Property-Backed Factory Upgrade Plan (2026): One Facility vs Split
Property-backed factory upgrade plan for manufacturers | Switchboard Finance
🏭 factory upgrade · one vs split facilities ·
Business Owners Finance Hub · 2026
Property-backed manufacturers can access bigger limits — but approvals get messy when one facility tries to fund three different things: (1) the machine, (2) the fitout/site works, and (3) ramp-up cash while production stabilises. This guide gives you the clean “pre-approval plan” so the structure matches what lenders actually fund.
If you want the quick “are we ready to finance this?” baseline first, start here: 11 Signs Your Business Is Ready for Asset Finance in 2025. Then use the one vs split framework below.
1) Why factory upgrades go wrong (it’s the structure, not the price)
A factory upgrade has mixed parts: a hard asset (machine), soft costs (electrical, slab, extraction, commissioning), and a cashflow phase (training, waste, downtime, ramp-up). Lenders don’t value and fund all three the same way.
If you bundle everything into one “all-in” request, the consequence is predictable: valuation haircuts, lower limits, and “pending” questions while someone tries to separate what’s actually fundable. A clean split respects the difference between Plant & Equipment funding and the cashflow buffer that keeps operations stable.
2) The “one facility vs split” decision rule (simple and practical)
Here’s the clean rule: if the costs are (a) easily traceable to an asset invoice and (b) align with the asset’s useful life, a single facility can work. If not, split — because the lender will split it anyway, just slower and less predictably.
If you ignore the rule, the consequence is wasted time in credit and rework of the quote pack. Underwriting is just Approval Criteria applied to a messy story.
- Single supplier invoice: the machine + included accessories are clearly itemised
- Minimal site works: install is light and doesn’t dominate the budget
- Stable trading: cashflow doesn’t need a separate buffer to survive ramp-up
- Fitout-heavy scope: power upgrades, extraction, slab, safety, mezzanine, racking
- Multiple suppliers: machine vendor + electrician + builder + installer
- Ramp-up cash needed: downtime, training, scrap rate, delayed receivables
3) The 3-bucket plan (machine / fitout / cash buffer)
Think of the upgrade as three buckets. This makes approvals clean because each bucket matches a different lender comfort zone. It also reduces the chance you’ll be short at settlement.
If you don’t bucket the upgrade, the consequence is you over-stretch one facility and then scramble for a last-minute patch. The “cash buffer” bucket is usually where businesses use a dedicated cashflow facility like Working Capital Loans.
| Bucket | What goes in | What lenders like | Common mistake |
|---|---|---|---|
| 1) Machine | Core equipment + included options + delivery | Clear invoice, asset identifiers, useful life | Vague quote / “turnkey” bundle with no breakdown |
| 2) Fitout | Electrical, slab, extraction, safety upgrades, install works | Scope + milestones + contractor invoices | Trying to hide works inside the machine finance |
| 3) Cash buffer | Ramp-up cash, wage weeks, raw material cycles, downtime | Simple cashflow story + clean limit sizing | No buffer → business strains right after install |
4) Property-backed: what changes (and what doesn’t)
Being property-backed can lift limits and improve pricing — but it doesn’t magically make mixed scopes easier to approve. Lenders still want the machine to be traceable and the works to be properly scoped.
If you assume “equity fixes everything,” the consequence is sloppy packaging and slower outcomes. Security helps, but lenders still test Borrowing Capacity and the logic of what you’re funding.
- Equity snapshot: property address + rough value + existing loans (one paragraph)
- Upgrade budget split: machine / fitout / buffer (numbers, not vibes)
- Timeline: order date → delivery → install → commissioning
- Cashflow note: why buffer is needed (ramp-up, downtime, wage weeks)
5) The “pre-approval plan” template (copy/paste)
Use this template as your one-page brief. It stops lenders guessing and makes it easier to size facilities cleanly. Keep it short and factual.
If you skip the one-page plan, the consequence is long back-and-forth and inconsistent lender feedback. When you need speed and clean packaging, the machine bucket commonly runs through Low Doc Asset Finance (when appropriate), while the buffer is kept separate.
- Business: ABN, industry, years trading, brief “what we make” summary
- Upgrade goal: what capacity/output improves and why now
- Machine: supplier, model, invoice total, delivery date
- Fitout: scope list (electrical/slab/extraction/commissioning) + total budget
- Cash buffer: amount + why (downtime, training, delayed receivables)
- Security snapshot: property-backed note + existing commitments
Property-backed factory upgrades work best when you stop forcing one facility to do three jobs. Split the plan into: (1) machine finance, (2) fitout scope, and (3) a small cash buffer for ramp-up.
The consequence of bundling everything is predictable: valuation haircuts, lower limits, and “pending” loops while the lender re-sizes the deal. If you want speed, keep the machine bucket clean and traceable, and use a separate buffer facility when timing requires it.
FAQ
Because the machine is a clear asset, while fitout/site works are scoped services. Splitting reduces valuation disputes and makes the Approval Criteria easier to satisfy without “pending” questions.
It’s a small dedicated limit to absorb ramp-up timing (downtime, training, scrap rate, delayed receivables). Without it, your Cashflow can tighten right when you need stability.
Not automatically. Property can strengthen security, but lenders still assess Borrowing Capacity and whether the funding structure matches what’s being purchased.
Often yes (when appropriate), especially if the machine invoice is clean and your trading story is clear. That’s why the machine bucket is commonly kept under Low Doc style packaging while works and buffer are handled separately.
Provide a one-page pre-approval plan with the budget split (machine / fitout / buffer), the timeline, and the security snapshot. It helps the lender size each Facility without rework.
Disclaimer: This content is general information only and isn’t financial, legal, or tax advice.
