Quick answer
Equipment finance funds machinery, vehicles, technology and tools, with the asset itself usually securing the loan. The main structures are the chattel mortgage, which puts title in your name at settlement, and finance or operating leases, which leave title with the financier while you use the item. Because the asset is the security, equipment finance is often easier to obtain and cheaper than unsecured lending, with terms matched to the asset's working life.
Key points
- The equipment usually secures the finance, reducing the need for other security.
- Structure choice affects ownership, GST and tax treatment.
- Balloon payments lower repayments but leave a lump sum at the end.
- Match the term to how long the asset will earn its keep.
At a glance
- Common structures
- Chattel mortgage, finance lease, operating lease, hire purchase
- Security
- The financed asset, registered on the PPSR
- Typical assets
- Vehicles, trucks, machinery, medical and IT equipment, fit-outs
- Options
- New or used assets, with or without a balloon
Our review: equipment finance at a glance
What works well
- Preserves cash for working capital
- Asset acts as security, often avoiding property
- Repayments spread over the asset's useful life
- Potential tax benefits depending on the structure
What to watch
- The asset can be repossessed on default
- Balloons create a large final payment
- Older or specialised assets can be harder to finance
- Early termination can be costly
Usually suits
- Businesses buying income-producing equipment
- Owners who want to keep cash in the business
- Upgrading vehicles or machinery on a cycle
Probably look elsewhere if
- The asset will not pay for itself within the term
- The equipment is unusual and hard to resell
- You need the money for something other than the asset
Equipment finance is one of the most straightforward ways for a business to borrow, because the thing you are buying does most of the work of securing the loan. A lender that knows it can recover a truck, an excavator or a dental chair if things go wrong is usually willing to lend more readily, and for longer, than it would without security. The decisions that matter are about structure, term and whether the equipment genuinely pays its way.
The main structures
| Structure | Who owns the asset | In short |
|---|---|---|
| Chattel mortgage | You, from day one | A loan secured by the asset; popular with GST-registered businesses |
| Finance lease | The financier | You lease the asset and may buy it at the end for a residual value |
| Operating lease | The financier | You rent the asset for a period and hand it back; suits assets that date quickly |
| Hire purchase | Financier, until you make the last instalment | Ownership passes after all payments are made |
The right structure depends on whether you want to own the asset, how you account for GST and tax, and how long you will keep it. The ATO’s treatment differs between structures, so check with your accountant before choosing. Our equipment leasing review and the guide to leasing versus buying go into the detail.
How lenders assess equipment finance
The lender considers the asset (type, age, condition and resale market), the business (trading history, financials and credit) and the deal (deposit, term and any balloon). Common, easily resold assets such as utes, vans, trucks, earthmoving machinery and standard medical or IT equipment are the easiest to fund. Highly specialised or very old equipment can need a larger deposit or extra security.
The lender registers its interest on the Personal Property Securities Register. When buying used equipment privately, do your own PPSR search first to make sure the seller does not still owe finance on it.
Balloons and residuals
A balloon (for a loan) or residual (for a lease) is a lump sum due at the end of the term. It lowers the regular repayments but has to be dealt with eventually: paid in cash, refinanced or covered by trading in the asset. A large balloon on an asset that loses value quickly can leave you owing more than it is worth. Read our glossary entry on balloon payments before agreeing to one.
Test the payback before you borrow
Equipment should earn or save more than it costs. Estimate the extra revenue or saved costs per month and compare with the repayments. If a new machine lets you take on more jobs, cuts subcontractor costs or reduces downtime, the numbers often stack up. If it is a nice-to-have, finance only makes the cost easier to start paying, not easier to justify. The repayment coverage calculator helps check affordability across all your commitments.
Tax and the write-off
Small businesses may be eligible for accelerated depreciation such as the instant asset write-off, depending on current thresholds and eligibility rules, which have changed several times. Check the ATO’s current instant asset write-off guidance and speak with your accountant. Our guide on the write-off and finance explains how the two interact.
Ready to finance equipment?
If you have an asset in mind and can see how it will pay its way, equipment finance is often the most cost-effective way to buy it without draining cash. To explore options, make one enquiry. There is no credit check when you first enquire, a real person reviews it and your details are not shared with a crowd of lenders. Tell us what the equipment is, whether it is new or used, and the approximate price. You can also ask about structure if you are unsure between a loan and a lease.
Frequently asked questions
Chattel mortgage or lease: how do they differ?
A chattel mortgage makes your business the owner straight away, with the financier registered as secured party. A lease keeps ownership with the financier; you pay rentals and choose what happens when the term ends. Tax and GST treatment differ, so check with your accountant.
Can I finance used equipment?
Often yes, although lenders consider the asset's age, condition and resale market. Private sales may need extra checks such as a PPSR search to confirm there is no existing finance owing on the asset.
What is a balloon payment?
A lump sum due at the end of the term, which reduces the regular repayments. It must be paid, refinanced or settled by trading in the asset. Plan for it from day one.
Does the instant asset write-off apply to financed equipment?
Depending on the structure and the current rules, eligible small businesses may be able to claim deductions on assets bought with finance. Thresholds and eligibility change, so check the ATO's current guidance and your accountant.
Sources and further reading
We are an information site, so we do not rank lenders, publish interest rates or accept payment to feature a product. Every page is written and checked by our editorial team against official sources. Read our editorial policy and how we are funded.
