What is equipment finance?
Equipment finance lets Australian businesses acquire equipment now and pay it off over time. It covers items from IT and office fitouts to vehicles, manufacturing machinery, medical and construction gear. Instead of using cash, you choose a finance structure that matches your ownership goals, tax position and cash flow.
- Popular structures: Chattel Mortgage, Hire Purchase, Finance Lease, Operating Lease
- Typical terms: see Equipment Finance Loan Terms
- Who qualifies: see Eligibility and Minimum Credit Score
How equipment finance works (step‑by‑step)
- Choose the asset and supplier. Get a written quote with full details (make, model, serials if available).
- Select a structure. Decide between chattel mortgage, hire purchase, finance lease or operating lease based on ownership outcome and cash flow. Compare with Equipment Loan vs Lease.
- Apply. Provide business info plus bank statements/BAS or financials. See Requirements.
- Assessment. Lender reviews trading strength, credit history, asset type and resale profile.
- Approval. You receive terms including interest rate, fees, balloon/residual (if any), and any pre‑settlement conditions. See Interest Rates.
- Settlement. You sign docs; lender pays the supplier; delivery is arranged. Learn the Approval & Settlement Process.
- During the term. Make fixed repayments; maintain insurance; keep the asset in good order.
- End of term. Options include ownership (or paying the balloon), refinancing, upgrading or returning—depending on your structure. See Balloon & Residuals.
Common structures and who owns the asset
- Chattel Mortgage — You own from day one; the lender takes a security interest. Often suits businesses wanting ownership and potential upfront GST claim on purchase price (confirm with your accountant). Learn more: How a Chattel Mortgage Works.
- Hire Purchase — You hire during the term and typically take ownership after the final payment. See How Hire Purchase Works.
- Finance Lease — Lender owns the asset; you lease it with a set residual value at end of term. See How a Finance Lease Works.
- Operating Lease — Rental-style arrangement with potential return/upgrade at end; ownership usually does not transfer. See How an Operating Lease Works.
Tax and GST outcomes differ by product and business profile. Always confirm the treatment with your accountant. Helpful pages: Tax Benefits and GST Treatment.
Costs, rates and repayments
Pricing depends on the asset, business strength, loan amount/term, deposit and whether you use a balloon or residual. Stronger files and standard assets tend to achieve sharper rates. You can shape repayments via term length, deposit size and balloon/residual.
- See current insights: Equipment Finance Interest Rates
- Understand repayment shaping: Balloon & Residuals and Minimum Deposit
- Plan your horizon: Loan Terms
Eligibility and documents
Lenders assess your ability to service the repayments plus asset suitability. Documentation ranges from low‑doc (bank statements or BAS) to full‑doc (financial statements), depending on exposure and profile.
- What lenders look for: Requirements
- Who qualifies: Eligibility
- Credit benchmarks: Minimum Credit Score
- New businesses: Startup Equipment Finance
- Low paperwork: Low Doc Asset Finance
- Past credit issues: Bad Credit Asset Finance
Approval time and settlement
Straightforward applications on standard assets can be approved quickly, sometimes within 24–72 hours. Complex assets, private sales, higher loan amounts or limited trading may lengthen timing. Clean documents and supplier info reduce friction.
- Step‑by‑step timeline: Approval Process
- Need it fast? Fast Approval Options
GST and tax basics
GST and tax treatment vary by product. For example, with a chattel mortgage, eligible businesses often claim GST on the purchase price via the next BAS, while lease options typically apply GST to each repayment. Depreciation, interest deductibility and instant asset write‑off/temporary incentives (when available) should be confirmed with your accountant.
- Learn more: Tax Benefits and GST Treatment
- Compare ownership vs leasing: Buy vs Lease Equipment and Finance Lease vs Operating Lease
Deposits, balloons and residuals
Deposits and balloons/residuals are tools to shape repayments and manage risk. Strong profiles and certain assets can be financed at or near 100% (including GST), while other scenarios benefit from a deposit. Balloons (loans) and residuals (leases) reduce regular repayments but leave a lump sum at the end of term.
- When a deposit helps: Minimum Deposit
- How end‑sums work: Balloon & Residuals Explained
- No upfront cash? No Deposit Asset Finance
Pros, cons and when it fits
The “best” structure is the one that meets your ownership goal, supports cash flow and makes sense after tax and accounting considerations—both now and at end‑of‑term. Review the trade‑offs before you commit.
- Deep dive: Pros and Cons of Equipment Finance
- Compare to a bank loan: Asset Finance vs Business Loan
- Choosing confidently: How to Choose Asset Finance
Industry examples
Lenders consider the asset’s role, resale profile and your industry. Explore examples by category:
Frequently asked questions
How does equipment finance work in Australia?
Choose a structure (loan or lease), apply with business and asset details, get assessed, and upon approval the lender pays the supplier. You make fixed repayments over a set term. End‑of‑term outcomes depend on the structure: own it, pay a balloon/residual, upgrade or return.
Which structure should I choose?
Chattel mortgage and hire purchase generally lead to ownership; finance lease and operating lease keep title with the lender during the term. The right choice depends on ownership goals, cash flow, and tax/accounting treatment—compare with your accountant and a broker.
Do I need a deposit?
Not always. Some approvals are possible at 100% including GST. Deposits are more likely for older/unique assets, private sales, startups or weaker credit files. See Minimum Deposit.
Can I finance used equipment or a private sale?
Often yes, subject to age/condition and proper checks (e.g., PPSR, proof of ownership, serials). Expect tighter policy for very old or highly specialised assets.
How long does approval take?
Simple applications can be turned around in 24–72 hours; complex deals may take longer. Learn the steps: Approval Process.
What credit score is needed?
Credit appetite varies by lender and product. Stronger credit broadens options and sharpens pricing; there are options for thinner files too. See Minimum Credit Score and Bad Credit Asset Finance.
How do GST and tax work?
Treatment differs by product. For example, chattel mortgages often allow an upfront GST claim on the purchase price (subject to ATO rules), while leases typically apply GST to each repayment. Confirm specifics with your accountant. See Tax Benefits and GST Treatment.
Why does “how it works” matter?
The structure you choose affects ownership, GST timing, tax deductions, cash flow, and end‑of‑term options. A good fit should still make sense at the end of the term—not just look easy at the start.
Get help with equipment finance
Want a quick read on your options or a comparison tailored to your goals? Send an enquiry and an Australian broker will outline structures, repayments and likely documentation—so you can move forward confidently.
Final takeaway
How equipment finance works in Australia comes down to choosing the right structure, documenting your case clearly and understanding the end‑of‑term outcome. When ownership goals, cash flow and tax/accounting treatment line up, the facility supports—not strains—your business.
If you want help selecting the right approach, reach out for a quick comparison and next steps.