Quick answer
Bakeries most often borrow for ovens, mixers, proofers and refrigeration, for a shopfront fit-out, for buying an established bakery, and for working capital when wholesale customers pay on account. Equipment finance is usually the best fit for bakery machinery because the gear secures the loan. Unsecured loans, lines of credit and invoice finance cover cash flow, while banks remain a strong, low-cost option for established bakeries with property.
Key points
- Commercial ovens, mixers and sheeters hold resale value, which makes equipment finance the natural starting point
- Adding wholesale accounts swaps daily cash for 14 to 30 day invoices, so a growing bakery can run short even as sales climb
- The ATO's 2023–24 benchmarks put bakery cost of sales at roughly a third of turnover, and lenders notice figures far outside that
- Easter and Christmas peaks need flour, butter and casual staff paid for weeks before the takings arrive
Roughly a third of every dollar through a bakery’s till goes on ingredients and packaging. The ATO’s small business benchmarks for bakeries and hot bread shops, based on 2023–24 returns, put cost of sales to turnover between about 29% and 39% depending on the size of the business. That leaves room to pay staff, rent and energy, but not much room for surprises.
Lenders know those numbers, and they’re generally comfortable with bakeries. People buy bread every week of the year, takings are steady and the equipment holds its value. The trouble usually starts somewhere less obvious: a bakery that grows into wholesale, or an oven that fails a fortnight before Easter.
What do bakeries usually borrow for?
Most bakery borrowing falls into one of five buckets.
- Production equipment. Deck and rack ovens, spiral and planetary mixers, dough dividers, sheeters, proofers, retarders and blast chillers.
- Refrigeration and display. Cool rooms, under-bench fridges and the glass cabinets customers see first.
- Fit-outs and relocations. Moving to a larger shop, adding seating or building a separate production kitchen. Our page on shop fit-outs explains the funding options.
- Buying an established bakery. Often the quickest way to secure a good location and a loyal customer base. See funding for buying a business.
- Working capital. Flour and butter bought in bulk, casual staff for peak periods, and the gap created by wholesale customers who pay on account.
Why is equipment finance usually the first stop?
Commercial bakery equipment is heavy, durable and in steady demand, which makes it good security. A lender funding a new deck oven can take a security interest over the oven itself and register it on the PPSR, so it doesn’t need much else behind the loan.
That brings practical advantages:
- Approval tends to be quicker and lighter on paperwork than a general business loan.
- Your cash and any property stay free for other needs.
- Loan terms can line up with how many years the oven or mixer should keep going.
Used equipment can usually be financed too, especially recognised brands bought through a dealer. Very old machines or private sales may need an inspection or a shorter term. Our equipment finance calculator shows what the repayments on an oven or mixer might look like before you talk to a lender, and the leasing vs buying equipment comparison helps if you’re unsure whether to own the gear outright.
Equipment just died? Let us know what you need replaced. It’s a short form, roughly a minute, and sending it doesn’t trigger any credit enquiry.
How does wholesale change a bakery’s cash flow?
This is the insight most bakery owners learn the hard way. A retail bakery is paid on the spot, every day. Add a wholesale round (supplying sourdough to a dozen cafés, pies to a service station chain, or rolls to a sandwich bar) and the money stops arriving with the sale. Customers expect invoices on 7, 14 or 30 day terms, and some pay later than that.
Meanwhile the bakery has already paid for the flour, the electricity and the early-morning shift. So a business that’s growing quickly can find its bank balance shrinking. Accountants call this the working capital cycle: the time between paying for inputs and getting paid for the product.
Ways to manage it:
- A business line of credit covers the gap and costs little when it isn’t drawn. See business line of credit.
- Invoice finance releases the bulk of each invoice the day you raise it, which suits larger, regular wholesale books. Our invoice finance page explains how it works, and the invoice finance calculator estimates the cost.
- Tighter terms. Asking new wholesale customers for 7-day terms costs nothing and can halve the problem.
How do seasons and costs affect a bakery loan?
Lenders reviewing a bakery’s bank statements will see a familiar rhythm.
- Easter is the big one for hot cross buns, with ingredients and extra staff paid for well before the rush.
- Christmas brings fruit mince pies, cakes and party orders, followed by quieter weeks in January in many suburbs.
- School holidays can lift or drop trade depending on whether the bakery sits near offices, schools or holiday traffic.
- Input prices for flour, butter, eggs and energy move independently of shelf prices. Running ovens through the night makes electricity and gas a big line item.
A lender doesn’t expect a flat year. It wants to see that the business has handled previous peaks and troughs without missed repayments or overdrawn accounts. If the pre-Christmas build-up is your pinch point, our page on the Christmas cash flow squeeze has a step-by-step plan, and funding seasonal stock compares the options.
Is food safety part of the loan assessment?
Not directly, but it underpins everything. Bakeries are category one businesses under Food Safety Standard 3.2.2A, which requires a certified food safety supervisor, trained food handlers and records showing key food safety controls are in place. A lender won’t inspect your logs, but a council closure would stop the takings that service the loan, so keeping this tidy protects your borrowing as well as your customers.
Which finance suits which bakery job?
- New or used oven, mixer or cool room: equipment finance or a chattel mortgage.
- Shop refit or relocation: an unsecured business loan for smaller amounts, or a property-secured loan for larger ones.
- Wholesale growth: a line of credit or invoice finance.
- Buying a bakery: a business acquisition loan, often combined with property security.
- Tax bill or catch-up: see ATO tax debt business loans.
Banks are a great option for established bakeries with clean accounts and property, and often the cheapest. If yours has said no, or wants weeks you don’t have, non-bank lenders assess on recent bank statements and the equipment instead.
What paperwork helps a bakery application?
Have your recent trading account statements ready, along with your last two activity statements and your most recent annual accounts. Add equipment quotes, your lease, a list of wholesale customers with their payment terms, and an ATO portal statement. If you’re buying a bakery, include the seller’s figures and the contract of sale.
Worked example: a bakery adding a wholesale round
Hypothetical figures, for illustration only. A family bakery on the Sunshine Coast turns over about $900k a year from its shop. The owners win wholesale orders from 14 cafés worth roughly $18k a month, all on 30-day terms. To meet the volume they need a second deck oven and a larger spiral mixer costing $78k, plus more flour, staff hours and a delivery van.
They finance the oven and mixer through equipment finance over five years. The van goes on a separate commercial vehicle loan. Rather than a lump-sum loan for cash flow, they set up a $40k line of credit to cover the first two months of wholesale invoices while the cafés settle into paying on time. Once payments are flowing regularly, the line sits mostly undrawn.
Ready to fund the next batch?
A bakery’s finance needs are usually clear-cut: equipment, a refit, a seasonal peak or the cash gap that comes with wholesale growth. Matching each one to the right product keeps the cost down.
If you’d like help working out the mix, send through the details. It takes a minute or so, and doing so won’t register as an enquiry on your credit report. One team handles your enquiry from start to finish rather than spreading it across the market, and a specialist reads what you’ve written before giving you a ring. Put in the real numbers on turnover, wholesale accounts and equipment quotes, and we can steer you straight to something that works.
Frequently asked questions
Can I finance a second-hand deck oven?
Often, yes. Many equipment lenders will fund used commercial ovens, particularly well-known brands bought from a dealer. Private sales and very old machines can be harder, and the lender may want an inspection or a shorter term. Ask before you commit to the purchase.
How do lenders view bakeries?
Fairly well, compared with some hospitality businesses. Bread and baked goods sell year-round, takings are steady and much of the equipment holds value. Lenders still watch margins closely, especially when flour, butter and energy prices rise faster than shelf prices.
Can invoice finance help a wholesale bakery?
It can, once wholesale sales are large and regular enough. Invoice finance advances most of the value of unpaid invoices to cafés, delis or supermarkets, so you aren't waiting weeks to be paid. Very small invoice books may suit a line of credit better.
Do I need property to get a bakery loan?
Not always. Equipment finance is secured by the equipment, and unsecured loans are sized on turnover. Property security usually comes into play for larger amounts, such as buying an established bakery or a full fit-out.
Will a bank lend to a bakery?
Yes. An established bakery with two years of accounts, steady profit and property to offer can often get the lowest cost finance from a bank, so that offer is worth taking seriously. If the bank says no or wants more security than you have, non-bank lenders can often help.
What's the best way to fund an Easter or Christmas stock build-up?
A business line of credit usually suits a seasonal peak, because you only draw what you need for the few weeks before the rush and repay it once takings come in. A short-term loan can also work if you prefer fixed repayments.