Choosing the right finance structure for machinery and equipment can have a significant impact on your business cash flow, tax position and long-term balance sheet. Not all lenders offer every product, and the right fit depends on your business structure, documentation, and how you plan to use and eventually dispose of the asset. This guide covers every major machinery finance option available through Overdrive Funding.
Chattel Mortgage
A chattel mortgage is the most widely used commercial machinery finance structure in Australia. Your business takes ownership of the equipment from settlement while the lender registers a mortgage over it as security. When the loan is fully repaid, the mortgage is discharged. GST-registered businesses may be able to claim the full GST on the purchase upfront, and the interest component of repayments is generally tax-deductible — check with your accountant.
Chattel mortgages suit construction companies, civil contractors, farmers and manufacturers buying equipment they intend to keep long-term. Fixed monthly repayments provide certainty over the full loan term. A balloon at the end of the term can lower monthly payments if cash flow flexibility is important.
Finance Lease
With a finance lease, the financier owns the machinery while your business leases it for an agreed term. Monthly lease payments are typically fully tax-deductible as a business expense rather than a loan repayment. At the end of the term, you can purchase the machinery at its agreed residual value, refinance the residual, or hand the asset back and upgrade.
Finance leases work well for businesses that want to upgrade machinery regularly or prefer to keep assets off the balance sheet. The lease cost flows through the income statement rather than appearing as debt.
Commercial Hire Purchase
Under a commercial hire purchase arrangement, the lender buys the machinery and hires it to your business over a set term. Unlike a finance lease, ownership is guaranteed to transfer to your business once the final payment is made — there is no decision to make at the end. CHP has similar tax treatment to a chattel mortgage and suits operators who want certainty of outcome from the start.
Rent-to-Own Machinery Finance
Rent-to-own allows your business to take immediate possession of the machinery and put it to work while making regular payments. Ownership transfers to your business at the end of the agreement. This structure is particularly practical for operators who need the equipment generating revenue straight away without a large upfront commitment.
Rent-to-own can also suit businesses that face challenges with traditional loan approval — certain lenders assess applications differently under this product, making it accessible to operators with non-standard financials or limited credit history.
Operating Lease
An operating lease suits businesses that prefer to regularly upgrade their machinery rather than own it long-term. You use the equipment for an agreed period, make monthly lease payments, and return it at the end without any obligation to purchase. The residual value risk sits with the financier. This structure is well-suited to technology-intensive equipment where upgrades are frequent — such as CNC machines, diagnostic equipment or specialised manufacturing plant.
Equipment Loan
An equipment loan is a straightforward business loan secured against the machinery. Your business owns the asset from day one, repays principal and interest over the agreed term, and the loan is discharged at the end. This structure suits businesses that prefer a traditional lending arrangement without the complexity of a lease. Interest may be deductible and the asset can be depreciated.
Low Doc Machinery Finance
Low doc machinery finance is designed for self-employed operators, sole traders and small businesses that cannot provide standard financial documentation — typically no tax returns, BAS or financial accounts required. Approval is based on ABN history, credit profile and the machinery as security. Most specialist lenders offer low doc products up to $500,000.
This option suits owner-operators, subcontractors working on project income, recently restructured businesses and those with incomplete or pending tax returns. Rates are slightly higher than full doc but approval is faster and the documentation requirement is far simpler.
Low Deposit Machinery Finance
Low deposit machinery finance allows businesses to purchase plant and equipment with a smaller upfront contribution — often as low as 10% — rather than the 20% deposit that major banks typically require. This is subject to lender approval based on the strength of the overall application. Lower deposit requirements mean more of your working capital stays accessible for operating costs, consumables and project delivery.
No Deposit Machinery Finance
Eligible businesses may be able to finance up to 100% of the purchase price of machinery with no upfront deposit, including approved on-road costs or accessories. This is available for prime applications — typically two or more years ABN and GST registration, clean credit, and strong bank statement trading history. No deposit financing lets you put revenue-generating machinery on site immediately without tying up capital.
Refinancing Existing Machinery
If your business owns machinery outright or with existing finance, refinancing can unlock equity to improve cash flow, fund the deposit on new equipment, or consolidate higher-rate facilities. A refinance places new finance against machinery your business already owns, releasing cash equal to the difference between the market value and the new loan amount.
Refinancing is also worth considering where your existing machinery finance rate is no longer competitive. Rates and lender appetite change, and a comparison across 80+ lenders can identify meaningful savings.
Sale and Leaseback
Sale and leaseback allows a business to sell machinery it currently owns to a financier and lease it back immediately, continuing to use the equipment without interruption. The transaction releases the equity in the machinery as working capital — which can be used to fund growth, cover tax obligations, bridge a cash flow gap, or invest in new plant.
This structure is used by businesses that have built significant equity in their plant and need capital without taking on new debt against other assets. It is also an option for operators who want to restructure their balance sheet by converting owned assets into a lease arrangement.
Which Machinery Finance Structure Suits Your Business?
The right structure depends on your tax position, how long you plan to keep the machinery, whether ownership or cash flow is the priority, and what documentation you can provide. Most GST-registered businesses buying to keep will default to chattel mortgage. Businesses that upgrade regularly or want operating expense treatment lean toward finance lease. Operators with limited documentation benefit from low doc. Those with equity in existing plant should consider sale and leaseback or refinance.
Overdrive Funding compares 80+ banks and specialist machinery lenders with one application — at no cost to your business. Contact us for a free comparison of all available machinery finance structures.