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Written byShaun 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.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
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:
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:
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.
|Type of finance||Pros||Cons|
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
Your equipment does not sit on your books as an asset or liability
Difficult for new businesses without much documentation
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
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.
The interest rate will also depend on which lender you choose to apply with, and may also alter depending on:
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.
|Brand-new||1-2 years old||2-5 years old||5+ years old|
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.
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.
|Type of finance||Interest rates||Term (length)|
Up to 5 years
Commercial hire purchase
3 to 5 years
Relative to the lifespan of the asset
Operating lease (rental agreement)
Up to 5 years
Unsecured business loan
Up to 3 years
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.
|Loan type||Amount||Term||Interest rate||Fees (monthly)||Repayments (monthly)|
Commercial hire purchase
Unsecured business loans
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.
|Loan type||Amount||Term||Interest rates||Fees (monthly)||Total repayment amount|
Commercial hire purchase
Unsecured Business Loan
Qualifying for equipment finance is relatively simple. Most equipment finance lenders will be able to provide plenty of options if you:
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 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.
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.
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|YEAR||REMAINING BALANCE||MONTHLY REPAYMENT||INTEREST PAID||ENDING BALANCE|
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.
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).
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.
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
Equipment and tools
Storage, setup and security
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.