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Equipment Finance

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Equipment Finance

Written by

Shaun McGowan

Equipment finance in Australia is business finance used to buy new equipment or replace and upgrade existing equipment for the business. Equipment finance can be used to acquire vehicles, electronics, machinery, office fit-outs, and many other types of business equipment.

There are a few methods of obtaining equipment finance, and each will offer varying interest rates, term lengths, and fees. Certain lenders may only offer certain types of equipment finance, or have specific conditions about what can be funded.

In summary

  • Can be used to finance anything relating to a business
  • Does not require a deposit in most cases
  • Can be used to purchase equipment outright
  • Can be used to lease or rent equipment from a lender
  • Can be obtained from banks, non-bank lenders, specialists, and through finance brokers
  • Can provide financing solutions to businesses with bad credit
  • Covers different types of loan or lease, each with their own pros and cons
Equipment finance with Money Matchmaker

Key Features

  • Borrow from $5,000 to $500,000
  • Fixed or variable interest rates
  • Repayments to suit your budget
  • Terms from one month to five years
  • Secured & unsecured options
Secured business loans with Money Matchmaker

Who is eligible?

  • Own a business and have an ABN
  • Business is GST-registered
  • Permanent Citizenship or Residency
  • Minimum business-operating time of six months
  • Can provide business bank statements
Minimum requirements for a business loan

Shopping around

Shopping around for the right loan can save you thousands of dollars in interest and fees.

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What is Equipment Finance?

Equipment finance is the term for business loans or commercial leases used to buy new business equipment or replace and upgrade existing equipment. Equipment finance covers any business-related equipment, including company vehicles, machinery, electronics, business fit-outs and more.

If you qualify for equipment finance with a lender, you can finance almost any asset related to your business. This can include:

  • Vehicles — e.g. company cars, trucks, trailers, delivery vans, motorcycles
  • Electronics — e.g. computers, servers, GPS equipment
  • Machinery — e.g. excavators, lifts and access equipment, forklifts
  • Equipment — e.g. printing, medical, dental, engineering
  • Construction — e.g. tools, tool-of-trade vehicles, scaffolding
  • Earthmoving — e.g. yellow goods, machinery, diggers, front loaders
How asset finance works

Need a new business vehicle or equipment for your business?

You can read our guide to compare the benefits of a chattel mortgage vs lease vs hire purchase.

Find the best rate on a equipment finance

FIND YOUR RATE

How to compare Equipment Finance options?

A business owner will commonly consider applying for equipment financing when they don’t have the cash flow or security to purchase expensive equipment outright, but they may also choose this type of finance if they:

  • Need to replace equipment frequently because it has a short lifespan
  • Work in an industry that requires constantly up-to-date technology
  • Want to purchase equipment for everyday business use and reclaim the GST on their next BAS
  • Require cash reserves for future business security, and would prefer to pay for equipment by instalments over a set period.

Just as every business is unique and your need for a loan or lease will vary, there are a number of different options available for equipment finance with lenders. Our free equipment finance calculator can quickly create personalised repayment assessment based on your desired loan amount.

It’s important to know the differences to understand which is most suitable for you. You can quickly compare 5 popular equipment finance options in the comparison table below.

Equipment Finance Comparison Guide

Type of financeProsCons

Chattel Mortgage

Vehicle is classified as a business asset

Any residual balance (balloon) is not tax-deductible

Commercial Hire Purchase (CHP)

GST is not charged on the monthly rental or residual payment

The lender can reclaim the asset if you don’t meet your payment obligations

Finance Lease

Your equipment does not sit on your books as an asset or liability

Difficult for new businesses without much documentation

Operating Lease

Can be more cost-effective than paying cash for equipment with a short lifespan

Your business won’t own the asset through an operating lease

Unsecured Business Loan

Quick approval timeframe

Expensive

Best Equipment Finance rates

Equipment finance interest rates will vary depending on which type of business finance you choose to apply for. The main factor considered by lenders when applying a rate to any type of loan is the level of risk presented by the borrower.

The lower the risk, the lower the interest rates — if you have been in business for a long time and have high, regular revenue, you’ll present far less risk to a lender than someone just starting a business without stable, annual revenue.

How lenders determine interest rates

The interest rate will also depend on which lender you choose to apply with, and may also alter depending on:

  • The amount you wish to borrow
  • The type of equipment you wish to purchase
  • Your time in business
  • The monthly revenue of your business
  • The term you are applying for
  • Your business credit history
  • Your personal credit history
  • If you own a property

The type of equipment you wish to finance, and its age, will also determine how a lender applies an interest rate to your loan.

This is important to understand for any type of equipment finance loan, but especially if you are considering loans for multiple pieces of equipment of different types — such as a business vehicle, an office fit-out, and leased office equipment.

Below, you can see how the age of the equipment you wish to acquire through equipment finance may affect the interest rate applied to your loan.

How the age of the equipment will affect your offered interest rate

Brand-new1-2 years old2-5 years old5+ years old

4.00%

4.90%

5.90%

8.00%

Important: These are example rates and are not reflective of the actual rate you may qualify for.

In the table below, you can see how the type of equipment may change the interest rate applied to your equipment finance.

A vehicle, for example, is a relatively secure piece of equipment that is designed to remain in good working order for a considerable amount of time. If you were unable to meet your repayments, a lender would be able to reclaim the vehicle and recoup a significant portion of their losses.

How the type of equipment will affect your offered interest rate

VehiclesMachineryElectronicsFit-outs

From 4.00%

From 5.00%

From 6.50%

From 8.00%

NOTE: This calculation is presented as an example of how deposits and residual amounts affect regular and final repayments. The figures used may not accurately reflect current commercial hire purchase rates and repayment terms.

As you can see above, different types of equipment will have different interest rates applied. Electronics, on the other hand, aren’t as reliable as a car; they have a shorter operating lifespan and their value can drop significantly in only a few years.

Non-reclaimable assets acquired through business fit-out finance is one common example; there is no way for a lender to reacquire a fit-out from a borrower, which presents the highest amount of risk.

Equipment Finance Rates and Term Comparison

Type of financeInterest ratesTerm (length)

Chattel mortgage

From 5.49%

Up to 5 years

Commercial hire purchase

From 4.49%

3 to 5 years

Finance lease

From 4.49%

Relative to the lifespan of the asset

Operating lease (rental agreement)

From 5.10%

Up to 5 years

Unsecured business loan

From 9.90%

Up to 3 years

Find the best rate on a equipment finance

FIND YOUR RATE

Cheapest Equipment Finance options

The primary reason people look to compare interest rates on equipment finance is to ensure they get the best deal and the lowest monthly and total repayment amount possible.

While an interest rate is a strong indicator of your total and regular repayments, there are other factors to consider as well, such as any initial or ongoing fees that may affect your total loan amount.

This is why it’s crucial to compare lenders using more than just the advertised interest rate — if you don’t, you could be locked into an agreement that costs your business thousands of dollars in fees over the loan term.

Avoid rate shock on loans with Money Matchmaker

Low interest rates don't always mean the lowest repayment amount

Loan typeAmountTermInterest rateFees (monthly)Repayments (monthly)

Commercial hire purchase

$50,000

5 years

4.5%

$0

$932.15

Chattel mortgage

$50,000

5 years

5.5%

$0

$955.06

Finance lease

$50,000

5 years

4.5%

$30

$962.15

Operating lease

$50,000

5 years

5.5%

$10

$966.06

Unsecured business loans

$50,000

5 years

10.00%

$0

$1,062.35

Important: These are examples only and do not reflect actual rates or fees you may qualify for.

You can see in the table above that monthly fees can impact the amount you will repay monthly. While it may not seem like a great difference in monthly repayments, the table below will show the total loan amount you would repay for each of the above finance options over the full term.

Want to see how much you’ll pay using equipment finance? Use our free equipment finance calculator to view a personalised repayment assessment.

How monthly fees can make a big difference to your total loan amount

Loan typeAmountTermInterest ratesFees (monthly)Total repayment amount

Commercial hire purchase

$50,000

5 years

4.5%

$0

$55,929.00

Chattel mortgage

$50,000

5 years

5.5%

$0

$57,303.60

Finance lease

$50,000

5 years

4.5%

$30

$57,729.00

Operating

$50,000

5 years

5.5%

$10

$57,963.60

Unsecured Business Loan

$50,000

5 years

10.00%

$0

$63,741.00

Important: These are only examples and do not reflect the actual fees or total repayment relative to the loan you may qualify for.

How to qualify and apply

Qualifying for equipment finance is relatively simple. Most equipment finance lenders will be able to provide plenty of options if you:

  • Have been trading for at least 12 months; and
  • Have an ABN; and
  • Are registered for GST; and
  • Have a clean credit history; and
  • Own property or can provide a 20% deposit
How to qualify for a loan in Australia

Although the process will be a little more involved, if you don’t meet the above criteria you can still get approved if you:

  • Are self-employed or a sole trader
  • Have been trading for between 6 - 12 months
  • Have an imperfect credit history
  • Do not own property

There are two main types of applications, which will depend on the amount you wish to borrow. If you are borrowing less than $100,000 the approval process will be fairly simple. Most times, just your business bank statements will be sufficient to illustrate your monthly business revenue.

If you wish to borrow more than $100,000, your lender will require additional documentation to assess your application.

If this is the case, you’ll need to provide additional documentation to the lender so they can better assess your application. Here are some tips to improve your chances of getting approved.

If you are borrowing less than $100,000:

  • Proof of identity
  • An ABN and GST registration
  • An acceptable credit rating — the lender will ask to conduct a credit check
  • Business bank statements
  • Trust Deed if the business is held in a trust
  • Australian Tax Office (ATO) Portal access.

If you are borrowing more than $100,000:

  • All the documentation provided if borrowing less than $100,000; and
  • Financial records (provided by your accountant)
  • Profit and Loss Statements
  • Balance Sheet

If you are making an application for more than $100,000, you can speak to your bank or a lender directly to discuss your financial circumstances and need for finance.

If you are applying for less than $100,000, you can generally apply online with a number of different specialist business loan lenders, including those who provide loans designed specifically for equipment finance.

Lenders will assess an application based on the monthly revenue of the business, its intended use for the loan, how the loan will benefit future business revenue, and more.

Each lender will have different approval criteria, but here are some tips to improve your chances of getting approved.

  • Demonstrate an ability to service your business loan or lease.
  • Meet the lender's criteria for acceptable credit rating
  • Meet the lender's criteria for minimum turnover and maximum debt
  • Provide profit and loss statements and your business balance sheet
  • Provide details of the asset you wish to purchase
  • Provide read-only access to your business bank statements
  • Provide a personal guarantee by the director of the company

You can apply for Equipment Finance with GetCapital. Read our review of the lender or compare finance options from Australia’s leading business lenders by visiting our Lender Reviews section.

Alternatively, equipment finance brokers operate in all states, cities, and towns of Australia. You can find a local equipment finance broker to help you compare options in Sydney, Brisbane, Perth, Melbourne, Adelaide, Canberra, Newcastle, and more.

No matter where you’re located, a broker can assist in finding a range of suitable finance options from local and national lenders in exchange for a small fee.

Here are the most popular equipment finance questions people are asking:

Will I need to put down a deposit for equipment finance?

If you own a home, you won’t need to put down a deposit for equipment finance. If you’re renting a home and want to apply for finance through the streamlined application process, you’ll need a 20% deposit for the assets you wish to finance.

Can I use equipment finance to replace existing business assets?

Yes — equipment finance can be used for any assets that a business may need, whether you are buying new assets (a new company car), or upgrading existing assets (computer hardware and servers).

Can I get equipment finance with bad credit?

Yes, you can often find lenders who will approve equipment finance applications if you imperfect credit. You may need to apply under the same process as a bad credit business loan, or apply for a self-declaration or low-doc loan if meet general criteria but you cannot provide supporting documents.

Is there a full list of available assets for business equipment finance?

Below is a full list of assets that you can purchase or lease through equipment finance. Each lender may have a different list of approved assets, so speak to your bank, lender, or broker about what you can finance for your business.

Vehicles and machinery

  • Cars / Light Commercial vehicles
  • Caravans
  • Motorcycles
  • Small and medium trucks
  • Trailers
  • Prime movers — i.e. cement mixers, tippers, local transport vehicles
  • Buses
  • Earthmoving equipment — i.e. excavators, bulldozers, graders, crushing equipment
  • Material handling equipment — i.e. forklifts, cranes, container lifts.
  • Access equipment — i.e. boom and scissor lifts.
  • Mulchers, wood chippers, and stump grinders
  • Mowers, tractors and trailer attachments.
  • Agriculture machinery, such as harvesters and headers
  • Forestry equipment

Equipment and tools

  • Camper trailers
  • Generators, welders, and pumps
  • Printing equipment
  • Medical and dental equipment
  • Engineering equipment
  • Workshop equipment
  • Long-haul freight equipment
  • Mining equipment
  • Agriculture equipment and tools
  • Food processing or food manufacturing equipment
  • Woodwork equipment — i.e. panel saws, banding machines, routers, and lathes.
  • Dynamometers

Storage, setup and security

  • Information technology and data storage equipment
  • Building management systems
  • Office fit-outs
  • Manufacturing line equipment
  • Sheds and silos
  • Moulding equipment for plastics
  • Concrete batching plants
  • Cabins for caravan parks
  • Coolrooms
  • Spray booths
  • GPS equipment
  • Commercial HVAC (heating, ventilation, air-conditioning) systems
  • AV (audio visual) equipment

About the Author

Shaun McGowan from money.com.au

Shaun

McGowan

Shaun McGowan

Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

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Money Pty Ltd (trading as Money.com.au) provides information about credit products and is authorised to do so as the holder of Australian Credit Licence 528698. Money.com.au does not compare every Lender in Australia. We are not a broker or credit provider and when we provide information via this website, we are not providing you with a recommendation or suggestion about a particular credit product. When you apply for a credit product via the Money.com.au website, you are not applying with us, you are applying directly with a Lender Partner. Before entering into any credit product from one of our Lender Partners, you should confirm the rates and product information with the Lender. All information on this website is general advice only and does not take into account your objectives, financial situation or needs. You should consider whether this advice is right for you and we encourage you to seek independent financial advice.