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The equipment price and the loan amount can be different. The gap deserves an explanation.
Separate the fee from the person charging it
A lender may charge an establishment, application or documentation fee. A broker or dealer may charge an origination fee. There may also be PPSR registration, inspection or valuation costs and ongoing account fees. These are not interchangeable. Ask who receives each amount and whether it is compulsory for that offer.
MFG does not add a separate broker origination fee to its equipment finance transactions. That does not mean a lender will charge no establishment fee, or that every transaction has the same other costs. Fees and disclosures should be checked on the actual proposal.
Check what has been financed
If an asset costs $150,000, a quote might show $151,500 or $152,000 financed after applicable fees. That changes the debt and interest paid over the term. There may be a reason to finance a fee rather than pay it upfront, but it should be a deliberate cash-flow choice.
PPSR registration is a real, usually modest government charge, while a private sale, older machine or specialist asset can call for a more substantial inspection or valuation. Ask whether those costs are included, paid separately, or only arise if a condition is triggered.
A better way to read the quote
Start at the asset price. Add each disclosed fee and identify the amount financed. Then compare the repayment amount, number and timing of payments, any balloon, total repayments and expected payout conditions. Finally, compare offers on the same basis.
A rate printed in bold tells you very little about a $2,000 difference in financed fees or a monthly account charge. If a line is unclear, ask for a written breakdown before signing.
Ask for the amount that reaches the seller
One of the first figures I check is the tax invoice price. Then I compare it with the amount the lender is actually advancing and the amount the borrower is agreeing to repay. A lender establishment fee of a few hundred dollars, a PPSR charge, a valuation or inspection, and any dealer or broker charge should each have its own line. A monthly account fee deserves its own line too. Some costs are paid separately; others are added to the facility and accrue interest over the term.
For example, if the seller is receiving $150,000 but the finance contract starts at $152,000, the extra $2,000 is not part of the equipment price. Ask what it comprises, who receives it and whether it can or should be paid upfront. Preserving cash can justify financing a legitimate fee, but I would want the owner to see that choice and the interest it creates, not discover it later in the schedule.
The rate needs a denominator
When comparing two proposals, I would show the client the actual cash being applied to the asset, all fees, the timing and number of repayments, any balloon and the total to be paid. The same printed rate can produce a different effective cost if one quote adds fees to the principal or takes a repayment at settlement while another begins a month later. A quoted flat rate and a reducing-balance rate are also different measures; the label alone is not a fair comparison.
If the proposal is unclear, ask the broker for a written schedule and for the settlement statement. Which charges are lender costs, which are third-party costs and which are remuneration? Are any contingent on an inspection or early payout? A fair fee can still be worth paying, especially on a difficult transaction. My objection is to a fee that the business cannot identify or evaluate before committing.
Every business, asset and lender is different. Talk through your circumstances with your advisers before making a finance decision.
