Equipment finance, in three easy steps

What is equipment finance?

Equipment finance is money borrowed to buy or use a business asset: an excavator, a commercial oven, a CNC machine, a fleet of laptops, a dental chair. In most cases the equipment itself acts as the security, which is why equipment finance can be easier to arrange than an unsecured loan of the same size.

Business.gov.au’s overview of funding options lists equipment leases, hire purchase and chattel mortgages among the common forms of debt finance. They look similar from the outside, but they differ on one key question: who owns the asset, and when?

Chattel mortgage, hire purchase or lease?

Here’s the 1-2-3 comparison:

Structure	Who owns it?	At the end	Often suits
Chattel mortgage	You, from day one	Security released when repaid	Businesses wanting ownership and to claim depreciation
Hire purchase	The financier, until the last payment	Ownership passes to you	Businesses wanting eventual ownership with structured payments
Lease	The financier	Return, upgrade or buy	Fast-ageing tech, or businesses preferring to rent

The tax and GST treatment differs between these structures, and that’s genuinely a question for your accountant. What we can help with is matching the structure to how long you’ll use the asset and how your cash flow works.

What about the instant asset write-off?

The instant asset write-off lets eligible small businesses deduct the business-use share of an eligible asset’s cost straight away, rather than depreciating it over several years. The ATO’s instant asset write-off page lists a $20,000 threshold applying from 1 July 2023 for businesses with an aggregated turnover under $10 million that use the simplified depreciation rules.

Two things to keep in mind:

• It’s about timing of a deduction, not a discount. You still pay for the asset.
• Eligibility and rules matter. Check with your accountant before relying on it, especially around the end of the financial year.

Our guide to the instant asset write-off and equipment finance explains how the two fit together.

How does the PPSR fit in?

When a lender takes security over equipment, it usually registers that interest on the Personal Property Securities Register. The PPSR describes itself as a register of security interests in personal property, covering items such as vehicles, equipment, stock and more. According to the PPSR’s guidance, registration helps protect the secured party’s position, including if the debtor becomes insolvent.

For you as a buyer, it’s also a safety check. If you’re buying second-hand equipment privately, a PPSR search can reveal whether someone else already has finance secured over it.

What if equipment finance isn’t the right fit?

Sometimes another route works better:

• Unsecured lending, typically $5,000 to $500,000 for trading businesses, can fund equipment along with installation, training and working capital in one facility. See unsecured business loans.
• Property-secured lending, from $20,000 to $5,000,000, can suit large, specialised or older equipment that equipment financiers are wary of.
• A combination, such as equipment finance for the machine and a small unsecured facility for the extras.

Want help choosing? Send a quick enquiry. A real person will call, and there’s no credit check to ask.

How long should the finance run?

Match the term to the asset’s useful life. Borrowing over seven years for a laptop that will be obsolete in three means you’re still paying for it long after it’s replaced. Borrowing over two years for a press that will last fifteen squeezes cash flow unnecessarily.

Illustrative example only. A commercial bakery buys a new deck oven expected to last well over a decade, plus a set of tablets for its ordering system that will be replaced in a few years. Financing them separately, with terms matched to each, keeps repayments sensible and avoids paying off tablets that are already in a drawer.

Checklist before you sign

• The supplier’s quote or invoice, with the exact model and serial number if available
• The total cost of finance, including fees and any balloon or residual payment
• Insurance requirements for the asset
• End-of-term options: payout, return, upgrade
• A PPSR search if buying second-hand from a private seller

Buying from a dealer versus a private seller

Where you buy the equipment changes the process slightly.

From a dealer or manufacturer, you’ll usually get a formal tax invoice with serial numbers, warranty information and a clear price. Lenders like this, because the asset is easy to identify and value. Settlement is often paid directly to the dealer.

From a private seller or at auction, prices can be sharper, but there’s more to check:

• A PPSR search, to confirm there’s no existing finance secured over the item
• Proof of ownership, such as the original invoice
• The condition, ideally inspected by someone who knows the equipment
• A clear sale agreement, listing the item, serial number and price

Some lenders are more cautious with private sales, particularly for older or specialised machinery. If that’s an obstacle, an unsecured business loan sized on your turnover, or a property-secured loan, can fund the purchase without relying on the item itself.

For vehicles specifically, our business vehicle finance page covers balloons and fit-outs. If the equipment is part of a premises upgrade, the fitout finance page explains how to split built-in work from movable items.

Ready to get the right kit?

Equipment finance works best when the asset, the structure and the term all line up. We’d be glad to help you put those three pieces together.

Here’s how it works with us. Asking costs nothing and leaves your credit file alone. A real person reads your enquiry and calls you, and your details won’t be shopped out to every lender going. Please be accurate on the form about the equipment, its cost and your business’s turnover, so we can match you properly the first time. Start your equipment finance enquiry.