Best Financing Options for Australian Business Equipment Purchases
The right equipment can change what a business is able to do. A new excavator opens up bigger jobs, a commercial oven lets a café cater for more customers, and updated technology can save hours every week. But equipment is often one of the largest single costs a small business faces, and paying for it all upfront can drain the cash you need to run day to day.
That's why many owners look at business equipment finance, spreading the cost of an asset over time instead of paying the full price at once. There isn't one best option for everyone, though. The right structure depends on your business, the equipment, your cash flow and how you plan to use the asset.
This guide compares the main financing options for equipment purchases in Australia, explains what lenders generally look for, and covers the costs and common mistakes to watch for. Browse more guides on our business finance blog.
What Counts as Business Equipment?
Equipment finance can generally apply to a wide range of business-use assets, depending on the lender's policies and the asset itself. Common examples include:
- Construction and trade equipment: excavators, skid steers, compressors, tools and machinery
- Manufacturing equipment: production lines, CNC machines, packaging equipment
- Hospitality equipment: commercial kitchens, ovens, refrigeration, coffee machines
- Medical and healthcare equipment: diagnostic, dental and treatment equipment
- Technology: computers, servers, point-of-sale systems and specialised software-enabled hardware
- Other business assets: commercial vehicles, trailers and agricultural equipment
Whether a particular item can be financed depends on factors such as its type, age, condition and value, and on the lender's policy. If you're financing a vehicle rather than machinery, our post on the benefits of financing a business vehicle instead of paying cash goes into more detail. See also Business Vehicle Loans.
Why Finance Equipment Instead of Paying Cash?
Neither approach is automatically better. It comes down to your cash position and priorities.
Financing may suit you if:
- You want to keep cash available for wages, stock and unexpected costs
- The equipment will help generate income that can support repayments
- You prefer predictable repayments you can budget for
Paying cash may suit you if:
- You have strong cash reserves that won't be needed elsewhere
- You want to avoid interest and fees
- You don't want a finance commitment
Finance generally costs more overall than paying cash, because of interest and fees, so it's worth weighing the benefit of preserving working capital against that extra cost. For a wider view of cash timing, read our small business cash flow guide.
The Main Options for Business Equipment Finance
Here are the structures most commonly used for equipment purchases in Australia. Product availability, features and terms vary between lenders, so details should always be checked directly.
Chattel mortgage
With a chattel mortgage, the business generally takes ownership of the equipment from the start, and the lender holds a mortgage over it as security until the finance is repaid. It's a common choice for businesses that want to own the asset from day one. Tax and GST treatment depends on your circumstances, so confirm the details with your accountant.
Equipment loan
An equipment loan is finance used specifically to buy equipment, usually secured against the asset itself. Because the equipment provides security, lenders may assess it differently from unsecured finance, though approval is never guaranteed.
Finance lease
In a finance lease, the financier generally owns the equipment, and your business pays to use it over an agreed term. At the end of the term, your options, such as returning, upgrading or purchasing the equipment, depend on the lease agreement. Leasing can suit businesses that expect to upgrade equipment regularly, such as technology that dates quickly.
Hire purchase
With hire purchase, the financier generally owns the equipment during the term, and ownership typically passes to your business once all payments, including any final payment, are made. It can suit businesses that want a clear path to ownership without owning the asset immediately.
You can read more about these structures in our equipment and vehicle finance guide, which covers financing vehicles, machinery and other business assets, and on the asset finance page.
Unsecured business loans
If you'd rather not offer security, or the equipment is lower in value, an unsecured business loan may be an option. These don't require an asset as security, but they're assessed mainly on the business's trading history and cash flow, and rates and terms may differ from asset-secured finance.
Secured line of credit
A secured line of credit gives you a limit you can draw on as needed, which can suit businesses with ongoing or variable equipment and working capital needs. Interest is generally charged on the amount you've drawn, and security is required.
Trade finance for imported equipment
If you're importing equipment from overseas suppliers, the timing gap between paying the supplier and receiving the goods can be significant. Trade finance is designed to help with that gap, and it may be worth exploring alongside an equipment finance structure.
Equipment Finance Options Compared
| Finance option | How it generally works | Often suits | Key consideration |
|---|---|---|---|
| Chattel mortgage | Business owns the asset from the start; lender holds security | Businesses wanting ownership from day one | Tax and GST treatment vary; confirm with your accountant |
| Equipment loan | Loan to buy equipment, usually secured against it | Buying a specific piece of equipment | Rates and terms vary by lender and asset |
| Finance lease | Financier owns the asset; you pay to use it | Equipment that may need regular upgrading | End-of-term options depend on the agreement |
| Hire purchase | Financier owns the asset until final payment | Businesses wanting a path to ownership | Ownership transfers only after all payments are made |
| Unsecured business loan | Loan without asset security | Lower-value purchases, or where security isn't preferred | May involve different rates and terms than secured finance |
| Secured line of credit | Revolving limit secured by an asset | Ongoing or variable funding needs | Interest accrues on drawn funds; security is required |
This table is general only. Suitability depends on your circumstances, the lender's policy and the asset.
What Do Lenders Look For?
Criteria vary between lenders, but they commonly consider:
- Trading history: how long the business has operated
- Revenue and cash flow: whether it can support repayments
- Credit history: business and, in some cases, personal
- Existing debts: current finance commitments
- Deposit or contribution: any upfront amount you can put in
- The equipment itself: its type, age, condition and value
- Business structure: sole trader, partnership or company
No single factor guarantees approval or rules it out, and each lender applies its own policies. Not every applicant will qualify for every product.
What Documents Might You Need?
Requirements vary by lender and by the size and type of finance, but you may be asked for:
- Identification
- ABN or ACN details
- Recent bank statements
- Tax returns or financial statements, where required
- A quote or invoice for the equipment
- Details of existing liabilities
Having these ready before you apply can help avoid delays. Start with our application form when you're ready.
What Does Equipment Finance Cost?
Looking only at the headline rate can be misleading. Consider the full picture:
- Interest rate: varies by lender, applicant and asset
- Loan term: a longer term can lower repayments but increase total cost
- Establishment or application fees: charged by some lenders
- Ongoing fees: where applicable
- Deposit: may reduce repayments but uses upfront cash
- Balloon or residual payment: a lump sum at the end that lowers regular repayments but must be planned for
- Early repayment or other fees: vary by lender
Ask for a full breakdown of costs for any offer, and compare the total amount payable, not just the rate. Specific rates and fees change over time, so always verify current details with the lender.
How to Choose the Right Option
- Do you want to own the equipment from day one? A chattel mortgage may suit better than a lease.
- How long will you use it? Equipment that dates quickly may suit a lease; long-life machinery may suit ownership structures.
- What can your cash flow comfortably handle? Check repayments against a realistic forecast, including slower months.
- Is the equipment the main security? If so, asset-secured options may be available.
- Will you need funding again soon? A line of credit may suit ongoing needs.
- What are the tax implications? These depend on your circumstances and may change, so speak to your accountant.
How Equipment Finance Can Affect Your Cash Flow
Spreading the cost of equipment can free up cash for day-to-day needs, but it also adds a fixed commitment. Before signing, map the repayments against your expected income for the term, including quieter months. Think about when the equipment will start earning money or saving costs, because repayments usually begin before the full benefit arrives.
It also helps to keep a buffer. If the equipment is critical to your business, an unexpected breakdown or a slow season can put pressure on repayments at the same time. Planning for that possibility early is far easier than reacting to it later.
New Equipment vs Used Equipment
Many lenders will consider finance for used equipment, though policies on age, condition and value differ. Used equipment may cost less upfront, but lenders may apply different criteria to older assets, and the equipment's expected lifespan may affect the term available. Whichever you choose, have a clear quote or invoice and, where relevant, details of the equipment's condition.
The Application Process Step by Step
- Decide what you need. Identify the equipment and how it will support your business.
- Get a quote. Obtain a formal quote or invoice from the supplier.
- Check what you can afford. Review cash flow and repayments before committing.
- Compare options. Consider the different structures and lenders.
- Apply. Provide the required documents.
- Lender assessment. The lender reviews your business, credit and the asset.
- Approval and documentation. If approved, review and sign the agreement.
- Settlement. Funds are released according to the agreement and you take delivery of the equipment.
Timeframes vary by lender and how quickly information is provided.
7 Tips Before Financing Business Equipment
- Get an accurate quote first. It keeps your application clear and helps avoid delays.
- Match the finance to the equipment's useful life. Avoid repayments that outlast the asset's usefulness.
- Test repayments against a forecast. A simple monthly forecast, including slower periods, can show whether repayments fit your cash flow.
- Compare total cost, not just the rate. Include fees and any balloon payment.
- Plan for the end of the term. Know what happens to the asset and any final payment.
- Keep working capital available. Consider whether invoice finance or other options might ease cash flow pressure, where suitable.
- Talk to your accountant. Tax treatment depends on your circumstances.
Common Mistakes to Avoid
- Choosing on rate alone. Fees, term and structure all affect the total cost.
- Borrowing more than needed. Finance only what the purchase requires.
- Stretching repayments beyond the asset's useful life.
- Ignoring the end-of-term obligations, such as a balloon payment.
- Not comparing lenders or structures.
- Overlooking tax implications. Get advice before deciding.
- Taking on repayments without testing cash flow.
Why Use a Finance Broker for Equipment Finance?
Comparing options across lenders can take time, and policies on equipment types, age and structure vary. A broker can help you understand the structures, compare options and prepare your application. As a broker, My Biz Finance doesn't lend directly, and lenders make the final decision on approval, rates and terms. A broker can't guarantee a particular outcome, but can help you approach the process in an informed way.
For a wider view of funding options beyond equipment, see our guide to business loans for small businesses, or read about how to grow your small business with financial loans.
Explore related options
- Business Equipment Loans — Finance machinery, fit-out and business assets
- Business Vehicle Loans — Finance for cars, vans, trucks and commercial vehicles
- Trade Finance — Funding when you import equipment from overseas
Frequently Asked Questions
What is the best way to finance business equipment in Australia?
There's no single best option. A chattel mortgage, equipment loan, finance lease or hire purchase may each suit different businesses, depending on ownership preferences, cash flow, the asset and tax circumstances.
Can I get equipment finance as a sole trader?
Sole traders can generally apply, though lenders assess each application on its merits, and requirements may differ from those for companies.
Can a new business get equipment finance?
It may be possible. Lenders may place more weight on personal credit, industry experience and the asset itself, and outcomes vary by lender.
Can I finance used equipment?
Many lenders consider used equipment, though policies on age, condition and value vary.
Do I need a deposit?
Requirements vary by lender and structure. Some may not require one, while others do.
What is the difference between a chattel mortgage and a finance lease?
With a chattel mortgage, the business generally owns the asset from the start. With a finance lease, the financier generally owns it and you pay to use it. Each can have different tax and end-of-term implications, so speak to your accountant.
What documents do I need?
Commonly identification, ABN or ACN details, bank statements, a quote for the equipment and details of existing liabilities, though requirements vary. Start with the application form when you're ready.
Can I get equipment finance with bad credit?
It may be possible depending on the circumstances and lender, but approval isn't guaranteed. A broker can help match you to suitable options.
How long does equipment finance take?
It depends on the lender, the complexity of the application and how quickly documentation is provided.
Are equipment finance repayments tax deductible?
Tax treatment depends on the structure and your circumstances. This is general information, so confirm the details with your accountant or the ATO.
Choosing the right business equipment finance option is a significant decision, and the best option depends on your business, your goals and the asset itself. Reviewing your cash flow and comparing structures before you commit can help you avoid costly mistakes.
If you'd like to explore your options, My Biz Finance can help you understand the choices and connect with lenders. Finance won't suit every situation and approval isn't guaranteed, but a conversation can help you work out what makes sense.
This article is general information only and doesn't take your circumstances into account. It isn't financial, tax or legal advice, so please confirm tax and other obligations with a qualified professional or the ATO.
To discuss your equipment finance needs, get in touch with My Biz Finance.
