Six trucks owned outright, and no cash to run them

A freight operator running interstate linehaul out of Melbourne’s west. Six prime movers and a set of trailers, all owned outright after a decade of paying facilities off and not replacing them. On paper the balance sheet looked healthy. In practice the business was tight every single week.

The reason was timing, not profitability. Fuel and wages fall due weekly. The customers were large, reliable, and on sixty-day terms. A business can be profitable and still spend every Thursday deciding which supplier waits, and that is a corrosive way to run anything.

What the business had been doing instead

• A business credit card carrying a revolving balance that never quite cleared.
• A merchant-style advance taken during one bad month, repaid by daily debits against the account.
• Two overdue supplier accounts being rotated, which was quietly damaging the terms on both.
• A standing conversation about mortgaging the family home, which nobody at the table actually wanted to have.

That last point is the one worth noticing. When a business owner runs short of working capital, the first structure suggested to them is very often the house, because it is the security everybody understands. It is not always the right answer and it should not be the first answer.

There was roughly $600,000 of unencumbered plant sitting in the yard. Assets a business owns outright can usually be refinanced, releasing their value as cash while the business keeps using them. The equipment secures the facility. The house does not.

What a lender checks on owned plant

• That the assets are genuinely unencumbered, verified on the PPSR rather than taken on trust.
• Serial and VIN identification for each unit, matched against registration and purchase records.
• Age and hours. Most lenders work to a maximum age at the end of the term rather than at the start, which is what determines how long a facility can run.
• Condition and value, usually by desktop or physical valuation depending on the asset and the amount.
• Whether the business services the debt, which is assessed on trading performance, not on the value of the steel.

The structure was a chattel mortgage across the fleet, the common business arrangement in which the business takes ownership and the lender holds security over the asset. A term was set against the useful life of the units rather than the maximum the lender would allow, because a facility that outlives the truck is a problem waiting three years to arrive.

Two things were done alongside it. The expensive short-term facilities were cleared with the released funds, and an invoice finance line was put in place against the sixty-day debtors so the timing gap had its own answer.

In this scenario the business releases working capital against plant it already owns, clears the high-cost short-term facilities, and stops the weekly triage. The family home is not involved in any part of it.

The trade-off is honest and should be said out loud. Refinancing owned plant reintroduces a repayment where there was none, and it converts an asset the business held clear into a financed one. It is the right move when the released capital does more for the business than the unencumbered title was doing. It is the wrong move when it funds an ongoing loss, because then the business has the same problem and a new commitment.

Balloon payments deserve the same treatment. They reduce the monthly figure and they do not reduce the debt. If a balloon is used, the plan for it belongs in the conversation at the start, not in the last quarter of the term.