A business equipment loan finances the machinery, tools, or technology your business needs, using the equipment itself as security. Because the lender has a physical asset to fall back on, equipment finance is often easier to get than a general business loan, particularly for newer businesses without property to offer.
This guide covers how a business equipment loan works, the finance structures available, how tax can affect your choice, and what to check before you sign.
What Is a Business Equipment Loan?
A business equipment loan is finance used to buy equipment for your business, where the equipment becomes the security for the loan. You choose the asset, the lender funds the purchase, and you repay over a set term. Some lenders also call it a commercial equipment loan or asset finance.
You’ll see it described in different ways, an equipment loan for business, a business machinery loan, or a loan for business equipment, but they all describe the same basic idea: the asset secures the debt.
What Equipment Can You Finance?
Most lenders will finance tangible equipment that holds its value reasonably well and has a clear resale market. Common examples include:
- Machinery and plant, from workshop machines to earthmoving and agricultural equipment
- Trades and tools, including larger tools and specialist gear
- Hospitality equipment, such as commercial kitchen fit outs, coffee machines, and refrigeration
- Medical and dental equipment
- Technology and office equipment, including computers, servers, and point of sale systems
- Vehicles and trucks, which often sit in their own category. Our Business Car Loan guide covers vehicle finance in detail.
Lenders usually care about the type, age, and condition of the equipment, since that determines what it could be resold for if the loan went wrong.
How a Business Equipment Loan Works
The equipment is the security. The lender takes a security interest in the asset, usually recorded on the Personal Property Securities Register (PPSR). You can learn how that register works on the PPSR website.
The term is matched to the equipment’s useful life. A lender generally won’t lend over a term longer than the asset is likely to last. A computer might be financed over two or three years, heavy machinery over five to seven or more.
You may need a deposit, or you may not. Some lenders will fund the full purchase price for an established business with good credit, while others ask for a deposit.
A balloon payment may be available. As with vehicle finance, some lenders allow a lump sum owing at the end of the term to lower your regular repayment. This is a trade off, since you’ll need to pay it out, refinance it, or cover it through the equipment’s resale value.
Equipment Finance Structures
The main structures are similar to those used for vehicles:
- Chattel mortgage. You own the equipment from the settlement, and the lender holds a mortgage over it.
- Hire purchase. The financier owns the equipment until the final payment, when ownership passes to you.
- Finance lease. The financier keeps ownership, and you lease the equipment for a fixed term, often with an option to buy it at the end.
- Equipment rental. You rent the equipment for a term without any expectation of owning it, which can suit technology that dates quickly.
Each structure treats ownership, GST, and tax differently, so it’s worth choosing deliberately rather than accepting whichever one a supplier offers. Our Business Car Loan guide explains how these structures compare in more detail, and the same principles apply to equipment.
How the Instant Asset Write-Off Affects Your Decision
Tax treatment is a big part of equipment finance, and one rule matters more than most. Under the ATO’s instant asset write-off, small businesses with an aggregated turnover under $10 million can immediately deduct the full cost of an eligible depreciating asset that costs less than $20,000, and the limit applies per asset. The ATO states this threshold became permanent from 1 July 2026. You can read the details on the ATO’s instant asset write-off page.
For assets costing $20,000 or more, the ATO notes they can generally go into the small business simplified depreciation pool, where they’re depreciated at 15% in the first year and 30% each year after.
What this means in practice is that the size of the asset can change how quickly you recover its cost through your tax return, which in turn affects whether financing it makes sense. The way you finance the asset can also affect who is entitled to claim deductions, so this is a decision to make with your accountant, not just your lender. Neither this article nor a broker can give tax advice.
How Much Does a Business Equipment Loan Cost?
Pricing varies with the lender, your business, and the equipment. Because the equipment is security, equipment finance is often priced below an equivalent unsecured loan, though it will usually sit above property secured lending. New equipment generally attracts better pricing than older or used equipment, since it holds its value more reliably.
Before you commit, look at the full cost, not just the rate. Establishment fees, ongoing fees, and any balloon payment all change what you actually pay. You can estimate repayments with our Business Loan Repayments calculator, and if you’re considering a balloon, the balloon option on our Business Car Loan calculator shows how a residual payment lowers your regular repayment. That calculator’s GST estimate is built around vehicles, so ignore that part for general equipment.
What Do Lenders Look For?
- An active ABN and, for most lenders, some trading history
- A supplier quote or invoice showing the equipment and price
- A reasonable credit history for the business and its directors
- The type and age of the equipment, since it’s the security
- Your ability to afford the repayments from business cash flow
Equipment finance can be more accessible than a general loan for a business with limited history, because the asset reduces the lender’s risk. If you’re launching a business and equipment is your biggest cost, our Start Up Business Loan guide covers the wider set of options. For general eligibility criteria, see our Business Loan Requirements guide.
Equipment Loan or General Business Loan?
An equipment loan usually makes sense when you’re buying a specific asset, because the asset secures the debt and the term can be matched to its life.
A general business loan makes sense when you need flexible funds for several purposes. Our Secured and Unsecured Business Loans guides cover those options.
Common Mistakes With Equipment Finance
- Taking a term longer than the equipment’s useful life, leaving you paying for something that no longer works
- Ignoring the end of term, particularly with a balloon or lease, and not planning how it will be settled
- Accepting supplier finance without comparing, since the supplier’s lender is often only one option among many
- Comparing only the interest rate, and missing fees that change the real cost
- Skipping the tax conversation, then discovering the structure wasn’t the best fit for your accounting position
ASIC’s Moneysmart has independent guidance on comparing credit and understanding what you’re agreeing to before you sign.
Should You Use a Broker for Equipment Finance?
Equipment lenders differ in the assets they favour, the age limits they apply, and the structures they offer. A broker compares across a panel to find who fits your asset and your business, and can structure the deal around your tax position. Lodestar Finance’s Business Loans service compares equipment finance alongside other options, and if you have property to offer, our Secured Business Loans page covers that route.
FAQs
Frequently Asked Questions
Often more easily than a general loan, since the equipment is the security. Some lenders will still want a few months of trading history or a personal guarantee.
Not always. Some lenders fund the full price for an established business with good credit, while others ask for a deposit, which can also improve your rate.
Yes, though lenders usually apply age limits and may price used equipment higher, since it holds its value less reliably.
It lets eligible small businesses immediately deduct the cost of qualifying assets under $20,000 each. Whether and how it applies to financed equipment depends on your structure, so check with your accountant.
It depends on the equipment's useful life, commonly two to seven years, with longer terms for heavy machinery.
