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.
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:
New and used equipment can be financed, with selected lenders also considering private sales and auction purchases.
The process generally begins with an assessment of the business and the asset being purchased.
Start by considering:
You can begin discussing finance before selecting the exact asset.
The final equipment and seller details will normally be required before settlement.
TAFS reviews the business before making a formal lender submission.
The assessment can include:
TAFS begins with a soft credit check that leaves no mark on the applicant's credit file.
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:
TAFS assesses the application against the requirements of more than 80 lenders before selecting an option for formal submission.
The finance can then be structured around the business and asset.
This may include:
The repayment should fit the business's cash flow and the expected working life of the equipment.
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.
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.
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.
A chattel mortgage is a commercial loan used to purchase a business asset.
Under a chattel mortgage:
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.
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:
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.
The main difference is ownership.
|
Feature |
Chattel Mortgage |
Equipment Leasing |
|
Who owns the asset during the term? |
The business |
Generally the leasing provider |
|
Business owns asset from settlement |
Yes |
Generally no |
|
Regular payments |
Loan repayments |
Lease payments |
|
Balloon payment |
May be available |
Depends on the agreement |
|
End of term |
Business keeps the asset after finance is repaid |
Depends on lease conditions |
|
TAFS offering |
Primary equipment finance structure |
Not the primary structure arranged by TAFS |
Business owners should compare the total cost, ownership position and end-of-term conditions before selecting a structure.
Small business equipment loans can be used across a wide range of industries.
Equipment loan terms and repayments depend on the complete finance structure.
The main factors include:
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.
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:
Before selecting a balloon, consider:
The balloon should suit the asset rather than simply being used to create the lowest possible monthly repayment.
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:
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.
Not always.
Some businesses can qualify for finance covering the full purchase price, subject to lender criteria.
A deposit may be requested depending on:
A deposit can reduce the amount financed and lower regular repayments.
A trade-in may also be used as the business's contribution.
Yes. Sole traders can apply for equipment financing for small businesses.
The lender may assess:
Complete financial statements are not always required.
Selected lenders may offer low doc equipment finance using recent bank statements and other supporting information.
Yes. Selected lenders consider equipment finance applications from businesses with newer ABNs.
A lender may place additional weight on:
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.
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:
Low doc doesn't mean no assessment.
The lender still needs to confirm that the business can afford the finance.
Yes. Used equipment can be financed through selected lenders.
The lender may consider:
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.
Yes. Selected lenders allow private-sale equipment finance.
The lender may need to confirm:
Private sales can require more checks than dealer purchases.
TAFS can coordinate the information required between the business, seller and lender.
Yes. Auction purchases can be financed through selected lenders.
Pre-approval may also be available before bidding.
This can help the business understand:
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.
The exact documents depend on the lender, asset and business.
For an initial assessment, you may need:
The lender may later request:
TAFS will confirm the documents required for the selected lender.
A lender looks at both the business and the asset.
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.
The lender needs to see that the business can afford the equipment repayment alongside existing debts and normal operating expenses.
A strong credit profile can support the application.
Previous credit issues may still be considered by selected lenders, depending on the circumstances.
The lender may review:
The asset's age, value, condition and expected resale market can affect the lender's decision.
A deposit isn't required for every application, but it can strengthen the proposal.
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:
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 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:
Where a business knows exactly which asset it needs to purchase, equipment finance can provide a structure linked directly to that asset.
Equipment finance costs depend on:
When comparing equipment finance options, review:
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.
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:
Having your business information ready can help make the approval process more efficient.
TAFS reviews the business, finance requirement and proposed equipment purchase.
TAFS begins with a soft credit check that leaves no mark on the applicant's credit file.
Our internal credit team assesses the application before a formal lender submission.
The application is assessed against the criteria of more than 80 bank and non-bank lenders.
The finance amount, deposit, term, repayment and balloon are considered based on the business and asset.
The formal application is submitted to the selected lender.
TAFS coordinates the lender requirements, finance documents and payment to the equipment seller.
Before proceeding, ask:
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.
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.
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.
Yes. Sole traders can apply for equipment finance.
Selected lenders may also offer low doc options where complete financial statements aren't available.
Yes. Selected lenders will consider newer businesses.
Industry experience, current work, bank statements and the equipment being purchased can all support the application.
Not every application requires a deposit.
The lender will decide based on the business, asset, finance amount and overall application.
Yes. Used equipment can be financed through selected lenders.
The asset's age, condition and value will affect the available options.
Yes. Private-sale finance can be available through selected lenders.
Additional seller, ownership and equipment checks may be required.
Yes. A balloon payment can be included in some chattel mortgage structures.
It reduces regular repayments but leaves a larger final payment.
TAFS can arrange approvals in as little as 24 hours for straightforward applications once the required information has been supplied.
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.