A loan for factory setup is usually several facilities, not one loan. What lenders fund, what your own cash covers, and the order to set it all up.
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Loan for Factory Setup · Machinery Finance · Setup Costs
You have spent years running machines for a bigger fabricator. Now you have a lease offer on an industrial unit, a quote for your first machine and no trading history of your own. What a lender will fund, and what has to come from you, decides how the setup unfolds.
Quick Answer
A loan for factory setup is usually several facilities rather than one loan, with machinery on equipment finance and the bond, fit-out balance, first stock and early working capital mostly coming from the owner's money until the business has a trading history. Start with machinery finance for the plant, then plan the rest of the budget around what a low doc asset finance lender can see on day one.
Also called: factory setup loan, startup manufacturing loan, business loan for factory setup. Same need; it is usually several facilities, not one loan.
What does a loan for factory setup actually cover?
A loan for factory setup usually covers the machinery and plant, and sometimes part of the fit-out, because those are the parts of a setup a lender can see, value and take security over. There is rarely a single product called a factory setup loan. In practice it is several facilities, not one loan: machinery on equipment finance, setup costs from owner cash, and a working capital facility added once the business has figures to show.
That split matters more for a new manufacturer than for an established one. An existing business can borrow against its own financials, its premises or its debtor book. A new operation usually has none of those yet, so the lender leans on the asset itself, the owner's contribution and the owner's personal position. How each facility fits a manufacturer once it is trading is compared in manufacturing business loan types compared, and the manufacturing hub collects the rest. This insight covers the stage before that, when the unit is empty and the first machine is still a quote.
If the operation already trades and the question is only the next machine, manufacturing equipment finance in Melbourne walks through how lenders read established plant.
What does it cost to set up a factory in Australia?
The cost to set up a factory in Australia depends on the size of the unit, the kind of manufacturing, the power the machines draw and how much fit-out the site needs, so there is no reliable national figure. What is reliable is the shape of the budget. business.gov.au separates start-up costs, which are paid before the business earns income, from running costs, which are the day-to-day costs once it trades. Its guide to calculating start-up costs also suggests making sure you can cover six months or more of running costs. For a factory, that second number is the one owners most often underestimate.
| Cost | What it covers | Usually financed? | How |
|---|---|---|---|
| Lease bond and legal | Security bond or bank guarantee, lease review, entity setup | Usually not | Owner cash |
| Zoning and approvals | Change of use, planning and building approvals, environmental or trade waste permits where they apply | Usually not | Owner cash |
| Power upgrade | Three-phase supply, switchboard and electrical work for the machines | Sometimes, varies by lender | Part of a fit-out facility, otherwise owner cash |
| Fit-out | Mezzanines, extraction, compressed air lines, racking, office and amenities | Partly, varies by lender | Removable items on finance, typically with a larger owner contribution |
| Machinery and plant | Production machines, tooling, forklifts, compressors | Usually yes | Chattel mortgage, finance lease or hire purchase |
| Installation and commissioning | Rigging, footings, setup and test runs | Sometimes, varies by lender | Added to the machine invoice where the supplier bills it |
| First stock | Raw materials and consumables for the first orders | Usually not at setup | Owner cash, then trade or working capital facilities once trading |
| Working capital | Wages, rent, power and insurance before customers pay | Usually not at setup | Owner cash, sized from a cash flow forecast |
Most of the money that goes out before the first invoice sits in rows a lender usually will not fund. That is why the budget question and the finance question need answering together, before the lease is signed rather than after.
Which parts of a factory setup will a lender finance?
Lenders usually finance the machinery and plant, sometimes part of the fit-out, and rarely the bond, approvals, stock or wages. The reason is security. A machine has a resale market and a serial number the lender can register; a mezzanine bolted into someone else's building, a council approval or a month of wages does not. Where this commonly lands is a chattel mortgage or lease on each machine, with the rest of the setup funded by the owner.
A machinist with years on CNC machines for a larger fabricator leases a small industrial unit and orders one machine, with a signed order from a former customer in hand. A lender is typically comfortable financing the machine on a chattel mortgage, with a deposit from the owner and a director's guarantee, because the machine has a resale market and the owner's experience and the order speak for the repayments.
The bond, the change of use approval, the three-phase upgrade, the first steel and the first months of wages come from the owner's savings. Once the unit has a few months of statements, a working capital facility can be added. This scenario is illustrative only; actual outcomes depend on the lender, the machine and the owner's position.
Fit-out is the grey area. Some lenders fund part of it, usually where the items can be removed and resold, and usually against a larger owner contribution. A business loan secured by property can cover the parts equipment finance cannot reach, but that usually means the owner's home or other real estate stands behind the factory.
For the machines themselves, machinery finance is the cleanest fit, because the asset secures its own loan and the repayments can be matched to the life of the machine. If you want to see what a lender could fund on day one, check eligibility before you sign the lease.
Can a new manufacturing business get finance with no trading history?
A new manufacturing business can get finance with no trading history, but usually only for assets, and usually with something else standing behind the deal. On a new operation, the lender starts with the owner: their industry experience, their credit file, their own deposit and whether the work is already there.
- A deposit. Typically larger than an established business would put in, varies by lender.
- A director's guarantee. Almost always required when the company has no history. The director's guarantee guide explains what you are signing, and a guarantor outside the business is sometimes asked for too.
- Property security. Where it is available, it can change what a lender will fund and on what terms.
- Signed orders or contracts. Signed orders before the first machine are the strongest evidence a new factory can meet its repayments.
- Industry experience. Years running the same machines for an employer count for more than a new ABN suggests.
Trading history still sets the ceiling. What a business can borrow as its trading builds is covered in the new ABN borrowing guide; the short version is that asset finance opens earliest and unsecured working capital opens last. Government-backed export finance is not a shortcut at this stage either: at the time of writing, Export Finance Australia states its finance for manufacturers is not available to startups or sole traders.
How do you pay for machinery before it is delivered and installed?
You usually pay a machinery supplier's deposit, and sometimes progress payments, from your own money, because most lenders fund at delivery or commissioning, once the asset exists and can be secured. Deposits go out before delivery while most funding arrives at commissioning, and that gap, which varies by lender, is where new manufacturers most often run short.
Some lenders will fund progress payments on new machinery, typically for established borrowers and with conditions on who holds title until the machine arrives. For a new business, assume the supplier deposit comes from your own cash unless a lender confirms otherwise in writing. Ask the supplier for a payment schedule that lines up with installation dates, not just shipping dates, and check that the final invoice matches the asset description the lender will register.
Imported machines add currency, freight and customs to the timing. The checks to run before paying an overseas deposit are in the importing business equipment guide, and the gap between what a machine costs landed and what a lender will value it at is covered in landed cost versus valuation.
In what order should you set up and fund a factory?
Set up a factory in the order the money goes out: site, approvals, power, fit-out, machinery, commissioning, then stock and orders, with the finance step lined up against each one. Setups that run late usually share one mistake: the lease was signed before anyone checked the zoning or the power supply.
- Site and lease. Check zoning, power capacity and floor loading before you sign. Fund the bond and legal costs from owner cash, and aim for a lease term that runs at least as long as the finance you plan to take.
- Zoning and approvals. Lodge change of use, building or environmental approvals where the site needs them. This stage is owner cash; lenders rarely fund it.
- Power upgrade and services. Get electrical, compressed air and extraction quotes early, because supply upgrades can take time. Sometimes part of a fit-out facility, varies by lender.
- Fit-out. Ask the landlord what they will contribute before you commit. Put removable items on finance where a lender will accept them and fund the rest from cash.
- Machinery order and deposits. Get the finance approval in principle before paying the supplier deposit, so the lender's conditions are known. The deposit itself usually comes from owner cash.
- Installation and commissioning. This is usually when the lender settles the balance with the supplier. Have the tax invoice, serial numbers and delivery sign-off ready.
- First stock and first orders. Hold six months or more of running costs, as business.gov.au suggests, and add trade or working capital facilities once the business has figures to show. A cash flow forecast sets the amount.
The documents a lender wants before step five are set out in the factory plant finance submission bundle. If you are weighing government programs alongside private finance, the guide to when your bank no longer lends to your industry covers the alternatives; check eligibility with each program directly. The manufacturing loan pack lists what to gather for each facility.
A loan for factory setup is several facilities, not one loan. Machinery and plant usually go on equipment finance, part of the fit-out sometimes does, and the bond, approvals, first stock and early wages come from your own money until the business has a trading history. Sequence the setup so the lender's conditions are known before you sign the lease or pay a supplier deposit.
Key takeaway: Budget the cash side of the setup first, including six months or more of running costs, then finance the machines against it.Frequently Asked Questions
The cost to set up a small factory in Australia varies widely with the size of the unit, the machines, the power supply and the fit-out, so any single figure is indicative at best. The more useful split is between start-up costs paid before you trade and the running costs you need to hold once you open. Machinery is usually the largest line a lender will fund, and manufacturing equipment finance shows how lenders read that plant.
Funding for a startup manufacturing business usually comes from the owner's own money, equipment finance on the machinery and, where the owner has property, a secured business loan. Government programs exist for manufacturers, but many require trading history or specific project criteria, so check eligibility with each program before planning around it. The guide to when a bank stops lending to your industry covers the non-bank options alongside them.
A loan for factory setup with no trading history is possible for the machinery, typically with a deposit, a director's guarantee and evidence of industry experience or signed orders. Unsecured working capital is much harder to get until the business has figures to show. How borrowing opens up as trading history builds is set out in the new ABN borrowing guide.
Lenders finance machinery deposits and progress payments only in some cases, typically for established borrowers and with conditions on title before delivery, and it varies by lender. Most lenders fund at delivery or commissioning, once the machine can be secured under a chattel mortgage or lease. A new business should plan for the supplier deposit to come from its own cash unless a lender confirms otherwise in writing.
How long it takes to fit out a factory before you can start trading depends on approvals, power upgrades, machinery lead times and installation, so the timeline varies widely from site to site. Approvals and power supply are the steps that most often run longer than planned. Build the delay into a cash flow forecast, because rent and loan repayments can start before the first invoice goes out.
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