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Operating Lease with Money Matchmaker™

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Operating Lease

The main benefit of choosing an operating lease for business finance is that your business can commonly upgrade the assets purchased within the lease period. This is highly beneficial for businesses purchasing IT equipment, as these types of assets often become obsolete within a few years. Your business can also claim tax on your rental payments.

Operating Lease Summary:

  • Cost-effective finance for equipment with a short lifespan
  • The business can’t sell or modify the asset without the lessor’s permission
  • When the lease expires, the terms of that lease are void. The business will often need to renegotiate another lease under new terms
  • You can usually upgrade your equipment during the lease term
  • Your lease payments will generally be tax-deductible
  • You cannot claim depreciation on the asset during the lease
  • You are only renting the asset and there is no guarantee of ownership or the option to purchase at the end
  • Can be more expensive than other finance options if maintenance and servicing costs are included in repayments

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

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

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

What is an Operating Lease

An operating lease is a type of business equipment finance in Australia. An operating lease is used for short-term low-value assets — e.g. laptops or phones — and provides greater options for upgrading and re-leasing the asset at the end of the lease than when using a finance lease.

Operating lease details

Asset ValueLow
Lease PeriodShort
Ownership BenefitsNone
Upgrade OptionsYes
Similar FinanceRental Agreement

Operating Lease vs other equipment finance options

An Operating Lease, or Equipment Rental Agreement is a type of equipment finance rental agreement, where a lender will purchase an asset on behalf of a borrower and rent it out to them over a period of time.

An Operating Lease is similar to most types of rental agreement — your business makes fixed monthly payments to use the asset — but offers greater freedom to the borrower in upgrading the asset throughout the lease term.

Similar to a commercial hire purchase, a lender will buy the asset from the vendor on your behalf, and will then rent it to you in exchange for regular payments. In most cases, you’ll be able to get a tax deduction for your lease payments.

However, as the lender will retain ownership and full responsibility for the asset, you may find operating leases have higher repayments to account for servicing and maintenance.

Need a new business vehicle or equipment for your business?

Why is an Operating Lease unique?

All types of business asset lease allow a business to access business equipment through regular finance repayments. The main difference between an operating lease and other types of lease is what happens at the end of the lease term — an operating lease will see the asset returned to the lender.

Operating lease overview

OwnershipOwnership of the property is retained during and after the lease term by the lender.
Running Costs & AdminThe lender is responsible for all associated costs, which are often included in the lease repayments.
Accounting & TaxOnly the lease payments are listed as a business expense on profit and loss statements. Payments are generally tax-deductible.

How to use an Operating Lease for your business

Businesses use an operating lease for assets that may quickly become obsolete — such as computers and IT equipment — and when it is more beneficial to upgrade the equipment than own it outright.

An operating lease may often be more expensive than purchasing an asset outright, however you will not be required to take ownership of the asset at the end of the lease. In fact, you will generally have the option to upgrade the asset, either at the end or throughout the lease term.

Operating leases are also used when a business wants to include all costs for asset rental in its regular repayments. Using an operating lease will ensure you aren’t caught out if something malfunctions or needs to be repaired, and offers a more accurate forecast of repayment amounts.

How to qualify and apply

You can apply for an operating lease the same way you would for most equipment finance applications. You can qualify for an operating lease 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

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’s what you may need to provide to a lender when applying:

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 finance lenders, including those who provide leases designed specifically for small businesses.

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 use the Money.com.au smart form to compare offers from real Australian lenders and apply directly from your results. These lenders offer the fastest approval speed in return for charging higher interest rates than a bank.

Here are the most popular questions people are asking about an operating lease:


What is the difference between an operating lease and a finance lease?


Primarily the difference between the two types of lease are what will happen at the end of the lease term. With an operating lease, you will either return the rented equipment, or negotiate new terms with your lender at the end of your existing loan contract.


What is an example of an operating lease?


One of the most popular examples of an operating lease is in acquiring IT assets, such as laptops or cellphones. These are often financed through an operating lease as doing so allows the borrower to upgrade the equipment throughout the term.


What happens at the end of an operating lease?


At the end of an operating lease, you will generally return the asset to the lender, who will in turn refinance the assets to another borrower. This is one of the clear benefits of an operating lease, where there is no responsibility of the borrower to maintain ownership or dispose of the asset at the end of the lease term.


Is a car lease an operating lease?


You may be able to acquire a vehicle through an operating lease, however there will generally be more suitable options available to businesses. You can learn about financing business vehicles or read our comprehensive guide on the most popular form of business car finance, a chattel mortgage.


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