Quick Answer
Equipment finance in Australia allows businesses to acquire essential assets like vehicles, machinery, or technology without upfront capital, spreading the cost over time. It typically involves secured loans such as chattel mortgages, commercial hire purchase, or finance leases, where the asset itself acts as security. Rates for how does equipment finance work generally range from 6-14% p.a. in 2025 (indicative only), with terms of 1-7 years. Eligibility often requires a minimum 12-24 months trading history and sound financials, though specialist lenders via comparison platforms can assist newer businesses or those with complex scenarios. Tax benefits like depreciation and GST credits may apply, subject to ATO guidelines and individual circumstances. Modern comparison platforms can provide efficient assessment, with settlements possible within 24-48 hours for straightforward applications (subject to lender and circumstances).
| Business/Borrower Profile | Indicative Rate Range (p.a.) | Typical Term | Common Use/Equipment |
|---|---|---|---|
| Established (2+ years, strong financials) | 6-9% | 3-7 years | Heavy machinery, prime movers, medical equipment |
| Standard (1-2 years trading history) | 9-12% | 1-5 years | Delivery vans, IT systems, workshop tools |
| Developing/Newer (less than 12 months) | 12-14%+ | 1-3 years | Essential start-up equipment, smaller assets |
Rates are indicative examples only. Actual rates depend on individual circumstances and lender assessment.
📄 Navigation Guide
By the Loan Phone team · Reviewed by Anthony Moncada, M.App.Fin, Cert IV Finance & Mortgage Broking, Director
Understanding Equipment Finance in Australia
For many Australian businesses, acquiring essential equipment is crucial for growth, efficiency, and competitiveness. Whether you’re a construction company needing a new excavator, a medical practice investing in advanced diagnostic tools, or a transport business expanding its fleet, the upfront cost can be substantial. This is where how does equipment finance work becomes a key question.
Equipment finance, often referred to as asset finance or equipment loans, provides a structured way for businesses to fund the purchase of new or used assets without depleting their working capital. Instead of paying the full cost immediately, businesses make regular repayments over an agreed term, allowing the equipment to generate revenue while being paid off. This approach helps preserve cash flow, which is vital for day-to-day operations and other strategic business investments.
The Australian market offers a robust landscape of equipment finance options, from major banks like CBA, NAB, and Westpac to specialist equipment financiers and non-bank lenders. Each offers different products, rates, and eligibility criteria, making a comprehensive comparison essential for securing the best deal.
Key Types of Equipment Finance
Understanding the different structures is fundamental to knowing how does equipment finance work in practice. Each option has distinct legal, accounting, and tax implications, so it’s important to choose the one that best suits your business needs.
| Feature | Chattel Mortgage | Commercial Hire Purchase (CHP) | Finance Lease |
|---|---|---|---|
| Ownership | Business owns asset from day one | Lender owns until final payment | Lender owns, business leases |
| GST | Can claim full GST input tax credit upfront | Claim GST on principal & interest repayments | Claim GST on lease payments |
| Tax Deductions | Depreciation, interest, running costs | Depreciation, interest, running costs | Lease payments, running costs |
| Balance Sheet | Asset & liability on balance sheet | Asset & liability on balance sheet | Off-balance sheet (operating lease) or on-balance sheet (finance lease) |
| Balloon Payment | Optional | Optional | Mandatory (residual value) |
| Flexibility | High | High | Moderate (return or purchase at end) |
Chattel Mortgage
A chattel mortgage is a popular equipment finance option where the business takes immediate ownership of the asset, while the lender holds a ‘mortgage’ over it as security. Once the loan is fully repaid, the lender’s security is released.
Key Features:
- Ownership: You own the equipment from the outset.
- GST: Businesses registered for GST can typically claim the full GST input tax credit on the purchase price in their next BAS, rather than over the loan term.
- Tax Deductions: Interest charged on the loan and depreciation of the asset are generally tax-deductible (subject to ATO guidelines).
- Flexibility: Options for fixed interest rates, loan terms (typically 1-7 years), and balloon payments (a lump sum at the end of the loan to reduce regular repayments).
Commercial Hire Purchase (CHP)
A commercial hire purchase agreement means the financier purchases the equipment on your behalf, and you ‘hire’ it from them over a set period. At the end of the term, once all payments (and any balloon payment) are made, ownership transfers to your business.
Key Features:
- Ownership: The lender retains ownership until the final payment is made.
- GST: You can claim GST on the monthly repayments (principal and interest components).
- Tax Deductions: Interest charges and depreciation of the asset are typically tax-deductible.
- Structure: Similar to a chattel mortgage, CHP often includes options for fixed interest rates, flexible terms, and balloon payments.
Finance Lease
With a finance lease, the lender purchases the equipment and leases it to your business for a fixed period. You pay regular lease rentals, and at the end of the term, you typically have the option to purchase the equipment for its residual value, refinance the residual, or return the equipment.
Key Features:
- Ownership: The lender retains ownership throughout the lease term.
- GST: GST is typically claimed on each lease payment.
- Tax Deductions: Lease payments are generally 100% tax-deductible as an operating expense.
- Residual Value: A pre-determined residual value (balloon payment) is mandatory at the end of the lease.
The Equipment Finance Process: Step-by-Step
Understanding how does equipment finance work from application to settlement can help you prepare and expedite the process. While specific steps may vary between lenders and platforms, the general flow is as follows:
1. Determine Your Needs Identify the specific equipment you need, its cost, and how it will benefit your business. Consider if you need a new or used asset.
2. Gather Information Collect key business documents such as ABN, financials (profit & loss, balance sheets), bank statements, and details of the equipment to be financed. For newer or low-doc business loans, requirements may be simplified.
3. Compare Options This is a critical step. Instead of approaching individual banks, a comparison platform like Loan Phone allows you to submit your details once and receive multiple tailored offers from over 100 lenders. This ensures you’re seeing competitive rates and terms. Compare equipment finance options now.
4. Application Submission Once you’ve chosen a preferred offer, complete the formal application, providing all necessary documentation.
5. Credit Assessment The lender will assess your business’s financial health, credit history, and the viability of the equipment purchase. This typically involves reviewing your financials and credit file.
6. Approval & Documentation If approved, you’ll receive a formal offer outlining the terms, rates, and conditions. Review this carefully before signing the finance agreement.
7. Settlement The lender pays the equipment supplier directly, and the equipment is then yours to use (or lease, depending on the structure). Settlements are often possible within 24-48 hours for straightforward applications (subject to lender and circumstances).
Eligibility Criteria for Equipment Loans
Eligibility for equipment finance in Australia varies significantly among lenders. However, general guidelines typically include:
- Trading History: Most traditional lenders prefer businesses with a minimum of 2 years trading history. Newer businesses (6-24 months) may be considered by specialist lenders.
- ABN/ACN: A valid Australian Business Number (ABN) or Australian Company Number (ACN) is essential.
- Financial Health: Lenders assess your business’s profitability, cash flow, and debt-servicing capacity. Strong financials demonstrate your ability to repay the loan.
- Credit History: A clean credit history is preferred, but lenders may consider minor blemishes for established businesses. Specialist lenders may offer solutions for businesses with imperfect credit.
- Equipment Type: The asset being financed must be for genuine business use. Lenders also assess the asset’s age and condition, particularly for used equipment.
- Deposit: While 100% finance is often possible, a deposit may improve your chances of approval or secure a better rate, especially for newer businesses or higher-risk assets.
If you’re unsure about your eligibility, it’s always best to compare your options now or speak with a specialist broker who can guide you through the requirements and match you with suitable lenders.
Indicative Rates and Terms in 2025
How does equipment finance work in terms of cost? Equipment finance rates in Australia typically range from 6% to 14%+ p.a. in 2025, but these are indicative and subject to significant variation. Several factors influence the actual rate you’ll receive:
- Business Profile: Established businesses with strong financials (2+ years trading, good credit, consistent profitability) often secure rates in the 6-9% p.a. range.
- Newer Businesses: Businesses with less than 2 years trading history or those with limited financial data may see rates from 10-14%+ p.a., as they represent a higher risk to lenders.
- Loan Amount & Term: Larger loan amounts and shorter terms may sometimes attract slightly lower rates, but this is not a hard rule. Typical terms range from 1 to 7 years.
- Asset Type: Standard, easily re-sellable equipment (e.g., truck finance Australia, excavators) may attract better rates than highly specialised or custom assets.
- Lender: Major banks often offer lower rates to prime borrowers, while specialist non-bank lenders provide more flexible solutions for a broader range of business profiles, sometimes at slightly higher rates.
It’s important to remember that rates are not published publicly and require individual quoting. Using a comparison platform is the most efficient way to get personalised indicative rates without impacting your credit score. Start comparing now.
Tax Implications of Equipment Finance
Important: Tax benefits depend entirely on your individual business structure, circumstances, and how you use the asset. The information below is general in nature only. Always seek independent advice from a qualified tax professional or accountant before making any financing decisions.
Understanding the tax implications is a key part of how does equipment finance work for your bottom line. The specific tax treatment varies depending on the finance structure:
- Chattel Mortgage & Commercial Hire Purchase:
- Depreciation: You can generally claim depreciation on the equipment over its effective life, as determined by ATO guidelines.
- Interest: The interest component of your repayments is typically tax-deductible.
- GST: For a chattel mortgage, you can usually claim the full GST input tax credit upfront. For CHP, GST is claimed on the principal and interest components of each repayment.
- Finance Lease:
- Lease Payments: The entire lease payment (excluding any GST portion) is generally tax-deductible as an operating expense.
- GST: GST is claimed on each lease payment.
Additionally, government incentives like the instant asset write-off or temporary full expensing (check current ATO guidelines for eligibility and thresholds for the 2025 financial year) can significantly impact the tax benefits of equipment acquisition. Learn more about equipment finance tax deductions. Always consult your accountant to understand how these apply to your specific situation and chosen finance structure.
Streamlining Your Equipment Finance Search
Navigating the equipment finance market can be complex, with numerous lenders offering varied products. This is where modern comparison platforms and specialist brokers significantly simplify how does equipment finance work for you.
Traditional Approach:
- Time-consuming: Approach individual banks one by one.
- Limited options: Only see what that specific bank offers.
- Multiple applications: Each application may impact your credit score.
- Less negotiation power: Harder to leverage competitive offers.
Loan Phone Approach:
- Fast Online Comparison: Submit your details once and compare personalised options from 100+ lenders simultaneously.
- Specialist Support Available: Our expert brokers can help you understand the nuances of each product, guide you through eligibility, and secure finance for complex or “left-of-centre” scenarios where traditional banks might decline.
- Efficient Processing: Our streamlined digital process reduces paperwork and accelerates approvals and settlements.
- No Credit Impact: Using our comparison tool allows you to see your options without affecting your credit score.
This combination of technology and human expertise ensures you access the best possible rates and terms for your business’s specific needs, saving you time and effort. Compare your options now to see how simple it can be.
Example: Financing a Commercial Vehicle
Commercial Ute Finance Example
| Purchase Price | $70,000 |
| Deposit | $0 |
| Amount Financed | $70,000 |
| Indicative Interest Rate | 7.85% p.a. |
| Term | 5 years (60 months) |
| Optional Balloon Payment | $15,000 |
| Indicative Monthly Repayment | ~$1,100 |
| Total Cost Over 5 Years (indicative) | ~$79,900 |
This example is for illustrative purposes only. Actual rates, terms, and repayments depend on lender assessment, your individual circumstances, and current market conditions. Consult your accountant regarding tax implications. Financing a Toyota Hilux or similar commercial vehicle can be crucial for many businesses.
Frequently Asked Questions
How long does equipment finance take? +
Initial credit decisions for straightforward applications may be provided within 24-48 hours. However, complete settlement timeframes vary based on documentation execution speed, vendor coordination, and lender processing times. Streamlined platforms can help accelerate this process significantly.
Can I get equipment finance with bad credit? +
While traditional lenders prefer a clean credit history, specialist equipment financiers are often more flexible. It's still possible to secure finance with minor credit blemishes, though rates may be higher. Speak with specialists who can explore options tailored to your situation.
What documents do I need for equipment finance? +
Typically, you'll need your ABN, recent bank statements (3-12 months), and financial statements (P&L, balance sheet) if your business is established. For newer or smaller loans, simplified 'low-doc' options may require less documentation.
What are the types of equipment finance? +
The primary types of equipment finance in Australia are chattel mortgages, commercial hire purchase (CHP), and finance leases. Each offers different ownership structures, tax implications, and end-of-term options. See Key Types of Equipment Finance for a detailed comparison.
Is equipment finance tax deductible? +
Yes, equipment finance often offers significant tax benefits. These can include claiming GST input tax credits, deducting interest charges, and depreciating the asset. The specific deductions depend on your chosen finance structure and individual business circumstances. Always consult your accountant.
Can new businesses get equipment finance? +
Yes, new businesses with less than 12-24 months trading history can often secure equipment finance, particularly through specialist non-bank lenders. While eligibility criteria may be stricter and rates potentially higher, options are available for essential start-up equipment.
What is the difference between a chattel mortgage and commercial hire purchase? +
The main difference lies in ownership. With a chattel mortgage, you own the asset from day one. With commercial hire purchase, the lender retains ownership until your final payment. Tax and GST treatments also differ.
How does Loan Phone help with equipment finance? +
Loan Phone simplifies the process by allowing you to compare personalised options from over 100 lenders simultaneously, saving you time and helping you find competitive rates. Our specialist brokers also provide expert guidance and support for complex scenarios.
Get Equipment Finance for Your Business
Ready to explore equipment finance options?
Loan Phone combines streamlined online comparison with specialist broker expertise.
Fast Online Comparison - See personalised options from 100+ lenders
Specialist Support Available - Expert guidance when you need it
Efficient Processing - Streamlined process with digital document handling
Free, No Credit Impact - Use our comparison tool with no effect on your credit score
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 for business owners and ABN holders:
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.
Loan Phone www.loanphone.com.au | loans@loanphone.com.au
Compare Loans Now - No impact to your credit score
Last updated: 2026-03-03