Equipment financing for small businesses can help Australian operators purchase essential vehicles, machinery and commercial equipment without using a large amount of working capital upfront.
For many businesses, the question is not simply:
Can we afford to buy the equipment?
A better question is:
What happens to our cash position after we buy it?
A business may have enough cash in the bank to purchase a $100,000 machine outright.
But using that $100,000 can reduce the money available for:
Equipment finance allows the business to spread the purchase cost over an agreed period while putting the asset to work immediately.
The Asset Finance Shop (TAFS) arranges equipment finance for Australian small businesses through access to more than 80 bank and non-bank lenders.
TAFS can review the business, asset, available documentation and cash flow requirements before comparing suitable small business equipment loans.
For straightforward applications where the required information is available, approval can be arranged in as little as 24 hours.
This guide explains how equipment financing can protect working capital, how repayments can be structured and what small businesses should compare before financing essential assets.
Equipment financing is commercial finance used to purchase an asset that supports or generates income for a business.
Rather than paying the complete purchase price upfront, the business finances the asset and makes agreed repayments over time.
Eligible assets can potentially include:
TAFS primarily arranges equipment purchases through a chattel mortgage.
Under a chattel mortgage:
Working capital is the money a business has available to meet its short-term operating requirements.
A business can be profitable and still experience cash flow pressure.
For example, a contractor might have plenty of work booked but still need to pay:
while customers may not pay invoices for another 30 days.
That timing difference matters.
Using a large amount of available cash to purchase equipment can leave less room to absorb normal business expenses while waiting for revenue to come in.
Equipment finance can separate the asset purchase from day-to-day operating cash.
Consider a small business with:
Cash reserves: $180,000
Equipment required: $120,000
If the business pays cash:
Cash remaining: $60,000
The company owns the machine outright.
But $120,000 of liquid cash has disappeared from the business immediately.
The remaining $60,000 may need to cover:
The business may technically be asset-rich while becoming much tighter on cash.
Now consider the same purchase using equipment finance.
Equipment price: $120,000
Deposit: $20,000
Amount financed: $100,000
Instead of using $120,000 upfront, the business uses $20,000 and retains significantly more cash.
That retained capital can remain available for:
The business pays interest for using the finance, so the decision is not automatically cheaper.
The commercial question is whether retaining the cash is worth the cost of borrowing.
|
Factor |
Paying Cash |
Equipment Finance |
|
Large upfront cash requirement |
Yes |
Usually lower |
|
Regular repayments |
No |
Yes |
|
Interest cost |
No |
Yes |
|
Working capital retained |
Less |
More |
|
Equipment available immediately |
Yes |
Yes |
|
Cash available for operating expenses |
Reduced |
Potentially higher |
|
Ability to structure term |
No |
Yes |
|
Balloon option |
No |
Potentially |
Neither option is automatically correct.
The business should consider what else its cash needs to do.
Paying cash may suit a business that:
The mistake is assuming cash is automatically the best option simply because the money is available.
Businesses should look at the position after the purchase.
Financing may suit a business that wants to:
The strongest reason to finance an asset is generally that it supports the wider business.
New contracts often create a cash flow gap.
A business might win a contract worth hundreds of thousands of dollars but need to invest before the first invoice is paid.
The business may require:
Consider a civil contractor that wins additional work but needs a:
$160,000 excavator
before the project begins.
Paying the full $160,000 from cash may leave less money available for:
Financing the excavator can potentially allow the equipment and working capital requirements to be separated.
Growing businesses often encounter the same problem:
Work is increasing faster than available equipment.
This can happen when:
The business needs assets before it can fully generate the additional revenue.
Small business equipment loans can allow those assets to be purchased without waiting to accumulate the complete purchase price in cash.
Equipment finance is not only for expansion.
Replacing an unreliable asset can also protect cash flow.
An old machine may have no finance repayment.
But it may create costs through:
The correct comparison is not simply:
Paid-off equipment versus financed equipment.
Compare:
Total cost of keeping the old asset
against:
Total cost and productivity of the replacement.
Consider a machine requiring:
Repairs: $3,000 per month on average
Lost productivity: $2,000 per month
Total estimated impact: $5,000 per month
If replacement equipment creates a manageable finance repayment while reducing those costs, replacing the machine may improve the business despite introducing debt.
The decision should be based on the complete commercial effect.
A chattel mortgage is the primary equipment finance structure arranged by TAFS.
The business owns the asset from settlement.
The lender provides the funds and registers security over the equipment until the finance has been repaid. Pasted markdown(20260820-020148)
A chattel mortgage may be structured with:
This allows the finance to be adjusted around the equipment and business cash flow.
Potentially.
The regular repayment can be affected by:
The aim should not simply be to produce the lowest possible repayment.
A sustainable structure should consider:
A deposit reduces the amount financed.
For example:
Equipment: $150,000
Deposit: $30,000
Finance amount: $120,000
A larger deposit can reduce:
But it also removes cash from the business.
Not automatically.
Consider what happens after settlement.
If a business has:
$70,000 cash available
and puts:
$60,000 into the equipment
it may only have $10,000 left for operating expenses.
A smaller deposit may produce a higher repayment but leave the business better protected from:
The deposit should be considered alongside working capital.
Potentially.
Not every equipment finance application requires a deposit.
Some eligible businesses may qualify for finance covering the full purchase price.
Others may need a contribution.
The lender may consider:
Deposit requirements vary between lenders.
A business replacing existing equipment may have equity available.
For example:
Current machine value: $70,000
Existing finance payout: $25,000
Potential equity:
$45,000
That equity can potentially contribute toward the replacement equipment.
This may allow the business to reduce new borrowing without using the same amount of cash.
A balloon leaves an agreed amount outstanding at the end of the finance term.
For example:
Amount financed: $120,000
Term: 5 years
Balloon: $24,000
Regular repayments are generally lower because $24,000 remains payable at the end.
A balloon can improve monthly cash flow.
The trade-off is that the business still needs to deal with the final amount.
A balloon may suit a business that wants to keep monthly repayments lower while an asset is generating income.
For example, a transport business may prefer to retain more monthly cash for:
An earthmoving contractor may need more cash available for:
The balloon should still make sense relative to:
Not necessarily.
It generally lowers regular repayments.
But because more principal remains outstanding for longer, the business may pay more interest overall.
Compare:
not just the smallest monthly number.
The available term depends on factors including:
A longer term generally produces lower regular repayments.
But it can also mean:
The finance term should match how long the business expects the asset to remain productive.
Consider the same piece of machinery.
Generally:
Generally:
Neither is automatically better.
Cash flow and expected asset life should guide the decision.
Equipment leasing is another structure businesses may encounter.
The ownership position differs from a chattel mortgage.
Under a chattel mortgage:
Under a typical lease:
Businesses comparing equipment leasing with a chattel mortgage should review:
TAFS primarily arranges chattel mortgage equipment finance.
Equipment finance and a general business loan are also different.
Usually tied to a specific identifiable asset.
That asset provides security for the finance.
May provide funds for broader purposes such as:
If the primary need is a machine or vehicle, equipment finance may provide a more appropriate structure.
If the business needs flexible capital across several expenses, a business loan may be more suitable.
Equipment finance can potentially be used across a wide range of industries.
Other commercial equipment may also qualify.
Yes.
Selected lenders can finance used equipment purchased through:
The lender may assess:
Used equipment can be a practical way to preserve cash while still increasing business capacity. Pasted text(28)
Potentially.
Selected lenders can finance eligible private-sale business assets.
Additional checks may include:
A valuation or inspection may also be required.
Potentially.
Selected lenders can consider eligible auction purchases.
It can help to complete an initial finance assessment before bidding so the business has a clearer idea of:
Final approval will still depend on the asset purchased.
Yes.
Sole traders can apply for equipment finance.
The lender may consider:
Low doc options may also be available through selected lenders.
Potentially.
Selected lenders can consider newer businesses.
Where trading history is limited, the lender may place greater emphasis on:
A newer ABN does not necessarily mean the person behind the business has no industry experience.
Potentially.
Selected lenders can assess eligible applications using information such as:
instead of requiring complete financial statements in every application.
Low doc still involves lender assessment.
Lenders may look at:
Particularly important for newer businesses.
This may be assessed through:
depending on the lender.
This can include:
The lender may review current and previous repayment conduct.
The lender considers:
Ultimately, the business needs to demonstrate that the proposed repayment fits alongside its other commitments.
Equipment finance providers do not all use the same credit policy.
For example:
May prefer established businesses with full financial statements.
May accept low doc applications.
May consider newer ABNs.
May be more comfortable with older machinery.
May accept private-sale equipment.
The business has not changed.
The lender criteria have.
That is why lender comparison can matter.
The lowest interest rate does not automatically mean the strongest equipment finance option.
Consider:
Lower rate
Large deposit
Shorter term
High monthly repayment
Slightly higher rate
Smaller deposit
Longer term
Lower monthly repayment
Option A may cost less overall.
Option B may protect more working capital.
The correct choice depends on what the business needs.
Compare:
A finance option should be judged by its effect on the whole business.
Consider a contractor with:
Cash: $150,000
Excavator: $130,000
The business could pay cash.
But it also has:
Paying $130,000 cash for the excavator could leave the business exposed.
Financing some or all of the excavator may allow the contractor to preserve enough working capital to comfortably meet those obligations.
A commercial cleaning business wins a large contract.
Before commencement it needs:
The customer may not pay the first invoice for 30 days.
Using the company's cash to purchase all the equipment upfront could make funding wages and mobilisation more difficult.
Equipment finance can allow the machines to be acquired while retaining more cash for contract delivery.
A trade business hires another technician.
To make that employee productive, the business needs:
The employee may begin generating revenue immediately.
But buying all those assets with cash creates a large upfront expense.
Equipment finance can spread the asset cost while the new employee begins producing income.
Finance should not be used simply to hide an underlying cash flow problem.
Warning signs may include:
The asset should support the business.
Finance cannot turn an uneconomic purchase into a good one.
Before applying, ask:
TAFS reviews:
TAFS considers:
TAFS begins with a soft credit check that leaves no formal enquiry on the credit file.
The internal credit team assesses the application against suitable lender policies.
TAFS can compare suitable options through access to more than 80 bank and non-bank lenders. Pasted text(27)
The finance can be considered around:
The aim is to create a structure that fits the business rather than simply maximising the loan amount.
Once a suitable lender has been selected, one formal application is submitted.
TAFS coordinates the remaining lender, seller and equipment requirements through to settlement.
Straightforward applications can be approved in as little as 24 hours once the required information is available. Pasted text(27)
|
Area |
Information |
|
Identity |
Driver's licence |
|
Business |
ABN and business structure |
|
History |
Time trading and industry experience |
|
Banking |
Recent business bank statements |
|
Income |
Current contracts or business activity |
|
Existing debt |
Current vehicle, equipment and business finance |
|
Equipment |
Make, model, year and description |
|
Purchase |
Price and seller |
|
Deposit |
Available contribution |
|
Trade-in |
Value and payout if applicable |
|
Settlement |
Invoice and asset identification |
Not every lender requires every item.
Equipment finance allows a business to purchase an asset and repay the cost over an agreed term.
Under a chattel mortgage, the business owns the equipment from settlement while the lender holds security over it until the finance is repaid.
It can reduce the amount of cash required upfront.
Instead of paying the complete equipment price immediately, the business can retain more working capital while making structured repayments.
Not automatically.
Paying cash avoids finance costs.
Financing preserves more working capital.
The right choice depends on what else the business needs its cash for.
Working capital is the money available to meet normal short-term business costs such as wages, suppliers, fuel, insurance and tax obligations.
Potentially.
Selected applications may qualify for finance covering the full eligible purchase price.
Others may require a deposit.
Not always.
Deposit requirements depend on the business, equipment, finance amount and lender.
Potentially.
Available equity in an existing asset may contribute toward the replacement purchase.
Yes.
A balloon can be included in some chattel mortgage structures.
It can reduce regular repayments but leaves a larger amount payable at the end.
It can reduce regular repayments.
However, the business may pay interest for longer.
The term should match the expected working life of the equipment.
A small business equipment loan is finance used to purchase commercial machinery, vehicles or other income-producing assets.
The asset generally provides security for the finance.
Eligible assets can include trucks, vans, excavators, construction machinery, agricultural equipment, forklifts, manufacturing machinery and other commercial equipment.
Yes.
Sole traders can apply for equipment finance subject to lender criteria.
Potentially.
Selected lenders will consider newer businesses based on industry experience, current work, financial position and the proposed asset.
Potentially.
Selected lenders can use bank statements and other business information rather than requiring full financial statements for every application.
Yes.
Selected lenders can finance used equipment purchased through dealers, private sellers and auctions.
Potentially.
Additional seller, ownership and equipment checks may be required.
Potentially.
Completing an initial finance assessment before bidding can help establish likely lender requirements.
No.
Under a chattel mortgage, the business owns the asset from settlement.
Under a typical lease, the provider generally owns the equipment while the business pays to use it.
No.
Equipment finance is normally tied to a specific asset.
A business loan may provide funds for broader business expenses.
Compare:
TAFS primarily arranges chattel mortgage finance.
The business owns the asset from settlement while the lender holds security over it until the finance has been repaid. Pasted markdown(20260820-020148)
TAFS has access to more than 80 bank and non-bank lenders. Pasted text(27)
Straightforward applications can be approved in as little as 24 hours once the required information is available. Pasted text(27)
Buying essential equipment should improve the business, not leave it short of the cash required to operate.
A business may have enough money to purchase an asset outright and still decide that keeping more working capital available is commercially stronger.
The key is finding the right balance between:
TAFS can review your equipment purchase, current cash position, available deposit or trade-in and repayment requirements before comparing suitable equipment finance options through access to more than 80 bank and non-bank lenders.
For straightforward applications where the required information is available, approval can be arranged in as little as 24 hours.
The Asset Finance Shop (TAFS) is a commercial asset finance brokerage based in Sydney.
Information on this page is general in nature and doesn't take your circumstances into account. Speak to a TAFS broker about finance options for your business and to your accountant regarding tax treatment.