How Does Equipment Finance Work?
Equipment finance can help businesses acquire vehicles, machinery and other assets while preserving cash flow. Learn how equipment finance works and what businesses may consider before applying.
Equipment finance is commonly used by Australian businesses to purchase machinery, tools, vehicles and commercial assets without needing to pay the full purchase price upfront.
For many businesses, equipment is more than just a purchase. It can be what allows the business to take on more work, improve productivity, replace ageing machinery or grow into new opportunities.
If you're looking at machinery, workshop equipment, agricultural assets or earthmoving equipment, our Business Equipment Finance Guide explains the broader options available.
What is equipment finance?
Equipment finance allows eligible businesses to spread the cost of equipment over an agreed term while using the asset in the business.
What Types Of Equipment Can Be Financed?
A wide range of business equipment may be financeable depending on the lender, asset type and business profile.
Common examples include:
- Excavators and earthmoving equipment
- Forklifts and warehouse equipment
- Skid steers and loaders
- Agricultural machinery
- Workshop tools and machinery
- Manufacturing equipment
- Commercial vehicles
- Technology and specialised business equipment
For broader business funding options, our Commercial Finance Guide explains how finance can support vehicles, equipment and other commercial assets.
How Does Equipment Finance Work?
The process usually starts with choosing the equipment your business wants to purchase.
Once the asset, supplier and purchase price are known, the finance application can be assessed by a lender.
If approved, the lender funds the equipment purchase and the business repays the finance over an agreed loan term.
The equipment may then be used in the business while repayments are made.
Because lender policy can vary, comparing options before applying may help identify a suitable structure. Our Compare Finance Options Guide explains why loan type, fees and lender policy all matter.
Common Types Of Equipment Finance
Chattel Mortgage
A chattel mortgage is commonly used for business asset finance. The business generally owns the equipment from the start, while the lender takes a security interest over the asset until the loan is repaid.
Finance Lease
A finance lease may allow a business to use equipment over a fixed term while making regular repayments. Ownership treatment and tax outcomes can vary, so businesses should seek their own accounting advice.
Commercial Hire Purchase
Commercial hire purchase may allow a business to use equipment while making repayments, with ownership generally transferring once the agreement is completed.
Equipment Loan
An equipment loan may be used to fund business equipment under a more straightforward loan structure, depending on lender and asset type.
What Do Lenders Consider?
Equipment finance applications are generally assessed by looking at both the business and the asset being purchased.
Lenders may consider:
- Business trading history
- ABN and GST registration
- Credit history
- Industry type
- Asset type and value
- Deposit or trade-in contribution
- Existing business commitments
- Cash flow and affordability
If you're unsure how credit history may affect an application, our Credit Score Guide explains how repayment conduct, defaults and enquiries may influence lender decisions.
Can Equipment Be Financed Under Low Doc?
In some circumstances, low doc equipment finance may be available for self-employed applicants or business owners who do not have current financial statements readily available.
Instead of relying solely on traditional income documents, some lenders may consider alternative indicators such as:
- ABN registration history
- GST registration history
- Property ownership
- Comparable credit conduct
- Deposit contribution
- Asset type and business use
Traditional financial statements may not always be required depending on the lender, loan amount and overall application profile.
Our Low Doc Finance Guide explains how low doc lending may work for eligible business applicants.
Low doc still involves assessment.
Lenders still need to be comfortable that the finance is suitable and affordable. They may simply assess the application using alternative information.
Equipment Finance Vs Business Loan
Equipment finance and business loans can both support business growth, but they are not always the same thing.
| Equipment Finance | Business Loan |
|---|---|
| Usually linked to a specific asset | Can be used for broader business purposes |
| The asset may secure the finance | May be secured or unsecured |
| Commonly used for machinery, vehicles or equipment | May be used for working capital, stock or expansion |
| Repayments are tied to the equipment purchase | Funds may be more flexible depending on lender policy |
The right option depends on what the business needs the funds for, the type of asset being purchased and the overall finance structure.
Why Businesses Use Equipment Finance
Businesses may use equipment finance for many reasons.
- To preserve working capital
- To replace ageing equipment
- To improve productivity
- To access equipment sooner
- To increase capacity
- To take on larger contracts
- To spread costs over time
For many businesses, the right equipment can help generate income, improve efficiency and support long-term growth.
Final Thoughts
Equipment finance can be a useful way for businesses to acquire the equipment they need while preserving cash flow.
The right structure will depend on the asset, lender, business profile and intended use.
Before applying, it is worth understanding the available finance options, likely repayments and lender requirements.
For further information, explore our Business Equipment Finance Guide, compare broader options through our Commercial Finance Guide, or estimate repayments using our Loan Calculator.
Need Help Comparing Equipment Finance Options?
Whether you're purchasing machinery, vehicles, workshop equipment or commercial assets, comparing finance options can help you understand repayments, lender requirements and available structures.
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