Business Equipment Loan Guide: Complete Application & Approval Guide Australia

By the Loan Phone team Reviewed by Anthony Moncada, M.App.Fin, Cert IV Finance & Mortgage Broking

Quick Answer

Business equipment loans allow Australian companies to purchase essential equipment without depleting working capital. Rates typically range from 6-12% p.a. in 2025 (indicative only), with loan amounts from $5,000-$1M+ over 1-7 year terms. Most traditional lenders require minimum 12 months trading history, current ABN/GST registration, and financial documentation demonstrating repayment capacity. Modern comparison platforms can provide fast online assessment, with settlements possible within days for straightforward applications (subject to lender and circumstances). Equipment serves as loan security, allowing 100% financing including GST in many cases.

Rates are indicative examples only. Actual rates depend on individual circumstances and lender assessment.

What is a Business Equipment Loan?

A business equipment loan (also called equipment finance or chattel mortgage) is specialised financing that allows your business to purchase essential equipment without paying the full amount upfront. The equipment itself serves as collateral for the loan, which typically results in more favourable rates compared to unsecured business finance.

This financing structure helps businesses preserve working capital while still acquiring equipment necessary for operations, growth, or competitive advantage. Rather than depleting cash reserves on a single large purchase, businesses spread the cost over time through manageable regular repayments.

Key Characteristics

Secured lending: The equipment being purchased serves as security for the loan, registered via the Personal Property Securities Register (PPSR). This security reduces lender risk, often resulting in competitive rates and the ability to finance 100% of equipment costs.

Immediate ownership: With most equipment loan structures (particularly chattel mortgages), your business owns the equipment from day one, despite the loan being outstanding. This allows full depreciation claims and complete control over equipment use.

Flexible terms: Loan terms typically align with the equipment’s useful life, ranging from 1-7 years depending on the asset type. Office equipment might attract shorter 1-3 year terms, while heavy machinery could extend to 7 years.

Preserves cash flow: Rather than tying up substantial capital in equipment purchases, businesses maintain liquidity for other priorities like inventory, payroll, marketing, or unexpected opportunities.

How Equipment Loans Work

Understanding the equipment loan process helps businesses prepare effectively and set realistic expectations for timing and requirements.

The Basic Process

You identify equipment your business needs and obtain a supplier quote. After selecting a lender (either directly or through a broker), you submit an application with required documentation demonstrating your business’s capacity to service the loan.

The lender assesses your application based on business age, financial strength, credit history, and the equipment being financed. Equipment type significantly impacts approval likelihood—lenders prefer equipment with strong resale markets that can be easily recovered if necessary.

Upon approval, the lender provides funds directly to the equipment supplier. Your business takes possession of the equipment and begins making regular repayments covering principal and interest over the agreed term.

Security Registration

Lenders register their security interest over the equipment via the PPSR, which protects their position if your business defaults on repayments. This registration doesn’t affect your day-to-day equipment use but prevents you from selling or refinancing the equipment without lender approval.

Once the loan is fully repaid, the lender removes their registered interest, giving your business clear title to the equipment.

Repayment Structures

Most equipment loans offer monthly repayments, though some lenders accommodate quarterly repayments for businesses with seasonal cash flow patterns. Repayments can be structured as:

• Fixed equal instalments: Standard approach where each payment covers part principal and part interest, fully paying off the loan by term end.
• Balloon payments: Lower monthly repayments with a larger lump sum (residual value) due at term end, typically 20-40% of the loan amount. This reduces monthly cash flow impact but increases total interest costs.
• Seasonal schedules: Customised repayment patterns matching business revenue cycles, particularly useful for agricultural or tourism-related businesses.

Types of Equipment You Can Finance

Business equipment loans can finance virtually any tangible business asset with a serial number and established resale market. Common categories include:

Commercial Vehicles

Work vehicles including utes, vans, trucks, delivery vehicles, and company cars used primarily (51%+) for business purposes. Vehicle loans typically attract competitive rates due to strong resale markets and straightforward valuation.

See our detailed guide on truck finance for heavy commercial vehicles.

Office & IT Equipment

Computers, servers, networking equipment, office furniture, telephone systems, and business software. These shorter-life assets typically require 1-3 year loan terms to match their useful life and technology refresh cycles.

Explore IT equipment finance options for technology investments.

Heavy Machinery

Construction equipment, earthmoving machinery, forklifts, manufacturing equipment, and industrial plant. These high-value assets often qualify for longer 5-7 year terms given their extended useful lives.

Check our forklift finance guide for warehouse equipment.

Medical & Dental Equipment

Diagnostic equipment, treatment devices, imaging systems, dental chairs, and practice fit-outs. Medical equipment typically attracts specialist lenders familiar with healthcare industry requirements.

See medical equipment finance and dental equipment finance for healthcare-specific guidance.

Specialised Equipment

Industry-specific equipment including agricultural machinery, hospitality equipment, manufacturing tools, and professional services equipment. Specialist lenders often understand unique equipment types and industry requirements better than mainstream banks.

Review our machinery finance guide for industrial equipment options.

Loan Structures Available

Australian businesses can choose from several equipment finance structures, each with distinct ownership, tax, and cash flow implications.

Chattel Mortgage (Equipment Loan)

The most common structure where your business borrows funds to purchase equipment outright. You own the asset from day one with the lender holding security interest. This structure allows depreciation claims plus interest deductions, typically offering the lowest total cost.

Chattel mortgages suit businesses wanting long-term equipment ownership with straightforward tax treatment. See our comprehensive chattel mortgage guide for detailed information.

Hire Purchase

The lender purchases equipment on your behalf, which you then “hire” through regular payments. Ownership transfers to your business after all payments (including any residual) are made. This structure suits businesses preferring gradual ownership without immediate ownership responsibilities.

Finance Lease

The lender purchases equipment and leases it to your business for an agreed term. You don’t own the asset during the lease period, though you typically have purchase options at term end. Lease payments are fully deductible, though you cannot claim depreciation on leased assets.

Operating Lease

Short-term rental arrangements where the lender retains ownership throughout. These suit businesses needing equipment temporarily or preferring regular upgrades without ownership commitment. Lease payments are operational expenses rather than capital expenditure.

Compare different equipment finance options to determine which structure best fits your needs.

Qualification Requirements

Most lenders apply similar baseline criteria, though specific requirements vary by lender, loan amount, and equipment type.

Standard Eligibility Criteria

• Trading history: Most traditional lenders require minimum 12 months trading history with demonstrable revenue. Specialist lenders may consider newer businesses (3-6 months) with strong applications or additional security.
• Business registration: Current ABN and GST registration (GST registration allows claiming input tax credits on equipment purchases, significantly improving cash flow).
• Financial capacity: Demonstrated ability to service loan repayments based on revenue, expenses, and existing debt commitments. Lenders typically assess debt service coverage ratios to ensure comfortable repayment capacity.
• Credit history: Business and director credit histories are assessed. While perfect credit isn’t required, significant defaults or payment issues may require specialist lenders or higher rates.
• Equipment specifications: The equipment must have identifiable serial numbers for PPSR registration, be available in Australia, and have established resale markets for lender security.

Eligibility criteria may vary by industry—specialist lenders apply different standards based on equipment type, business sector, and loan amount. Specific requirements vary by loan amount, asset type, and industry.

Documentation Requirements

Standard applications require:

• Business financials: Recent financial statements or tax returns (typically last 2 years), business activity statements (BAS), and bank statements showing transaction history.
• Equipment details: Supplier quotes clearly showing equipment specifications, pricing (including GST breakdown), and delivery timeframes.
• Business verification: Current ABN/ACN registration certificates, GST registration confirmation, and evidence of ongoing business operations.
• Director information: Director identification, residential addresses, and consent for credit checks.

For businesses with limited documentation, explore ABN finance options designed for self-employed and newer businesses.

Application Process

Modern equipment loan applications can be completed efficiently through streamlined digital processes, though traditional banks may require more extensive documentation and longer processing times.

Step 1: Equipment Selection and Quote

Identify equipment requirements and obtain detailed supplier quotes. Ensure quotes include all costs (equipment, delivery, installation, GST) and specify exact equipment models with serial numbers where possible.

Step 2: Lender Selection and Application

Research lenders or engage a broker to access multiple lender options. Compare rates, terms, repayment flexibility, and approval criteria. Modern comparison platforms allow you to see options from 100+ lenders efficiently.

Complete the application form with accurate business and financial information. Incomplete or inaccurate applications delay processing and may result in declined applications.

Step 3: Documentation Submission

Provide required documentation promptly. Lenders typically request additional information during assessment—responding quickly accelerates approval timeframes.

Step 4: Credit Assessment

Lenders assess your application based on business financials, credit history, equipment type, and loan structure. Initial credit decisions for straightforward applications may be available within 24-48 hours, though this timeframe varies by lender and application complexity.

Step 5: Approval and Documentation

Upon approval, review loan documentation carefully including interest rates, fees, repayment schedules, and any conditions. Ensure you understand balloon payments if applicable, early repayment terms, and lender obligations regarding equipment maintenance and insurance.

Step 6: Settlement and Equipment Delivery

After signing documentation, the lender typically pays the supplier directly. You receive the equipment and begin repayments according to the agreed schedule. Settlement timeframes vary based on equipment availability and documentation execution speed.

Rates and Costs

Equipment loan costs extend beyond nominal interest rates to include various fees and charges that impact total borrowing costs.

Interest Rates

In 2025, Australian business equipment loan rates typically range from 6.5% p.a. for established businesses with strong financials purchasing standard equipment, to 12%+ p.a. for newer businesses, specialist equipment, or higher-risk profiles.

Factors affecting your rate include:

• Business age and strength: Established businesses with 2+ years trading and strong financials typically access better rates than newer businesses.
• Credit history: Clean credit records attract lower rates, while previous defaults or credit issues may increase rates or require specialist lenders.
• Loan amount and term: Larger loans over longer terms may attract different pricing than smaller short-term facilities.
• Equipment type: Standard equipment with strong resale markets (vehicles, common machinery) typically attracts better rates than specialist or niche equipment.
• Loan structure: Chattel mortgages often offer slightly lower rates than lease structures due to immediate ownership reducing lender risk.

Fees and Charges

Beyond interest rates, equipment loans may include:

• Application or establishment fees: One-time fees for processing your application, typically $300-$1,000+ depending on loan size.
• Monthly account keeping fees: Ongoing administrative charges, typically $10-$30 per month.
• Early repayment fees: Penalties for paying out loans before term end, particularly for fixed-rate loans. These can be substantial, so understand these terms before committing.
• PPSR registration fees: Costs for registering and removing security interests, typically $10-$50.

Always compare total cost of ownership including all fees, not just advertised interest rates.

Tax Benefits

Equipment loans offer significant tax advantages for Australian businesses, though specific benefits depend on your business structure and equipment use.

Depreciation Deductions

When you own equipment (chattel mortgage structure), your business can claim depreciation deductions based on the asset’s effective life as determined by ATO guidelines. High-value equipment may qualify for instant asset write-off provisions, allowing immediate deduction of the full purchase price (subject to eligibility thresholds and current legislation).

Depreciation timing and rates depend on equipment type and ATO depreciation schedules. Consult the ATO’s depreciation guidelines for specific asset categories.

Interest Deductions

The interest portion of equipment loan repayments is typically tax-deductible as a business expense, reducing your taxable income.

GST Treatment

Businesses registered for GST can claim input tax credits on the GST component of equipment purchases, improving upfront cash flow. The GST credit is typically claimed in your next business activity statement after purchase.

Lease Payment Deductions

If using finance or operating lease structures, the entire lease payment (excluding GST) is typically deductible as an operating expense. However, you cannot claim depreciation on leased equipment since your business doesn’t own it during the lease term.

Important: Tax benefits depend entirely on your specific business structure, tax position, and how you use the asset. The information above is general in nature only. Always seek independent advice from a qualified tax professional or accountant before making financing decisions.

Choosing the Right Loan

Selecting appropriate equipment finance requires evaluating multiple factors beyond just interest rates.

Consider Your Business Circumstances

• Cash flow priorities: If minimising monthly repayments is critical, consider balloon payments or longer terms. If minimising total cost matters most, shorter terms with higher monthly payments typically prove more economical.
• Equipment lifespan: Match loan terms to equipment useful life. Financing 7-year-life equipment over 10 years means paying for equipment after it requires replacement.
• Ownership intentions: If you want the equipment long-term, chattel mortgages typically offer better value. For shorter-term needs or regular upgrades, lease structures provide more flexibility.
• Tax position: Businesses with strong profitability maximise value from depreciation deductions under ownership structures. Those preferring simpler tax treatment may favour lease payment deductions.

Compare Multiple Options

Don’t accept the first offer—comparing multiple lenders often reveals significantly different rates and terms. Modern comparison platforms allow efficient evaluation of options from 100+ lenders, while brokers can access specialist lenders not available directly to businesses.

Consider:

• Interest rates and fee structures
• Repayment flexibility and seasonal schedules
• Balloon payment options
• Early repayment terms
• Lender reputation and service quality

Seek Professional Advice

Engage your accountant to evaluate tax implications of different structures. Consider consulting specialist equipment finance brokers who understand industry-specific requirements and can access lenders familiar with your equipment type.

Compare best equipment finance lenders to understand which providers suit your needs.

Frequently Asked Questions

Can I finance used equipment? Yes, most lenders finance both new and used equipment, though age restrictions typically apply. Used equipment older than 5-10 years (depending on type) may be harder to finance or attract higher rates. Lenders assess used equipment’s condition, remaining useful life, and resale value when determining loan terms.

How long does approval take? Initial credit decisions for straightforward applications may be available within 24-48 hours, though this refers to the approval decision itself. Complete settlement timeframes vary based on documentation execution speed, equipment availability, and supplier coordination. Complex applications or unusual equipment may require several days for assessment.

Can I refinance existing equipment loans? Yes, equipment refinancing is possible and may reduce rates or access equity built up in equipment. See our equipment refinancing guide for details on refinancing options.

Do I need a deposit? Many lenders offer 100% financing covering the full equipment cost plus GST, meaning no upfront deposit is required. Some lenders may require 10-30% deposits for higher-risk applications, newer businesses, or specialist equipment. Providing a deposit typically improves rates and approval likelihood.

What happens if equipment breaks down during the loan term? You remain responsible for all loan repayments regardless of equipment condition. Most lenders require comprehensive insurance covering equipment value, which may cover repairs or replacement depending on your policy. Maintain equipment properly and ensure adequate insurance coverage to protect against unexpected failures.

Can I pay out the loan early? Most equipment loans allow early repayment, though fixed-rate loans typically include early repayment fees to compensate lenders for lost interest. Variable-rate loans may allow fee-free early repayment. Review early repayment terms before committing to ensure flexibility matches your circumstances.

Speak with Specialists

Need expert guidance on your business equipment loan application? Email: loans@loanphone.com.au Website: www.loanphone.com.au

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Last updated: 2025-11-08