Equipment financing for small businesses allows Australian business owners and sole traders to purchase vehicles, machinery and other income-producing assets without paying the full purchase price upfront.

Instead, the cost of the asset is spread across an agreed finance term. This can help a business keep more cash available for wages, suppliers, fuel, maintenance, tax obligations and other day-to-day expenses while putting the equipment to work straight away.

The Asset Finance Shop (TAFS) arranges equipment finance for Australian businesses through access to more than 80 bank and non-bank lenders. Our internal credit team reviews each application before a formal lender submission, helping match the business, asset and available documentation with suitable finance options.

This guide explains how small business equipment loans work, the common finance structures, how repayments are calculated and what business owners should know before applying.

What Is Equipment Finance?

Equipment finance is commercial finance used to purchase assets that a business needs to operate, generate income or grow.

The equipment usually provides security for the loan, while the business repays the finance over an agreed period.

Equipment finance can be used for assets such as:

• Trucks
• Trailers
• Utes and vans
• Excavators
• Skid steers
• Posi-tracks
• Loaders
• Tractors
• Harvesters
• Manufacturing equipment
• Trade equipment
• Commercial kitchen equipment
• Medical equipment
• Technology and business hardware
• Other commercial assets

New and used equipment can be financed, with selected lenders also considering private sales and auction purchases.

How Does Equipment Financing for Small Businesses Work?

The process generally begins with an assessment of the business and the asset being purchased.

1. Work Out What Equipment the Business Needs

Start by considering:

• What asset is required
• Purchase price
• Whether it will be new or used
• How the equipment will be used
• How long the business expects to keep it
• Whether a deposit is available
• Whether there is a trade-in
• How the equipment will support business income

You can begin discussing finance before selecting the exact asset.

The final equipment and seller details will normally be required before settlement.

2. Complete an Initial Finance Assessment

TAFS reviews the business before making a formal lender submission.

The assessment can include:

• ABN and trading history
• Industry experience
• Recent bank statements
• Credit history
• Existing finance commitments
• Current business income
• Asset type
• Finance amount
• Available deposit or trade-in

TAFS begins with a soft credit check that leaves no mark on the applicant's credit file.

3. Compare Suitable Lenders

Equipment lenders have different policies.

One lender may suit an established business purchasing a new truck, while another may be better suited to a sole trader buying a used excavator.

Lender requirements can differ around:

• ABN age
• Financial statements
• Credit history
• Equipment age
• Purchase price
• Private sales
• Auctions
• Deposits
• Balloon payments
• Low doc applications

TAFS assesses the application against the requirements of more than 80 lenders before selecting an option for formal submission.

4. Structure the Equipment Loan

The finance can then be structured around the business and asset.

This may include:

• Finance amount
• Deposit
• Trade-in
• Finance term
• Repayment frequency
• Balloon payment
• Existing asset finance payout

The repayment should fit the business's cash flow and the expected working life of the equipment.

5. Submit the Formal Application

Once the business has reviewed the finance option, a formal application is submitted to the selected lender.

The lender may request additional information before approval.

6. Approval and Settlement

After approval, the lender prepares the finance documents and completes any final checks.

Once all conditions are satisfied, the lender generally pays the approved funds directly to the equipment seller.

The business can then begin using the asset.

What Are the Main Equipment Finance Options?

There are several ways businesses can fund equipment.

The structure determines who owns the asset, how repayments work and what happens at the end of the finance term.

TAFS primarily arranges chattel mortgage finance for business equipment purchases.

What Is a Chattel Mortgage?

A chattel mortgage is a commercial loan used to purchase a business asset.

Under a chattel mortgage:

• The business owns the equipment from settlement
• The lender registers a security interest over the asset
• The finance is repaid over an agreed term
• A deposit may be included
• A trade-in can contribute to the purchase
• A balloon payment may be available
• The lender's security is removed once the finance is repaid

Chattel mortgages are commonly used for trucks, machinery, commercial vehicles and other business equipment.

The business may be able to claim the GST on the purchase price, along with eligible interest and depreciation deductions. Speak with your accountant about the tax treatment that applies to your circumstances.

What Is Business Equipment Leasing?

Business equipment leasing generally allows a business to use equipment owned by a finance or leasing provider.

The business makes regular payments for the right to use the asset during the agreed term.

Depending on the agreement, the business may have options at the end of the term relating to:

• Returning the equipment
• Continuing the arrangement
• Purchasing the equipment
• Upgrading to newer equipment

Ownership and end-of-term conditions depend on the specific agreement.

TAFS primarily arranges chattel mortgage finance rather than equipment leasing. For businesses comparing equipment finance options, it is important to understand whether ownership from settlement is a priority.

Chattel Mortgage vs Equipment Leasing

The main difference is ownership.

Business owners should compare the total cost, ownership position and end-of-term conditions before selecting a structure.

What Equipment Can a Small Business Finance?

Small business equipment loans can be used across a wide range of industries.

Transport and Logistics

• Prime movers
• Rigid trucks
• Tippers
• Trailers
• Refrigerated trucks
• Courier vans
• Utes
• Service vehicles

Earthmoving and Civil Construction

• Excavators
• Mini excavators
• Skid steers
• Posi-tracks
• Loaders
• Rollers
• Graders
• Dozers
• Attachments

Agriculture

• Tractors
• Harvesters
• Headers
• Seeders
• Balers
• Sprayers
• Agricultural implements

Trades and Contracting

• Work vehicles
• Generators
• Compressors
• Scissor lifts
• Trailers
• Service bodies
• Larger tool packages

Manufacturing and Engineering

• CNC machinery
• Lathes
• Presses
• Fabrication equipment
• Packaging equipment
• Production machinery

Other Business Equipment

• Commercial kitchen equipment
• Refrigeration
• Medical equipment
• Dental equipment
• Technology
• Solar equipment
• Workshop equipment
• Other specialised business assets

How Are Equipment Loan Repayments Calculated?

Equipment loan terms and repayments depend on the complete finance structure.

The main factors include:

• Purchase price
• Amount financed
• Deposit
• Trade-in
• Interest rate
• Finance term
• Balloon payment
• Repayment frequency
• Lender fees
• Applicant profile
• Equipment age

A larger deposit reduces the amount borrowed.

A longer finance term can reduce regular repayments, although the business may pay more interest because the debt remains outstanding for longer.

A balloon payment can also reduce regular repayments by leaving part of the loan balance until the end of the term.

What Is a Balloon Payment?

A balloon is a lump sum left until the end of the equipment finance term.

For example, instead of repaying the entire loan through monthly instalments, the business can leave an agreed amount to be paid at the end.

A balloon can help reduce regular repayments and preserve more working capital during the finance term.

The final amount can potentially be:

• Paid from business funds
• Covered through a trade-in
• Paid from the sale of the equipment
• Refinanced, subject to approval

Before selecting a balloon, consider:

• Expected future value of the equipment
• How long the business will keep it
• Annual usage
• Maintenance costs
• Replacement plans
• Expected trade-in value
• Ability to manage the final payment

The balloon should suit the asset rather than simply being used to create the lowest possible monthly repayment.

How Long Are Equipment Loan Terms?

Equipment loan terms depend on the asset and lender.

Terms can commonly range between two and seven years, although the final term will depend on:

• Equipment type
• Asset age
• Purchase price
• Expected working life
• Business cash flow
• Applicant strength
• Balloon payment
• Lender requirements

A newer truck or long-life machine may support a longer finance term than an older asset approaching the end of its commercial life.

The finance term should make sense alongside the business's expected replacement cycle.

Do You Need a Deposit for Equipment Finance?

Not always.

Some businesses can qualify for finance covering the full purchase price, subject to lender criteria.

A deposit may be requested depending on:

• ABN age
• Credit history
• Equipment age
• Purchase price
• Market value
• Available documentation
• Business cash flow
• Finance amount

A deposit can reduce the amount financed and lower regular repayments.

A trade-in may also be used as the business's contribution.

Can a Sole Trader Get Equipment Finance?

Yes. Sole traders can apply for equipment financing for small businesses.

The lender may assess:

• ABN history
• Industry experience
• Recent bank statements
• Current contracts
• Personal credit history
• Existing debts
• Equipment value
• Deposit or trade-in
• Expected repayment capacity

Complete financial statements are not always required.

Selected lenders may offer low doc equipment finance using recent bank statements and other supporting information.

Can a New ABN Get Equipment Finance?

Yes. Selected lenders consider equipment finance applications from businesses with newer ABNs.

A lender may place additional weight on:

• Previous industry experience
• Current or upcoming work
• Contracts
• Work source agreements
• Personal credit history
• Bank statement activity
• Available working capital
• Deposit
• Equipment value

A new ABN doesn't automatically prevent approval.

The application needs to show how the asset will support the business and how the proposed repayments will be managed.

What Is Low Doc Equipment Finance?

Low doc equipment finance allows eligible businesses to apply without always providing complete financial statements or several years of tax returns.

Selected lenders may instead use:

• Recent business bank statements
• ABN details
• Credit history
• Industry experience
• Existing business income
• Contracts
• Assets and liabilities
• Equipment information

Low doc doesn't mean no assessment.

The lender still needs to confirm that the business can afford the finance.

Can Used Equipment Be Financed?

Yes. Used equipment can be financed through selected lenders.

The lender may consider:

• Asset age
• Condition
• Operating hours or kilometres
• Purchase price
• Market value
• Manufacturer
• Expected working life
• Seller type

Older or specialised equipment may require an inspection or valuation.

The available loan term can also be shorter where the equipment will be significantly older by the end of the finance period.

Can You Finance Equipment From a Private Seller?

Yes. Selected lenders allow private-sale equipment finance.

The lender may need to confirm:

• Seller identity
• Ownership of the equipment
• Serial or identification numbers
• Purchase price
• Market value
• Existing finance or security
• Asset condition

Private sales can require more checks than dealer purchases.

TAFS can coordinate the information required between the business, seller and lender.

Can Equipment Bought at Auction Be Financed?

Yes. Auction purchases can be financed through selected lenders.

Pre-approval may also be available before bidding.

This can help the business understand:

• Approximate borrowing capacity
• Deposit requirements
• Suitable equipment age
• Expected repayments
• Finance term
• Conditions that need to be met

Final approval will depend on the equipment purchased.

Auction payment deadlines can be short, so completing the initial finance assessment before bidding can help prevent settlement delays.

What Documents Are Needed for Equipment Finance?

The exact documents depend on the lender, asset and business.

For an initial assessment, you may need:

• Driver's licence
• ABN and business details
• Recent business bank statements
• Existing finance information
• Details of current work
• Information about your industry experience
• A summary of assets and liabilities

The lender may later request:

• Dealer invoice
• Private seller information
• Auction invoice
• Equipment serial numbers
• Vehicle registration details
• Inspection report
• Valuation
• Business Activity Statements
• Tax returns
• Financial statements

TAFS will confirm the documents required for the selected lender.

What Do Equipment Finance Lenders Look For?

A lender looks at both the business and the asset.

Trading History

Established businesses can provide a longer record of income and account conduct.

Newer businesses may still qualify where the applicant has relevant experience and a clear source of work.

Repayment Capacity

The lender needs to see that the business can afford the equipment repayment alongside existing debts and normal operating expenses.

Credit History

A strong credit profile can support the application.

Previous credit issues may still be considered by selected lenders, depending on the circumstances.

Bank Statement Conduct

The lender may review:

• Regular income
• Existing repayments
• Cash flow
• Dishonoured payments
• Overdrawn balances
• Tax payments
• Normal operating expenses

The Equipment

The asset's age, value, condition and expected resale market can affect the lender's decision.

Deposit or Trade-In

A deposit isn't required for every application, but it can strengthen the proposal.

Can Equipment Finance Help Preserve Business Capital?

Yes. One of the main reasons businesses use equipment finance is to avoid using a large amount of cash for a single purchase.

Paying cash for a truck or machine can reduce the funds available for:

• Payroll
• Fuel
• Insurance
• Suppliers
• Maintenance
• Tax obligations
• Repairs
• Stock
• Marketing
• Unexpected expenses

Financing business assets allows the cost to be spread over time while the equipment begins supporting the operation.

The business still needs to make sure the repayment is affordable alongside normal operating costs.

Equipment Finance vs a Small Business Loan

Equipment finance and general small business loans can both provide funding, but they are designed for different purposes.

Equipment finance is generally used for a specific asset.

The equipment provides security for the finance.

A general business loan may be used for broader purposes such as:

• Working capital
• Stock
• Marketing
• Supplier payments
• Tax obligations
• Business expansion

Where a business knows exactly which asset it needs to purchase, equipment finance can provide a structure linked directly to that asset.

What Does Equipment Finance Cost?

Equipment finance costs depend on:

• Amount borrowed
• Interest rate
• Finance term
• Deposit
• Balloon payment
• Applicant profile
• Equipment age
• Lender fees

When comparing equipment finance options, review:

• Interest rate
• Regular repayment
• Finance term
• Balloon
• Establishment costs
• Ongoing fees
• Early payout conditions
• Total estimated amount repayable

A lower monthly repayment doesn't always mean the finance costs less overall.

The repayment could simply be lower because the loan has been extended over a longer term or includes a larger balloon.

How Fast Can Equipment Finance Be Approved?

Straightforward applications can be approved in as little as 24 hours once the required information has been supplied.

Applications may take longer where they involve:

• New businesses
• Limited financial information
• Older equipment
• Private sellers
• Auction purchases
• Credit issues
• ATO debt
• Equipment valuations
• Inspections
• Larger finance amounts

Having your business information ready can help make the approval process more efficient.

How the TAFS Equipment Finance Process Works

1. Initial Assessment

TAFS reviews the business, finance requirement and proposed equipment purchase.

2. Soft Credit Check

TAFS begins with a soft credit check that leaves no mark on the applicant's credit file.

3. Internal Credit Review

Our internal credit team assesses the application before a formal lender submission.

4. Compare Suitable Lenders

The application is assessed against the criteria of more than 80 bank and non-bank lenders.

5. Review the Finance Structure

The finance amount, deposit, term, repayment and balloon are considered based on the business and asset.

6. Submit One Formal Application

The formal application is submitted to the selected lender.

7. Approval and Settlement

TAFS coordinates the lender requirements, finance documents and payment to the equipment seller.

Questions to Ask Before Financing Business Equipment

Before proceeding, ask:

1. What finance structure is being recommended?
2. Who owns the equipment from settlement?
3. What is the interest rate?
4. What will the regular repayment be?
5. How long is the finance term?
6. Is there a balloon payment?
7. What is the total estimated amount repayable?
8. Is a deposit required?
9. Can a trade-in be used?
10. Can used equipment be financed?
11. Are private sales accepted?
12. Can auction equipment be financed?
13. What documents are required?
14. Will the initial credit check leave a mark?
15. Can the finance be paid out early?
16. What happens if the equipment is sold?
17. How quickly can approval and settlement happen?

Frequently Asked Questions

What Is Equipment Financing for Small Businesses?

Equipment financing allows a business to purchase machinery, vehicles or other commercial assets and repay the cost over an agreed term.

The equipment generally provides security for the finance.

What Is the Most Common Equipment Finance Structure?

TAFS primarily arranges chattel mortgage finance.

Under a chattel mortgage, the business owns the equipment from settlement while the lender holds security over the asset until the finance is repaid.

Is Equipment Finance the Same as Leasing?

No.

Under a chattel mortgage, the business owns the asset from settlement.

Under a lease, the provider generally owns the equipment while the business pays to use it.

Can a Sole Trader Get Equipment Finance?

Yes. Sole traders can apply for equipment finance.

Selected lenders may also offer low doc options where complete financial statements aren't available.

Can a New Business Finance Equipment?

Yes. Selected lenders will consider newer businesses.

Industry experience, current work, bank statements and the equipment being purchased can all support the application.

Do I Need a Deposit?

Not every application requires a deposit.

The lender will decide based on the business, asset, finance amount and overall application.

Can I Finance Used Equipment?

Yes. Used equipment can be financed through selected lenders.

The asset's age, condition and value will affect the available options.

Can I Finance Equipment From a Private Seller?

Yes. Private-sale finance can be available through selected lenders.

Additional seller, ownership and equipment checks may be required.

Can Equipment Finance Include a Balloon?

Yes. A balloon payment can be included in some chattel mortgage structures.

It reduces regular repayments but leaves a larger final payment.

How Quickly Can TAFS Arrange Equipment Finance?

TAFS can arrange approvals in as little as 24 hours for straightforward applications once the required information has been supplied.

Apply for Equipment Finance With TAFS

TAFS can assess your business, proposed equipment purchase and available documentation before comparing suitable finance options through access to more than 80 lenders.

Start with a no-obligation assessment and a soft credit check that leaves no mark on your file. Contact The Asset Finance Shop or apply online at www.tafs.com.au.

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 personal circumstances into account. Speak to a TAFS broker for options tailored to your business, and to your accountant regarding tax treatment.