and tax treatment for the business; those outcomes depend on the entity and transaction and are not determined by the finance quote alone.
How X Lend Finance structures the request
We reconcile the purchase, contribution, trade-in, payout and project costs before comparing suitable options. The requested amount should match the supplier and settlement evidence, while the cash-flow forecast shows that the business can operate after settlement. The lender makes the final decision on contribution, security and acceptable costs.