By the Loan Phone team Reviewed by Anthony Moncada, M.App.Fin, Cert IV Finance & Mortgage Broking
Equipment finance in Australia involves using business equipment as security for a loan, allowing businesses to acquire essential assets without large upfront capital. In Australia, rates typically range from 6-14% p.a. (indicative only), loan amounts from $5,000 to $5M+, with terms of 1-7 years. Modern platforms can provide fast online comparison, with settlements possible within 5-10 business days for straightforward applications.
Most traditional lenders require ABN registration, a minimum 6-12 months trading history, and good business financials, though specialist lenders may consider newer businesses. Potential tax benefits include depreciation deductions and GST credits on financed equipment (subject to individual circumstances).
| Business/Borrower Profile | Indicative Rate | Typical Term | Common Equipment |
|---|---|---|---|
| Established (2+ years, strong) | 6-9% p.a. | 3-5 years | Manufacturing machinery, IT, vehicles |
| Standard (1-2 years) | 9-12% p.a. | 1-5 years | Office equipment, retail fit-outs |
| Developing/Newer | 12-14%+ p.a. | 1-3 years | Basic equipment, tools, initial assets |
Rates are indicative examples only. Actual rates depend on individual circumstances and lender assessment.
📄 Navigation Guide
- → What is Equipment Finance?
- → How Equipment Finance Works in Australia
- → Types of Equipment Finance Available
- → Eligibility Requirements
- → Equipment Finance Application Process
- → Equipment Finance Rates & Fees
- → Tax Benefits of Equipment Finance
- → Equipment Finance vs Other Business Loans
- → Choosing the Right Equipment Finance Option
- → Frequently Asked Questions
What is Equipment Finance?
Equipment finance is a specialized form of business lending where the equipment being financed serves as security for the loan. This allows Australian businesses to acquire essential machinery, vehicles, technology, and other assets without large upfront capital expenditure, spreading the cost over an agreed term. Because the loan is secured by the asset, interest rates are typically more competitive than unsecured business loans.
How Equipment Finance Works in Australia
The process is straightforward:
- Select Equipment: Choose the asset and get a quote from a supplier.
- Apply for Finance: Complete an application with your business details and equipment information.
- Lender Assessment: The lender assesses your application based on business strength, credit history, and the asset’s value.
- Receive Offer: If approved, you receive a finance offer detailing the rate, term, and fees.
- Settlement: Once you accept and complete documentation, the lender pays the supplier.
- Repayments: You begin making regular repayments over the agreed term.
Types of Equipment Finance Available
- Chattel Mortgage: You take immediate ownership of the equipment, and the lender takes a mortgage over it as security. This is the most popular option for businesses wanting to own assets from day one.
- Finance Lease: The financier buys the equipment and leases it to you. At the end of the term, you can choose to purchase, return, or extend the lease on the asset.
- Hire Purchase: The financier owns the equipment until you make the final payment, at which point ownership transfers to you.
- Operating Lease: A short-term rental agreement where you use the equipment without intending to buy it. Ideal for technology that becomes obsolete quickly.
Eligibility Requirements
While criteria vary between lenders, most require:
- Active ABN: Your business must be registered and operating in Australia.
- Trading History: Typically a minimum of 6-12 months, although specialist lenders can assist newer businesses.
- Financial Standing: A history of positive cash flow and a good credit record.
- Equipment Use: The asset must be used primarily for business purposes.
Equipment Finance Application Process
Modern platforms have streamlined the application process significantly.
- Research & Compare: Use a comparison tool to see options from multiple lenders at once.
- Online Application: Complete a digital application, providing business, financial, and equipment details.
- Upload Documents: Securely upload supporting documents like bank statements and equipment quotes.
- Assessment & Approval: Lenders typically assess straightforward applications within 24-48 hours.
- Settlement: Once documentation is finalized, settlement usually occurs within 3-10 business days.
Equipment Finance Rates & Fees
- Interest Rates: Indicative commercial rates range from 6-9% p.a. for established businesses to 12-14%+ p.a. for newer or higher-risk applicants. Rates are influenced by your business profile, credit history, and the asset being financed.
- Fees: Common fees include an establishment fee ($200 - $1,000) and a small monthly account-keeping fee. Always check for any early termination fees if you plan to pay the loan out early.
Tax Benefits of Equipment Finance
Financing equipment can offer significant tax advantages, depending on the finance structure and your business circumstances.
- Depreciation: As the owner of the asset (under a chattel mortgage), you can claim depreciation. This may include eligibility for the Instant Asset Write-Off.
- GST Credits: GST-registered businesses can typically claim the GST paid on the equipment purchase as an Input Tax Credit on their BAS.
- Interest Deductibility: The interest component of your repayments is generally a tax-deductible business expense. Important: Always seek advice from a qualified accountant to understand the specific tax implications for your business.
Equipment Finance vs Other Business Loans
Equipment finance is purpose-built for acquiring assets. Compared to an unsecured business loan, it typically offers lower interest rates because the equipment itself acts as security. It is often faster to arrange and has a more straightforward application process. While a traditional business loan offers more flexibility in how you use the funds, equipment finance is almost always the more cost-effective choice for purchasing specific assets.
Choosing the Right Equipment Finance Option
To select the best structure, consider:
- Ownership: Is owning the asset from day one important? If yes, a chattel mortgage is likely the best fit.
- Technology: Will the equipment become obsolete quickly? If yes, a lease provides flexibility to upgrade at the end of the term.
- Cash Flow: An operating lease generally has the lowest monthly payments, freeing up cash flow.
Frequently Asked Questions
What is equipment finance and how does it work? Equipment finance is a specialized loan where the asset you’re buying serves as security. It allows you to acquire equipment by making regular repayments over a set term, preserving your working capital. See the What is Equipment Finance section for more details.
How much deposit is required for equipment finance? It varies from 0% to 30%. Established businesses with strong financials can often secure 100% finance (no deposit), while newer businesses or those financing used equipment may need to contribute a 10-20% deposit.
Can I get equipment finance with a bad credit history? Yes, it’s possible. Specialist lenders often consider applications from businesses with varied credit histories. Because the loan is secured by the asset, it’s more accessible than an unsecured loan, though you may face a higher interest rate.
How long does the equipment finance application process take? For straightforward applications, you can receive conditional approval within 24-48 hours. The entire process from application to settlement typically takes 5-10 business days.
Is equipment finance better than a business loan? For purchasing assets, it’s usually better. It offers lower interest rates, a faster application process, and terms that can be matched to the equipment’s useful life. See our detailed comparison of Equipment Finance vs Other Business Loans.
Can I finance used equipment? Yes, most lenders finance used equipment, although age limits (often 5-7 years) and higher deposit requirements may apply.
What happens if I can’t make the repayments? Because the equipment is security, the lender has the right to repossess it. However, most lenders prefer to work with businesses on a solution first, such as a temporary payment arrangement. It’s crucial to communicate with your lender early if you face financial difficulty.
Are there tax benefits to equipment finance? Yes, significant benefits are available, including depreciation deductions (like the Instant Asset Write-Off), GST credits, and the ability to claim interest as a business expense. Always consult with your accountant for personalized advice.
Speak with Specialists
Need expert guidance on your equipment finance application?
Email: loans@loanphone.com.au Website: www.loanphone.com.au
Related Resources
Explore these related guides to learn more about specific types of equipment finance:
Disclaimer: This article provides general information only and should not be relied upon as financial or tax advice. Rates, terms, and eligibility vary by lender and individual circumstances. Tax benefits are subject to your specific business structure and circumstances. Always seek independent professional advice from a qualified accountant and financial adviser before making financing decisions.
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Last updated: October 17, 2025