Refinancing equipment finance looks simple on paper. Find a lower rate, swap lenders, save money. In practice the saving can vanish into exit fees, a longer term or a balloon that quietly grew. This is the order we suggest working through before you ask anyone for a quote.
Start with what you owe today
Your statement balance is not your payout figure. Ask your current lender for a written payout to a specific date, and ask what early termination costs apply. Fixed-rate agreements may carry break costs that move with market rates, so the number can change between quote and settlement.
- Payout figure and the date it is valid to
- Early termination or break fees
- Any balloon or residual still owing at the end of term
- Whether other assets or personal guarantees are tied to the agreement
Be clear about why you are refinancing
The reason decides what a good outcome looks like. A lower rate and a lower repayment are not the same thing, and the cheapest monthly figure is often the one with the longest term.
| Reason | What to look for | Watch for |
|---|---|---|
| Lower repayments | Better rate or restructured term | A longer term can increase total interest paid |
| Release cash | Equity built up in the asset | Borrowing more against an ageing machine |
| Combine agreements | One lender, one repayment date | Short-life assets rolled into a long term |
| Fix a bad structure | Balloon or seasonal repayments that suit your cash flow | Fees that cancel out the benefit |
Compare total cost, not the repayment
Line up each option on the same basis: rate type, term, fees, balloon and total payable over the life of the agreement. A slightly higher rate with no establishment fee can beat a lower rate with a heavy upfront cost, particularly on a shorter remaining term.
If you are comparing a refinance with simply paying the agreement down, work out how many months of savings it takes to recover the switching costs. If the answer is longer than the time left on the agreement, the switch probably does not make sense.
Expect the asset to be looked at again
A new lender will usually re-assess the equipment. Age, hours or kilometres, condition and make all influence how much they will lend against it and for how long. Older machines may attract shorter terms, which can push repayments up even when the rate is lower.
Check also whether the new lender wants different security. Some refinances release a director guarantee. Others add one. Read that part of the offer closely.
Get your paperwork together early
Most delays come from documents, not credit decisions. Have these ready before you apply:
- Current finance agreements and recent statements
- Latest financials or tax returns, and recent BAS
- Asset details such as serial or VIN numbers and a recent service history
- Identification for directors and trustees
If your paperwork is thin, a low documentation loan may be worth discussing, though lenders typically price that flexibility into the rate.
Talk to your accountant about tax
How an agreement is structured can affect depreciation, deductions and GST treatment. That is accountant territory, and a change of lender or structure mid-term is worth checking before you sign. The Australian Taxation Office publishes general guidance on depreciation and small business concessions, but your own situation will decide what applies.
Where a broker fits
A broker can take the same application to several lenders, which saves you repeating the paperwork. They can also spot the traps above, such as a break cost or a security change that is easy to miss on a first read. For straightforward single-agreement refinances, going direct to your existing lender is also a reasonable first step, if only to see whether they will match an outside offer.
Whichever way you go, our equipment finance and business loan teams can talk through the numbers with you.
Comparing two offers properly
Suppose you have an agreement with 30 months left and two refinance quotes in front of you. One has a lower rate but a $1,200 establishment fee and a 48 month term. The other has a slightly higher rate, no fee and runs for the remaining 30 months. The first will almost certainly show the lower repayment, which is why it looks attractive. But once you add the fee and the extra 18 months of interest, it can cost more overall. This is for illustration only, and real quotes will differ, but the exercise is always the same: put both offers on the same time frame and compare the total you will pay.
- Total repayments over the full term
- All upfront and ongoing fees
- The balloon, if any, and when it falls due
- What you would pay if you wanted to exit early
What refinancing cannot fix
Refinancing can improve a rate or a structure. It cannot make an expensive asset cheaper to run, and it will not solve a cash flow problem that comes from slow-paying customers or thin margins. If the real issue is somewhere else in the business, a new finance agreement may only postpone it. It is worth being honest about that before you start, because it affects what you ask for. In some cases the better move is to talk to your accountant about working capital, rather than shuffling the same debt between lenders.
It is also worth remembering that a refinance resets the clock. If you are three years into a five year agreement and refinance over another five years, you may reduce the repayment while extending the period you are in debt for an asset that is already three years older.
Timing a refinance
There is rarely a perfect moment. Fees tend to be lower and savings clearer when an agreement still has a good stretch to run, and a refinance close to the end of a term often saves little. If a balloon is approaching, start the conversation six months out, so you have time to compare options and are not forced into a rushed decision.
Frequently asked questions
How soon after taking out equipment finance can I refinance?
There is usually no fixed rule, but early termination costs tend to be highest in the first part of an agreement. Many operators wait until the remaining term and fees make the saving clear.
Will refinancing affect my credit file?
A credit enquiry is generally recorded when a lender assesses your application. Applying to several lenders directly can leave multiple enquiries, while a broker may limit the number of formal applications.
Can I refinance an asset with a balloon still owing?
Often yes. The balloon is usually included in the payout, and the new lender may structure a new balloon or fold it into the repayments, subject to lender approval.
Is a lower rate always worth chasing?
Not always. Fees, term and structure can outweigh the rate difference, so it helps to compare total cost over the same period.
Next step
If you have an agreement you are thinking about moving, send us the payout figure and a few asset details and we will tell you honestly whether a switch looks worthwhile. Get in touch with TYG Finance or call 1300 894 894.
General information only. Finance is subject to lender approval, and results vary based on individual circumstances.
