The Complete Guide to Equipment Finance in Australia (Structures Explained)

Key highlights

• Four core structures: chattel mortgage, finance lease, commercial hire purchase, operating lease.
• One application compares 80+ banks and non-bank lenders through a single broker.
• Rates from around 6.55% p.a. for strong, asset-backed deals, subject to assessment.
• Low-doc options may suit ABN holders without full financials on hand.
• Terms typically 1 to 7 years, with balloon or residual options to lower repayments.
• New and used equipment can be financed; structure affects tax and GST treatment.

What equipment finance is

Equipment finance is a broad category of commercial lending that funds the physical assets a business uses to operate and grow, from vehicles and machinery to IT, medical devices, fit-outs and manufacturing plant. Rather than paying the full purchase price upfront, you spread the cost over a set term while the asset earns its keep. Most facilities are secured against the equipment itself, which keeps pricing sharper than an unsecured loan because the lender holds a tangible asset as security. In Australia the term covers several distinct legal structures, chiefly chattel mortgage, finance lease, commercial hire purchase and operating lease, each with different ownership, accounting and tax outcomes. It is available to businesses of most sizes, from sole traders with an ABN to established companies, and can fund a single item or a full fleet. Because the right structure depends on how you use the asset, your cash flow and your accountant's advice, understanding the options first is what turns equipment finance from a simple loan into a genuine planning tool for your business.

Equipment loans versus leases

The first fork in the road is whether you want to own the asset or simply use it. Loan-style structures, such as a chattel mortgage or commercial hire purchase, are built around ownership: you take title to the equipment (immediately or at the end of the term) and treat it as your asset for accounting and depreciation. Lease-style structures, such as a finance lease or operating lease, are built around use: the financier owns the asset and you pay for the right to operate it over an agreed period. The practical differences show up in your balance sheet, your tax treatment and what happens when the term ends. Ownership structures suit equipment you intend to keep and run for years, especially assets that hold value. Leasing can suit fast-depreciating or rapidly changing equipment you may want to upgrade or hand back. Neither is universally better; the right answer depends on cash flow, how long you will use the asset, and your accountant's view on tax. A broker can model both against your numbers before you commit.

Chattel mortgage

A chattel mortgage is one of the most common structures for Australian businesses buying equipment they want to own. You take ownership of the asset from day one, and the lender registers a mortgage over it as security until the loan is repaid. Because you own the asset, it sits on your balance sheet and you generally claim depreciation and interest, while the financed amount can often be structured to suit your GST position, all subject to your accountant's advice. Chattel mortgages typically offer competitive rates because the security is strong and clearly defined, and they are flexible on deposits, from nil deposit for eligible applicants through to larger contributions that lower repayments. You can also set a balloon or residual amount at the end of the term to reduce monthly payments, then refinance, pay it out or trade the asset. Terms usually run from one to seven years. This structure tends to suit assets you plan to keep and use productively over the medium to long term, where owning outright at the end has clear value to the business.

Finance lease

Under a finance lease, the financier buys the equipment and leases it to your business for an agreed term, while you take on the risks and rewards of using it much as an owner would. You make regular lease payments and, at the end of the term, typically have options to pay a residual value and take ownership, refinance the residual, or continue leasing. Because the lease payments can often be treated as a business expense, this structure may appeal where you want predictable, fully expensed repayments, though the exact tax and GST treatment always depends on your circumstances and your accountant's guidance. A finance lease keeps the upfront outlay low, since the financier funds the full purchase price, and the residual lets you tailor repayment size to your cash flow. It can suit businesses that want the use of an asset over most of its working life without tying up capital, and that are comfortable with a defined residual obligation at the end. As always, comparing it against a chattel mortgage on your actual figures is the surest way to see which structure costs less overall.

Commercial hire purchase

A commercial hire purchase, sometimes called a CHP or hire purchase agreement, sits between a loan and a lease. The financier buys the equipment and hires it to your business over the term, and you take ownership automatically once the final payment (including any balloon) is made. During the term you have use of the asset while the financier retains title as security. This structure has become less common than the chattel mortgage since GST rule changes, but it still suits some businesses depending on their accounting method and how they account for GST, which is a question for your accountant. Repayments are fixed for the term, which makes budgeting straightforward, and you can set a balloon to reduce the regular amount. Like other ownership-oriented structures, a CHP tends to work well for equipment you intend to keep and depreciate over time. Because the differences between a CHP and a chattel mortgage are often more about tax and accounting than headline rate, it is worth having a broker and your accountant look at both before deciding which structure to apply for.

Operating lease

An operating lease is a pure rental arrangement: the financier owns the equipment, you pay to use it for a set period, and you hand it back at the end with no obligation to buy. Payments are usually treated as an operating expense, and the asset generally stays off your balance sheet, though accounting standards and your specific situation determine the treatment, so confirm with your accountant. This structure shines for equipment that dates quickly or that you only need for a defined project or period, such as technology, some vehicles and specialised plant, because it removes the risk of being left holding an asset worth less than expected. Some operating leases bundle maintenance or servicing into the payment, giving you a predictable all-in cost. The trade-off is that you never build equity in the asset, so over a long horizon it can cost more than owning. Operating leases suit businesses that value flexibility, want to upgrade regularly, or prefer to avoid residual value risk. A broker can help you weigh the convenience against the total cost across the options available to you.

Current equipment-finance rates

Equipment finance rates in Australia start from around 6.55% p.a. for strong, asset-backed deals, but the figure you are offered depends on several factors, so treat that as indicative and subject to lender assessment. Newer assets from mainstream categories, a solid trading history, a healthy deposit and clean credit all push pricing toward the sharp end. Conversely, older or specialised assets, smaller or cheaper equipment, low-doc applications or weaker credit are typically priced higher because they carry more risk for the lender. The structure you choose can also influence the rate, as can the term and any balloon or residual you set. Because more than 80 banks and non-bank lenders each assess these factors differently, the same deal can attract materially different offers. That is the practical value of comparing lenders on one application: rather than accepting the first rate you find, you see where your particular asset, business and structure are priced best. Rates move with the broader market too, so it is worth getting a current, tailored indication rather than relying on a headline number you saw months ago.

Low-doc versus full-doc applications

How much paperwork you need depends on the lender, the loan size and the strength of the deal. A full-doc application usually involves financial statements, tax returns and sometimes management accounts, and it tends to unlock the sharpest pricing because the lender can see your full position. A low-doc application asks for less, often relying on bank statements, BAS or a simple declaration, which suits ABN holders who do not have current financials on hand or who want a faster path. Low-doc facilities may be available for eligible applicants, particularly on straightforward assets and moderate loan sizes, though they can be priced higher to reflect the reduced verification. Some lenders also offer streamlined or asset-backed approvals where the equipment itself provides strong security. The right path depends on your circumstances: if your financials are strong and available, full-doc often wins on rate; if speed or simplicity matters more, low-doc can be the better trade. Because lenders set their own thresholds for when full financials are required, comparing options on one application helps you find the lightest-touch path your deal qualifies for.

Deposits and 100% funding

One of the attractions of equipment finance is that you often do not need a large deposit. For eligible applicants, many lenders will fund up to 100% of the asset's value, and in some cases associated costs, meaning you can preserve working capital and put the equipment to work straight away. A deposit is not always required, but contributing one can lower your repayments and sometimes improve your rate, because it reduces the lender's exposure. The amount of funding available depends on the asset type, its age and value, your trading history and credit profile, and the structure you choose. Newer, mainstream assets with strong resale value are the easiest to fund fully, while older or specialised equipment may attract a deposit requirement. If you are trading in an existing asset, its equity can serve as your contribution. There is no single rule, so it is worth understanding what each lender will fund before you commit your own cash. A broker can tell you quickly whether a nil-deposit structure is realistic for your particular purchase, or whether a modest contribution would meaningfully sharpen the deal.

New and used equipment

Equipment finance is not limited to brand-new purchases. Used and second-hand assets can absolutely be financed, whether bought from a dealer, through a private sale or at auction, which matters because plenty of quality commercial equipment is bought pre-owned. That said, the asset's age and condition influence the terms. Newer equipment usually attracts the longest terms and sharpest rates because it holds value and has more working life ahead of it. Older assets can still be financed, but lenders may shorten the term, adjust the rate or ask for a deposit, and some set a maximum age the asset can reach by the end of the loan. Private-sale and auction purchases are common and workable, though they can require a little extra verification of the seller and the asset. The type of equipment matters too, as specialised or niche items are assessed more cautiously than mainstream ones with an active resale market. Whether your purchase is new or used, comparing lenders on one application helps surface those willing to fund your specific asset on the best available terms rather than declining it on age alone.

Tax, GST and depreciation considerations (general - see your accountant)

The structure you choose has real tax, GST and depreciation implications, which is a major reason the four options exist. As a general guide only, ownership structures such as a chattel mortgage put the asset on your balance sheet, where you may be able to claim depreciation and the interest component of repayments, and the GST on the purchase price is typically handled upfront depending on your accounting method. Lease-style structures may allow you to treat payments as a deductible business expense, with GST applied to the payments rather than the full price. Operating leases often keep the asset off balance sheet and treat rentals as an operating cost. These outcomes interact with your accounting method, your GST registration and any instant asset write-off or depreciation measures in force at the time. None of this is tax advice, and the rules change, so the single most valuable step you can take is to run the specific structure past your accountant before you sign. Getting the structure right for your tax position can be worth more than a small difference in the headline interest rate.

Loan terms and balloons

Equipment finance terms typically run from one to seven years, and the length you choose is a balance between repayment size and total cost. A longer term lowers each repayment but means paying interest for longer, while a shorter term costs less overall but demands more each month. Lenders often align the maximum term to the asset's expected working life, so newer assets can usually be financed over longer periods than older ones. A balloon payment (also called a residual) is a lump sum set aside to be paid at the end of the term, which reduces your regular repayments in the meantime. When the balloon falls due you can pay it out, refinance it, or trade or sell the asset to cover it. Balloons are useful for managing cash flow, but a larger balloon means higher total interest and a bigger obligation at the end, so it pays to set it deliberately rather than simply to hit a target monthly figure. The right combination of term and balloon depends on how long you will keep the asset and how you want your cash flow to look, which a broker can help you model.

Equipment categories

Equipment finance covers a wide spread of asset categories, and the category often shapes how readily and cheaply a deal is funded. Common categories include commercial vehicles and trucks, yellow goods and construction machinery, agricultural and farming equipment, manufacturing and processing plant, medical and dental devices, hospitality and commercial kitchen fit-outs, IT and office technology, and trailers and materials-handling gear such as forklifts. Assets with an active resale market and clear value, like mainstream trucks or excavators, tend to attract the sharpest terms because lenders can recover their position easily if needed. More specialised or bespoke equipment, or items that are hard to resell, are assessed more cautiously and may carry higher rates or shorter terms. Soft assets such as software, signage or low-value fit-out items can still be financed, though often through different structures or at different pricing than hard, resaleable plant. Whatever category your equipment falls into, the breadth of lenders in the market means there is usually an appetite for it somewhere. Comparing 80-plus lenders on one application is how you find the ones that specialise in, and price keenly for, your particular type of asset.

Approval requirements

To finance equipment in Australia you generally need an active ABN, as these are commercial facilities rather than consumer loans, and GST registration can help though it is not always essential. Beyond that, lenders look at your trading history, credit profile, the asset being financed and, for full-doc deals, your financials. Established businesses with clean credit and strong, mainstream assets have the widest choice and the sharpest pricing. Newer businesses, including recently registered ABNs, may still qualify subject to lender criteria, sometimes through low-doc or asset-backed structures. A deposit, property ownership or a trade-in can strengthen an application, and past credit issues do not automatically rule you out, as some non-bank lenders take a more flexible view of adverse history, typically at a higher rate. For eligible applicants, same-day pre-approval and settlement within 24 to 48 hours may be possible, particularly on straightforward assets with tidy paperwork ready to go. Because each lender weighs these factors differently, the practical way to see where you stand is a single application compared across the panel, rather than applying to one lender, being declined, and having that mark your credit file.

Repayment examples

These examples are purely illustrative estimates, not quotes, and your actual repayments depend on the rate, structure, term and balloon a lender offers. As a first example, financing $50,000 over five years at an indicative 6.99% p.a. with no balloon works out to roughly $990 a month, an estimate only. As a second, $120,000 over five years at an indicative 6.99% p.a. with no balloon comes to around $2,375 a month. As a third, that same $120,000 over five years but with a 30% balloon (around $36,000 due at the end) drops the monthly figure to roughly $1,870, though you then face the balloon payment at the end of the term. These figures are rounded, exclude fees, and assume a fixed rate for simplicity; a small change in rate or term shifts them noticeably. They are meant to show how term and balloon move your repayments, not to represent an offer. For an accurate, tailored figure based on your asset and profile, the next step is a quick, no-obligation indication rather than relying on an estimate.

Choosing the right equipment finance structure is easier when you can see the options side by side against your own numbers. If you would like a clear, no-obligation indication, Simon Kendrick at Overdrive compares more than 80 banks and non-bank lenders on a single application, so you can weigh chattel mortgage, lease, hire purchase and operating lease on rate, structure and total cost, then apply once for the deal that fits. Reach out whenever you are ready to talk through your next purchase, and remember to run the final structure past your accountant so the tax treatment suits your business.