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My starting point would usually be no deposit
For an established business, if a lender offers 100% equipment funding on acceptable terms, my general preference would be to keep cash in the business. If the machine earns enough to comfortably service its debt, I would usually let the finance fund it.
A deposit is not automatically required. Established operators may qualify for funding of the full tax invoice, including GST, depending on the borrower, asset and lender. Approval gives you a choice; it does not make 100% funding right for every purchase.
On a $500,000 machine, paying a $100,000 deposit reduces debt and repayments. It also converts $100,000 of accessible cash into asset equity. You cannot simply ask for it back when the fleet stops working.
Think about what happens when the plan changes
Rain, a delayed project, a major repair or a customer paying late can tighten cash flow in a strong business. Equipment may still be valuable while wages, fuel and finance commitments keep falling due.
That is why I compare the repayment saving with the buffer the deposit removes. If the business has genuine surplus cash or needs lower leverage, contributing money may make sense. If liquidity is already tight, stripping it out to meet an arbitrary percentage can create another problem.
The lender may require a deposit because of the asset or credit position. Then we work through the amount and the cash left after settlement, rather than treating the condition as separate from the operating budget.
If I put cash in, I would work backwards
Consider realistic resale value, depreciation, expected payout and how long the asset will stay in the fleet. If you had to sell in six or twelve months, would the proceeds clear the loan, or would you need more cash?
Also discuss the GST position with your accountant. An eligible input tax credit may affect the net cash cost, but it is not necessarily an immediate refund. BAS timing and other liabilities can change the cash benefit available.
My aim would be sensible equity without starving the business of working capital. There is no magic deposit percentage: compare the actual funding terms, monthly affordability and the cash you want available when something unexpected happens. Starting a new business? Read the startup deposit article
Want to know more or talk through your options? Reach out to James and Dan anytime.