Equipment finance: paying for machinery and tools as they earn

Ask an equipment financier what they’re really lending against and most will tell you the same thing: the machine. Your business matters, but the asset does a lot of the work. A late-model excavator with a ready resale market gets approved on terms that a custom-built packaging line or a café fit-out never will. Once you understand that, the rest of equipment finance makes sense.

How does equipment finance work?

You choose the equipment and the supplier. The lender pays the supplier (or, for a private sale, the seller) and you repay the lender in regular instalments over an agreed term. Throughout the term the lender holds a security interest in the equipment, recorded on the national PPSR so that anyone checking the serial number can see the lender’s claim. Pay the debt off and the lender discharges that registration.

Repayments are usually fixed and monthly, though seasonal businesses such as farmers and contractors can often negotiate structured schedules that follow their income. Many agreements also let you defer part of the price to a final balloon (called a residual on leases), which trims each instalment in exchange for a bigger cheque at the finish.

Our equipment finance calculator shows how term, deposit and balloon change the repayment and the total you’ll pay.

Which structure should you choose?

“Equipment finance” is the umbrella. Underneath sit four common structures, and choosing well affects ownership, your BAS and your tax return.

Structure	Title while you’re paying	How GST is handled	Tends to suit
Chattel mortgage	Yours from day one; the financier registers security	Claim the GST in the purchase price as a credit, usually on your next BAS	Owners who want the asset on their books and the depreciation
Finance lease	The lender (lessor)	GST is built into each lease payment	Businesses preferring deductible rentals and a residual at the end
Hire purchase	Stays with the financier until you make the last instalment	GST credit claimed upfront	Buyers who want ownership but at the end of the term
Operating lease	The lender, who takes the resale risk	GST in each rental	Gear that dates fast or that you’ll hand back

If you’re torn between two, our comparisons of chattel mortgage vs finance lease and leasing vs buying equipment set the trade-offs out side by side.

How do lenders rate the equipment?

Lenders sort assets roughly by how quickly and reliably they could resell them:

• Primary or “hard” assets: trucks, trailers, earthmoving and construction machinery, tractors, forklifts, buses. Serial-numbered, widely traded and durable. These attract the best terms and the least paperwork.
• Secondary assets: manufacturing machinery, printing presses, medical and dental equipment, commercial kitchens. Worth plenty to a specialist buyer, though there are fewer of them.
• “Soft” assets: IT hardware, software, office furniture, signage, fit-outs. Little second-hand value, so lenders lean much more heavily on your business strength, or require extra security.

That ranking explains why a newer business can sometimes finance a prime mover more easily than a $40,000 server room. It also explains why term matters: lenders want the finance paid down faster than the asset loses value, so terms often match the asset’s working life.

What else do lenders check?

Checkpoint	Typical expectation
Trading history	ABN age and GST registration; two years is a common comfort level, but not universal
Credit	Business and director credit files; defaults assessed case by case
Ability to repay	Smaller deals may need only recent statements; bigger ones move to BAS, then full accounts
The asset	Make, model, age, supplier invoice, and for used gear an inspection or valuation
Deposit or trade-in	More likely needed for specialised assets, older gear or newer businesses
Existing commitments	Other finance you’re repaying, including other equipment loans

For many standard purchases from an established business, approval can rest on a short application, ID and bank statements. Larger amounts and specialised assets move closer to full financials.

Does the instant asset write-off change the equation?

It can. The ATO’s small business newsroom confirms that, starting 1 July 2026, the $20k immediate deduction is no longer a year-by-year extension but a standing rule. It’s open to businesses whose aggregated turnover sits below $10m, and the cap is tested item by item rather than across your total spend, so a $14k welder and an $18k trailer could both qualify. Anything priced at or above the cap is pooled and depreciated gradually instead.

Two points owners often miss. First, the write-off applies whether you pay cash or finance the purchase with a chattel mortgage or hire purchase, because you’re treated as the owner. Under a lease you don’t own the asset, so you claim the lease payments instead. Second, a deduction reduces tax; it isn’t free money. Buy equipment because it earns its keep, then let the tax treatment improve the numbers. For the finer points, read our piece on the write-off and financed purchases, then have your tax agent sign off on the specifics.

Shopping for gear this quarter? Run your purchase past us. Sixty seconds of typing, and your credit history stays untouched while we look.

A quick worked example

A Toowoomba earthmoving contractor wants a used 14-tonne excavator advertised privately for $165,000, plus a $22,000 tilt hitch and bucket set from a dealer.

• The lender orders a valuation on the excavator and has the contractor search the PPSR by serial number. The search shows the seller’s existing finance, so the lender arranges to pay out that loan at settlement and send the balance to the seller.
• The attachments are bought new through the dealer and included in the same chattel mortgage.
• The contractor trades for six years and has strong bank statements, so the lender funds the full price over five years with a modest balloon.
• The GST on the dealer invoice is claimed as a credit; the private sale carries no GST because the seller isn’t registered.

The PPSR step protects against the most expensive mistake in second-hand equipment: buying something still encumbered by someone else’s finance.

Pros and cons

Advantages

• Keeps cash and overdraft limits free for wages and stock
• Usually no property security needed
• Repayments can be matched to the income the gear produces
• Tax deductions through depreciation or lease payments

Drawbacks

• Total cost exceeds paying cash, especially with fees and a balloon
• The asset can be repossessed if you default
• A balloon still has to be cleared, either from cash or by refinancing it
• Soft assets and specialised gear are harder to fund

Who provides it?

Banks are strong in equipment finance and often the cheapest option when your business fits their criteria, so speak to your own bank first. Manufacturer finance arms such as Cat Financial and John Deere Financial fund their own brands, and independent asset financiers such as Angle Finance and Flexicommercial handle a broad mix, including used and private-sale gear. If a bank has declined you, our page on equipment finance with bad credit covers the next steps.

Put the right gear to work

The best equipment purchase is one that starts earning before the first repayment is due. Found the machine already? Then the next job is funding it in a way your cash flow can carry, we can help work through the structure as well as the approval.

Our enquiry form is brief, roughly a minute of your time, and it doesn’t put a mark on your credit report. What you send stays with our team, not a distribution list, and a person who knows asset finance calls you back to discuss it. Precise details on the make, model, year, price and whether it’s a dealer or private sale mean we can suggest a sensible structure on the first call.

Find out how to fund your equipment →