If you’re looking at a new excavator, forklift, delivery van or any other piece of equipment your business needs, chances are you’re not planning to pay for it outright. That’s where equipment finance comes in, but if you’ve never used it before, it’s fair to have questions about the process and, more importantly, the equipment finance requirements you’ll need to meet.
This guide walks through the basics: what equipment finance actually is, how the process works from application to settlement, and the equipment finance requirements lenders look for when deciding who to approve.
What Is Equipment Finance?
Equipment finance is a way of funding the purchase of business assets, machinery, vehicles or equipment, without paying the full cost upfront. Instead, you spread the cost over an agreed term, usually anywhere from 1 to 7 years, while using the equipment to generate income in your business.
There are a few common structures, and the right one depends on your business and what you’re financing:
- Chattel mortgage – you own the asset from day one, the lender holds a mortgage over it as security. Common for businesses that want the asset on their balance sheet and plan to claim GST upfront.
- Finance lease – the lender owns the asset and leases it to you for a fixed term, with an option to purchase at the end.
- Hire purchase – similar to a chattel mortgage, you take possession and pay it off over time, with ownership transferring once the final payment is made.
- Operating lease / equipment rental – you use the asset for a set period without ever owning it, useful if you upgrade equipment frequently or don’t want it sitting on your books long term.
How Does Equipment Finance Work?
At a practical level, the process usually looks like this:
You identify the equipment.
This might be a specific machine from a dealer, a private sale, or even equipment you already own that you want to refinance.
You apply through a lender or broker.
This includes details about your business, the asset, and how it’ll be used.
The lender assesses the application.
This covers your business’s financials, credit history, and the value and type of the asset itself.
Terms are agreed.
Loan amount, term length, interest rate, and repayment structure are set based on the assessment.
Settlement.
Funds are released, generally paid directly to the seller or dealer, and you take possession of the equipment.
For straightforward applications, especially under a low-doc threshold, this process can move quickly, sometimes within a few business days. More complex applications, larger asset values, or newer businesses without much trading history typically take longer and may need more documentation.
Equipment Finance Requirements: Who Qualifies?
Equipment finance requirements vary by lender, but most look at a similar set of factors:
- Active ABN, generally registered for a minimum period (this varies by lender, some accept newer businesses, others want 1–2 years of trading history)
- Credit history, both business and sometimes director-level personal credit
- Type and value of the asset, since it’s usually used as security for the loan
- Deposit, if required, some equipment finance is available with no deposit depending on the lender and asset type
- Financials, particularly for larger loan amounts, lenders may ask for BAS statements, tax returns or bank statements
One thing that surprises a lot of first-time applicants: you don’t need years of trading history to qualify. Some lenders offer low-doc equipment finance for newer businesses or sole traders, provided the asset itself is strong security. It’s a different assessment to, say, an unsecured business loan, because the equipment backs the loan.
What Can You Finance?
Most physical business assets can be financed, including:
- Construction and earthmoving machinery
- Trucks, trailers and commercial vehicles
- Farm and agricultural equipment
- Forklifts and materials handling equipment
- Manufacturing and production equipment
- Technology, fit-out and office equipment (depending on the lender)
Generally, if the asset has a clear resale value and a reasonable working life, it’s financeable. Highly specialised or custom-built equipment can sometimes be harder to finance simply because it’s harder for a lender to value as security.
Equipment Finance and the Instant Asset Write-Off
One reason equipment finance and tax planning often go hand in hand is the ATO’s instant asset write-off. It allows eligible small businesses to immediately deduct the full cost of qualifying assets in the year they’re first used or installed ready for use, rather than depreciating the cost over several years.
The specific turnover threshold and asset value cap are set by the government and reviewed periodically, so it’s worth checking the ATO’s current instant asset write-off rules before making a purchasing decision, rather than relying on figures that may since have changed.
That means it’s often possible to finance a piece of equipment and still claim the write-off in the same financial year, which is worth discussing with your accountant when timing a purchase around the current thresholds.
Equipment Finance vs a Regular Business Loan
The key difference is security. A regular business loan might be unsecured or secured against general business assets, while equipment finance is secured specifically against the asset being purchased. That difference often means:
- Equipment finance can be easier to qualify for, since the asset itself reduces the lender’s risk
- Interest rates can be more competitive, again because of the security involved
- The loan is tied to that specific asset, so it’s less flexible than a general business loan if your needs change
If you need funds for something other than a specific piece of equipment, working capital, stock, or day-to-day expenses, a different type of business finance is usually a better fit.
Frequently Asked Questions
What are the equipment finance requirements for a new business?
Some lenders offer low-doc equipment finance for newer businesses or sole traders, using the equipment itself as the main security. Requirements vary by lender, so it’s worth comparing options rather than assuming you won’t qualify.
Can I finance second-hand equipment?
Yes, most lenders finance both new and used equipment, though the age and condition of the asset can affect terms, interest rate, and how much of the value a lender is willing to fund.
Do I need a deposit for equipment finance?
Not always. Some equipment finance is available with no deposit, depending on the lender, the asset type, and your business’s credit profile.
What’s the difference between a chattel mortgage and a finance lease?
With a chattel mortgage, you own the asset from the start and the lender holds it as security. With a finance lease, the lender owns the asset and you lease it, usually with an option to buy at the end of the term.
How long does equipment finance approval take?
Straightforward, low-doc applications can be approved within a few business days. Larger loan amounts or more complex applications generally take longer, since they involve more detailed financial assessment.
Get the Right Equipment Finance for Your Business
Equipment finance isn’t just about ticking a box on lender requirements. It’s what lets you get the machinery, vehicles or tools your business needs without tying up the cash you’d rather use elsewhere. If you want to understand what structure and equipment finance requirements actually apply to your situation, QPF can help you explore your equipment finance options and structure the right approach around what you’re financing.
Get in touch with our team today to talk through equipment finance built around how your business actually operates.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal, nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal circumstances and may not be relevant to your situation. Before taking any action, consider your own circumstances and seek professional advice. This content is protected by copyright and other intellectual property laws. It must not be modified, reproduced or republished without prior written consent.
