1.
How to qualify
2.
The assets you can finance
3.
Where to apply
4.
Types of equipment finance
5.
How to apply
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.
Who can get Equipment Finance?
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.
Money Tip Protect your cash reserves and pay for equipment through instalments, remembering all interest is tax-deductible.
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 (Australian Business Number); and
- Are registered for GST.
Although the process will be a little more involved, you can still apply if you:
- Are self-employed
- Are a sole trader
- Have been trading for less than 12 months
Money Tip
You can also use equipment finance to upgrade or replace existing equipment for your business.
What assets and equipment can I finance for my business?
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
To see a full list of business equipment that you could finance, click here.
Money Tip
Not all assets have to be objects. You can even use finance for an office fit-out.
Who can I talk to about Equipment Finance?
Most banks will offer equipment finance options to their customers. Otherwise, you could choose to work with a finance broker, who will help manage your application process.
There are also ways you can apply online, including:
- Non-Bank Lenders
- Specialist asset finance lenders
- Equipment finance brokers
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.
Money Tip
You can usually get quicker approval on equipment finance loans from specialist equipment finance lenders than with your bank.
What types of Equipment Finance are available?
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 view the benefits and restrictions of each type in our comparison guide, and learn more about the various loans and leases below:
Equipment Finance Comparison Guide
| Type of Finance | Pros | Cons |
|---|---|---|
| Chattel Mortgage | Vehicle is classified as a business asset | Any residual balance (balloon) is not tax-deductible |
| Commercial Hire Purchase | 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 |
Chattel Mortgage (or Secured Loan Agreement)
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the asset — the ‘chattel’ — at the time of purchase.
How does it work for equipment finance?
Under a Chattel Mortgage the lender advances funds to the customer to purchase an asset, such as a vehicle, which the customer then owns.
The lender registers their interest over the asset with the PPSR (Personal Property Securities Register) takes a 'mortgage’ over the asset as security for the loan. Once the contract is completed, the security interest is removed giving the customer full ownership.
Commercial Hire Purchase
A Commercial Hire Purchase — or corporate hire purchase, CHP, or HP — is a commercial finance product where the customer hires the equipment from the lender for a fixed monthly repayment over a set period of time.
How does it work for equipment finance?
Under a commercial hire purchase arrangement, the lender agrees to purchase the equipment — such as a vehicle — on behalf of the customer, who will then hire the equipment from the lender over a set period of time.
The customer has the use of the equipment for the term of the contract but is not the owner of the vehicle. At the end of the contract term when the total price of the equipment (minus any residual) and the interest charges have been paid in full, the customer takes ownership of the asset.
Finance Lease For Equipment Finance
A finance lease enables the customer to have the use of an asset (business equipment) and the benefits of ownership, while the lender retains actual ownership of the asset.
How does it work for equipment finance?
The lender will purchase the equipment on behalf of the customer, who then pays the lender a fixed monthly lease rental for the term of the lease. At the end of the lease, the equipment is returned to the lender or often can be purchased by the customer for business at an agreed price.
Operating Lease (or Rental Agreement)
An Operating Lease (or equipment rental agreement) is an agreement between a lender and a customer where the lender will purchase equipment on behalf of the customer and rent it out to them over a period of time.
How does it work for equipment finance?
Your business makes fixed monthly payments to a lender to use the equipment — but generally involves you being able to purchase the equipment from the lender at the end of the rental period. If the business chooses not to purchase the equipment, it will need to sign another lease to continue using the asset.
Money Tip
Want to learn more? You can read our guide on the benefits of a chattel mortgage vs lease vs hire purchase in Australia.
Unsecured Business Loan for Equipment Finance
Unsecured business loans allow a business to acquire funds from a lender without providing collateral. Collateral is used as security for loan repayment and could include your home, vehicle, personal savings, or other assets. The lack of collateral on an unsecured business loan is often reflected by higher interest rates.
How does it work for equipment finance?
An unsecured business loan is supported only by the credit rating and trustworthiness of the borrower. Unlike a secured business loan, the lender cannot claim assets should you be unable to meet your repayment.
However, you will still need to meet lender criteria — such as assessing income and credit rating — and some lenders may ask for a personal guarantee from the directors of the business.
How do I apply for Equipment Finance?
Some lenders have a simple, online application process for equipment finance and offer conditional approval on the spot. Others will ask you to contact them for a quote, and then speak to you to progress your application. To apply for equipment finance, you will need to:
- Demonstrate the ability to service your equipment loan or lease.
- Meet the lender’s criteria, such as:
- An ABN and GST registration
- An acceptable credit rating
- A minimum level of turnover
- A maximum level of other debt
- Supply all your supporting documents, such as:
- Proof of identity
- Financial records (provided by your accountant)
- Profit and Loss Statements
- Balance Sheet
- Details of the asset you wish to purchase
- Business bank statements
- Rates notice (if you own a home)
- Rental agreement (if you are renting)
Money Tip You can use equipment finance to upgrade or replace existing equipment for your business.
What are the best interest rates on equipment finance?
You can quickly compare the best equipment finance interest rates and terms in the table below. However, it’s important to remember that interest rates will vary from lender to lender.
Best Equipment Finance Interest Rates Comparison
| column 0 | column 1 |
|---|---|
| Chattel mortgage | From 5.49% |
| Commercial hire purchase | From 4.49% |
| Finance lease | From 4.49% |
| Operating lease (rental agreement) | From 5.10% |
| Unsecured business loan | From 9.90% |
How to get the 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.
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
Does the age or type of equipment affect the interest rate?
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-new | 1-2 years old | 2-5 years old | 5+ years old |
|---|---|---|---|
| 4.00% | 4.90% | 5.90% | 8.00% |
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
| Vehicles | Machinery | Electronics | Fit-Outs |
|---|---|---|---|
| From 4.00% | From 5.00% | From 6.50% | From 8.00% |
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 finance | Interest rates | Term (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 |
Cheap equipment finance
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.
Equipment finance fees
You can see in the table below how the monthly fees can alter your monthly repayments.
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.
Low interest rates don't always mean the lowest repayment amount
| Loan Type | Loan Amount | Loan Term | Interest Rate | Fees (monthly) | Monthly Repayment |
|---|---|---|---|---|---|
| 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 Loan | $50,000 | 5 years | 10.00% | $0 | $1,062.35 |
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 Type | Loan Amount | Loan Term | Interest Rate | Fees (monthly) | Total Loan Repayment |
|---|---|---|---|---|---|
| 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 Lease | $50,000 | 5 years | 5.5% | $10 | $57,963.60 |
| Unsecured Business Loan | $50,000 | 5 years | 10.00% | $0 | $63,741.00 |
Summary
Equipment finance in Australia is used by businesses 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 for Businesses FAQ
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.
What is a Self-Declaration Loan?
A self-declaration loan is a type of equipment finance for business where the applicant is unable to provide proof of income or financial statements for various reasons, such as the revenue of a business is difficult to calculate.
Each lender’s assessment process will be slightly different from a streamlined or standard loan application, which may involve them running a credit check or requiring you to present a trust deed or partnership agreement.
Self-Declaration Loans may also come with higher interest rates or stricter conditions than a standard loan.
What is Low Doc Loan?
Low Doc (Low Documentation) loans are for potential borrowers who are self-employed or own a small business can’t supply the required documents to support their application to the lender.
Generally this will be a lack of PAYG payslip records or where the applicant cannot provide sufficient financial statements or tax returns.
Low Doc Loans may also come with higher interest rates or stricter conditions.
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).
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? | Equipment and Tools | Storage, Setup and Security |
|---|---|---|
| Cars / Light Commercial vehicles | Camper trailers | Information technology and data storage equipment |
| Caravans | Generators, welders, and pumps | Building management systems |
| Motorcycles | Printing equipment | Office fit-outs |
| Small and medium trucks | Medical and dental equipment | Manufacturing line equipment |
| Trailers | Engineering equipment | Sheds and silos |
| Prime movers — i.e. cement mixers, tippers, local transport vehicles | Workshop equipment | Moulding equipment for plastics |
| Buses | Long-haul freight equipment | Concrete batching plants |
| Earthmoving equipment — i.e. excavators, bulldozers, graders, crushing equipment | Mining equipment | Cabins for caravan parks |
| Material handling equipment — i.e. forklifts, cranes, container lifts. | Agriculture equipment and tools | Coolrooms |
| Access equipment — i.e. boom and scissor lifts. | Food processing or food manufacturing equipment | Spray booths |
| Mulchers, wood chippers, and stump grinders | Woodwork equipment — i.e. panel saws, banding machines, routers, and lathes. | GPS equipment |
| Mowers, tractors and trailer attachments. | Dynamometers | Commercial HVAC (heating, ventilation, air-conditioning) systems |
| Agriculture machinery, such as harvesters and headers | AV (audio visual) equipment | |
| Forestry equipment |
