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Can I Borrow Your Mower?

Updated: Nov 9, 2022

We’ve all heard the stories about the guy who borrows their neighbour's or friend's mower, hedger, whipper snipper … and “forgets” to return it. It results in angry exchanges and the dissolution of the friendship.

It can make sense to borrow things but at what cost?

The same can be said about small businesses. They can be faced with the decision to buy business equipment outright or lease it. The answer lies in – at what cost?

Benefits and Considerations

It’s important to understand your role in advising your self-employed clients in securing new assets or equipment. You can assist them with the choice of buying or leasing. And where leasing is the way to go, you can help your clients select the right type of finance product. This will not only save them time and money, but it will also help them reduce their risk of owning obsolete, older equipment, and understand the various tax outcomes depending on the product type chosen.

If your clients are in the market to purchase commercial vehicles, wheel-based assets, earthmoving and construction equipment, or general engineering and manufacturing equipment - the large upfront cost can have a detrimental impact on their cash flow.

Asset and equipment finance can be the solution for their businesses. Finance is available for a wider range of quality new and used assets, including equipment that they already own. Your self-employed clients can preserve their cash flow and working capital by financing the purchase of new or second-hand equipment or by accessing the equity in the equipment that they already own.

Asset and equipment finance is a type of business loan that can help your self-employed clients’ businesses grow. It allows them to purchase the equipment that is needed to conduct business.

These loans are tailored towards self-employed clients, small business owners and contractors who want the resources to help their business succeed, but who may not necessarily have the capital available.

Benefits of equipment finance

For a business, being able to spread the cost of a high-value item over time, instead of paying a large lump sum payment in one go, is likely to be the main benefit. However, there are other benefits:


Even if your self-employed clients’ businesses are profitable, compromising capital to buy new equipment can be risky for their working capital cycle. Equipment finance allows you offer your SMEs to spread the cost of the equipment over its useful life without the large up-front cost.

This helps preserve cash flow for other areas of the business, including projects and strategies for growth.

New v Used equipment

Often, traditional lenders either steer clear of used equipment or impose strict eligibility and credit requirements. However, second-hand equipment still has significant commercial value and usefulness. Indeed, in times when supply chains are disrupted, the only option for growth may be to acquire used equipment.

A financier that recognises the value of used equipment can support your SMEs’ plans and growth with flexible equipment finance solutions – whether it be for the acquisition of used equipment, or the access of capital tied up in existing owned assets.

Potential tax benefits

Several tax benefits can come from business asset and equipment finance. Your clients should speak to their accountant or tax professional to find out exactly what these are, and which ones are available to them.

Typically, your clients may be able to claim back the input tax related to the GST on the purchase price of new equipment, depreciate the value of the equipment over its life or take advantage of the current Australian Government stimulus measures, including the instant write-off of the full value of the asset. In certain circumstances, they may also be able to claim the credit charges of any equipment finance loan as an operating expense.

Considerations of equipment finance

Asset finance isn’t always the best solution for a business, so take time to consider if it suits your client’s financial situation before they sign an agreement:

No Alteration in the Asset

Since the lessee is not the owner of the asset, they cannot make any changes to the asset. With the purchase of an asset, the buyer can make alterations or modify the asset according to their requirements.

Higher Cost

The lessee pays periodic rentals to the lessor, and these rentals include a margin for the lessor. It is because there is a risk of obsolescence of the leased asset. Thus, equipment financing is often considered high-cost financing.

Restricted Usage of Asset

In an equipment lease agreement, there is a risk that the lessor may restrict the utilization of the leased asset for the lessee (the annual mileage on a vehicle for example). In such a case, the lessee may be deprived of full utilization of equipment/assets.


Usually, the lessee is required to pay a sum to the lessor if they terminate the Equipment Lease contract before the expiry of the lease term. This payment of the penalty is a disadvantage for the lessee.

Asset & Equipment Financing Benefits and Considerations is part of the Asset and Equipment Lending module in the Business Finance Certification, a professional development program that helps position you as an SME Finance specialist, so you can help your clients succeed and prosper.

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