How much deposit do I need for equipment finance as a startup?

A starting point, not a rule

Startup finance is assessed differently from lending to an established operator. A lender does not yet have years of trading history showing the new business can service the debt, so it may ask the applicant to contribute cash. Around 20% is a figure we commonly encounter as a starting point. That does not mean our first response is simply to accept it.

Why taking 20% upfront can create another problem

Imagine someone starting an earthmoving business. They have saved towards their first piece of equipment and secured work for it. Taking virtually all their available cash at settlement may reduce the lender’s initial exposure, but the new business still needs oxygen.

The asset needs collecting and perhaps floating to site. There may be transport, insurance, fuel and mobilisation expenses. Then the operator has to complete the work. They could work for a month before issuing their first invoice, which might be on 30-day or longer terms. The gap between buying equipment and receiving meaningful cash flow can be considerable.

If we strip most of the available cash out on day one to satisfy a deposit condition, we may make the business less resilient during precisely the period when working capital matters most.

Can we negotiate the deposit?

Sometimes. How the application is structured and presented matters. Rather than simply accepting a 20% upfront contribution, we may argue that retaining working capital makes for a stronger business.

Depending on the applicant and lender, we might seek something closer to 10% upfront, followed by an agreed principal repayment when an eligible GST credit has flowed through the business. This is not a guaranteed structure. The applicant, asset, lender, credit profile and strength of the whole transaction all matter.

Using GST recoupment as part of the structure

Take an illustrative $330,000 purchase, including $30,000 GST. Assume the lender agrees to a 10% upfront contribution of $33,000 and finances the remaining $297,000. At an illustrative 8% annual interest rate over 60 months, with monthly payments and no fees or balloon, a standard amortising repayment on that initial balance is about $6,022 per month. This is a mathematical example, not a quote or a promise of approval.

Normal repayments begin. If the business is eligible for the $30,000 input tax credit, receives the cash benefit through its BAS position, and the lender has agreed to the arrangement, an additional $30,000 can be paid to reduce the finance balance in an early month. We have shown month four or five only to make the sequence clear; actual BAS timing can be sooner or later, and a credit may offset other GST or tax liabilities rather than arrive as a stand-alone refund.

The lender then deals with that additional payment under the actual agreement. It may change the remaining repayment amount, the loan term or neither in the way the example suggests. The facility documents and lender determine what happens next. The purpose is to show that a lender may receive meaningful early principal reduction while the startup keeps more working capital on settlement day. Confirm GST eligibility and timing with your accountant or tax adviser before relying on this approach.

The work letter matters

A reduced-deposit startup approval is not something we assume. One of the strongest supporting documents can be a substantial work letter or contract explaining exactly how the equipment will earn money. For an earthmoving contractor, we want considerably more than a vague note saying work is available.

Useful detail can include expected or minimum hours; hourly, daily, weekly or monthly rates; duration and commencement date; site or project; who pays for fuel and whether it is separately charged; float or transport costs; insurance responsibilities; and other commercial terms showing expected utilisation and revenue.

The party providing the work matters too. A credible arrangement with a substantial counterparty may give the lender more comfort than an unsupported startup forecast. Multiple credible sources of work can strengthen the application further.

MFG can help with the work letter

We explain what information we think the lender needs and how to set out the letter. Where appropriate and with the client’s authority, we can speak directly with the party providing the work to clarify the arrangement and help obtain the details needed for the application.

The aim is not to manufacture a story. It is to document the genuine commercial arrangement so the credit assessor can see how the equipment will be used, what it is expected to earn and why the business needs enough working capital to get started.

Can a startup get finance with no deposit?

Potentially, but it is neither normal nor guaranteed. Limited-deposit and occasionally no-deposit startup funding can be possible when the overall application supports it.

We look at industry experience, personal and business credit, asset type and resale strength, purchase price, contracts or work letters, the credibility of the work provider, available cash, other assets and liabilities, and lender appetite at the time. The stronger the underlying transaction, the more room there generally is to negotiate.

Give the new business room to succeed

The goal is not simply to get the smallest deposit possible. It is to give the lender enough comfort to support a startup while leaving the new business with the working capital it needs after the equipment arrives.

Sometimes that is 20%. Sometimes there is room to negotiate 10% upfront and further principal reduction through a GST recoupment. Stronger circumstances may support something else. Understand what the lender needs, document the work properly and negotiate rather than assuming the first deposit requirement is the only option.

MFG Finance can work through this before the equipment is purchased, including the proposed work arrangements and the supporting information a lender is likely to want.