Equipment finance is funding used to acquire business equipment, from utes and excavators to ovens and scanners, where the asset itself backs the borrowing. Because the lender can look to the equipment rather than to your home or other property, it is one of the most accessible ways to grow capacity. This page explains the structures, how the $20,000 instant asset write-off fits in, and when a faster, property-secured route is the better choice.
What is equipment finance, and how does it work?
Equipment finance works by a lender paying the supplier for the asset while you repay the lender over an agreed term, with the asset as security until the debt is cleared. You get the use of the equipment straight away and pay for it as it earns.
The Reserve Bank’s October 2025 bulletin on small business finance reports that around half of small-sized loans to SMEs are secured with assets other than residential property, such as vehicles and equipment, and that this share has been rising since 2019. Asset-backed lending is not a niche. It is where much of small business borrowing already sits.
The business.gov.au funding guide lists equipment leases and asset financing among bank products, and notes that some non-bank lenders specialise in vehicle or equipment finance.
What are the main equipment finance structures?
The three main structures are chattel mortgage, hire purchase and finance lease, and they differ on who owns the asset and what happens at the end.
| Chattel mortgage | Hire purchase | Finance lease | |
|---|---|---|---|
| Who owns it during the term | You | The lender | The lender |
| Security | The asset | The asset | The lender owns it |
| At the end | You keep it | Ownership passes after final payment | Return, renew or buy at an agreed amount |
| Best for | Buyers who want ownership from day one | Buyers who like a staged path to ownership | Equipment that dates quickly |
| Lump sum at the end | Often an option | Sometimes | Common |
How a structure is treated for tax can vary, so ask your accountant before choosing, particularly if you intend to claim the write-off.
Leasing suits technology and equipment that goes out of date quickly. Owning suits assets with a long working life, such as trucks, plant and fit-out items, where you will use the asset well past the end of the term.
How does the $20,000 instant asset write-off work?
The instant asset write-off lets eligible small businesses deduct the full cost of an eligible depreciating asset costing less than $20,000 in the income year it is first used or installed ready for use. It applies to businesses with an aggregated turnover under $10 million, and it is now permanent from 1 July 2026.
Key points from the ATO:
- The threshold applies per asset, so a business can write off several assets in the same year
- Assets that cost more can still go into the small business simplified depreciation pool, depreciated at 15% in the first income year and 30% each year after
- Pool balances under $20,000 at the end of the income year can be written off
- The five-year re-entry restriction stays suspended until 30 June 2027
The write-off is a tax deduction, not funding. It reduces tax after you have spent the money, so you still need the cash or the finance to buy the asset first. A write-off is a good reason to time a purchase but a poor reason to buy something you do not need.
Illustrative example: an electrician buying a van
Illustrative example: an electrician buys two items in the same year. The first is a $17,000 set of specialist test equipment. The second is a $45,000 fitted-out van.
The test equipment costs less than $20,000, so it can qualify for the instant write-off in the year it is first used. The van does not. If it is placed in the small business pool, and it is the only pool asset, the first-year deduction is 15% of $45,000, which is $6,750. The following year is 30% of the remaining balance of $38,250, which is $11,475.
Financing helps on both. The electrician does not need to find $62,000 at once, the van is security for its own loan, and the tax deductions land over the year or years as the ATO rules allow. The cash flow improves from day one, while the tax benefit arrives at lodgement.
Is equipment finance better than an unsecured loan?
Equipment finance is usually better when you are buying a single identifiable asset with a long life, and an unsecured loan is better when the money must cover more than the asset.
| Question | Equipment finance | Unsecured loan |
|---|---|---|
| Security | The asset | None; assessed on turnover and statements |
| What it can pay for | The asset only | Anything, including stock and wages |
| Property needed | No | No |
| Fit for a new business | Often easier, given the asset security | Harder without trading history |
| Speed | Depends on supplier and lender | Often days |
For the full trade-offs, see secured vs unsecured business loans and unsecured business loans. If the equipment is only part of the cash need, the rest of it is usually a working capital loan question.
What if the seller wants payment now?
If the seller wants cash within days, standard equipment finance may be too slow, and a property-secured loan can be ready sooner. This comes up at auctions, on distress sales and when a supplier is offering a limited-time price.
If you own property with equity, a second mortgage can fund the purchase without waiting for the asset to be delivered and registered. In suitable scenarios funding can be possible within 24 hours when the security, documents and exit are ready; many files take a few business days. Interest can often be prepaid or added to the loan, and you can later refinance into standard equipment finance once the asset is in your hands.
If speed is the issue, tell us the deadline and we will say which route can meet it. That second step is a real exit: buy fast with the quicker money, then replace it with the cheaper, asset-backed structure. Our page on the business loan exit strategy explains how lenders look at it.
What do lenders need for equipment finance?
Lenders need the quote or invoice for the asset, your business details and enough bank statements to see you can repay. For newer assets from a dealer, that is often enough.
- A written quote or invoice showing the asset, price and supplier
- Your ABN, how long you have traded and your turnover
- Recent business bank statements
- Details of existing debts and repayments
- A deposit, where one is required
The lender will also check that nobody else has a registered claim on the asset. The government’s Personal Property Securities Register is the public record of security interests in personal property such as vehicles and goods, and the same record is how buyers confirm goods are free of debt. For the full checklist, see documents needed for a business loan.
How do you choose between buying, leasing and borrowing?
Start with how long you will use the asset and how fast it dates. Own what lasts, lease what ages, and borrow generally when the asset is only part of the need.
- Long-life asset you will keep: chattel mortgage or hire purchase.
- Asset that dates quickly: a finance lease, with a plan for what happens at the end.
- Asset plus working costs: an unsecured or property-secured loan that covers both.
- Time-critical purchase: a property-secured loan now, refinanced into equipment finance later.
To weigh the choices side by side, use compare business loans. If your business is new, startup business loans covers the options when there is little trading history.
Ready to move?
Send us the quote and tell us how quickly the supplier needs paying. The quick application takes minutes, and we help match you with equipment-style funding or a faster property-secured option. Apply now or call 03 4059 1829 if the deadline is today.