What lenders actually lend against

Ask a lender how much of a purchase price they will fund and the honest answer is that it depends entirely on what you are buying. Not on you, not on the business, not on the strength of the year you have just had. On the asset.

A new machine and a block of development land might be the same price, bought by the same borrower with the same financials, and attract advance rates that differ by forty points. That is not inconsistency. It is a single question applied consistently: if this has to be sold, how deep is the market and how long will it take?

The pattern, by asset class

These are ranges rather than rates, and deliberately so. Different lenders sit at different points, and where any one of them sits on a given day depends on their appetite, the sector and how the rest of the file reads.

The three things that move the number

Read down that table and the same three factors explain almost every step.

• How deep the resale market is. A five-year-old ute has thousands of buyers. A specialised production line has perhaps four in the country, and two of them are your competitors.
• How long it takes to sell. Equipment can move in weeks. Rural property can take a year, and a lender pricing the risk is pricing twelve months of carrying costs and uncertainty alongside the sale price.
• Whether the asset produces income on its own. Tenanted property does, until the tenant goes. Vacant land never does, which is why it sits at the bottom of the table despite often being the safest thing on it in a physical sense.

Notice what is not on that list: how good your business is. Trading strength decides whether you get the facility and what it costs. The asset decides how much of the price it covers. Confusing the two is the single most common reason an approval comes back smaller than expected.

Where the extras go

On new equipment you will occasionally see advance rates quoted above the purchase price, which sounds like a lender being generous and is not. It reflects that installation, freight, commissioning and accessories are part of what it costs to get the asset working, and some financiers will fund those alongside the asset itself.

What it does not mean is that the security has grown. The bolted-down cost of installing a machine is not recoverable when the machine is sold, so a facility struck above the hardware price is genuinely more exposed, and it will usually be priced or secured accordingly.

Development is a different arithmetic entirely

Construction and development lending is not measured the same way, and quoting a single loan to value ratio for it is close to meaningless. Two ratios run in parallel.

• Against gross realisation, meaning what the finished project is expected to sell for, commonly 65% to 75%.
• Against total cost, meaning land plus construction plus everything else, commonly 70% to 85%.

Both are tested, and the lower of the two governs. Funds are then drawn in stages against work certified as complete rather than advanced in a lump at settlement, which is why development facilities behave nothing like a term loan even when the headline percentage looks familiar.

What to do with this

• Work out your funding gap before you commit to a purchase. If a used machine attracts 65% and you have been planning around 85%, you need to know that before you sign, not during the assessment.
• Ask which value the percentage applies to. An 80% advance against a conservative valuation can produce less money than a 65% advance against market value. The percentage is the part everyone quotes and often the less important half of the calculation.
• Consider whether new changes the maths. The advance rate difference between new and used is frequently large enough to close most of the price gap, and the funding gap you have to find in cash is what actually constrains the decision.
• Where the asset will not carry it, look at what else in the business can. That decision has consequences worth understanding before you make it, because tying a second asset to a facility restricts what you can do with it later.
• Expect a personal guarantee on most small business facilities regardless of the asset. The advance rate governs how much is lent. It does not govern who is on the hook.

None of this is negotiable in the way a rate is. Advance rates come from credit policy and reflect a genuine view of recoverability, so the productive conversation is not about arguing the percentage up. It is about understanding which number applies to what you are buying, early enough to plan around it.