Equipment finance without the runaround

Most Australian equipment purchases are financed under a chattel mortgage: your business owns the asset from settlement and the lender registers security over it until the final repayment. That ownership matters — the equipment sits on your balance sheet, it can be modified and branded freely, and in general terms GST-registered businesses may be able to claim GST on the purchase price. Because tax treatment depends on your entity structure and turnover, that last point is one to confirm with your accountant before you commit to anything.

The term and any balloon are the levers that shape repayments. Terms typically follow the asset's useful working life — financing a ten-year machine over three years strangles cash flow for no good reason, while stretching a short-life asset too far leaves you paying for gear you've already replaced. A balloon defers a portion of the cost to the end of the term, trimming the monthly commitment where resale value supports it. Our guide on choosing term, deposit and balloon walks through those trade-offs in detail.

A chattel mortgage suits businesses that want to own the asset and keep it for most of its working life — which describes the majority of equipment buyers. A finance lease flips the ownership: the lender owns the equipment and your business pays to use it, with options at the end of the term. Rental and operating-style arrangements go further again and tend to suit fast-dating technology you intend to hand back. Each structure carries different accounting and tax consequences, which is exactly why the choice deserves a conversation with your adviser.

The practical test is simple: what do you want to be true when the term ends? If the answer is a machine you own that still earns, a chattel mortgage with a sensible balloon usually fits. If the answer is handing the gear back and taking the newest model, a lease-style structure may sit better. The chattel mortgage versus finance lease guide covers the mechanics, and the assistant can model different terms so the comparison is concrete rather than abstract.

New equipment brings warranty, dealer support and the longest financeable life, which generally supports longer terms and larger balloons. Used equipment is where the value often hides, and lenders finance it every day — they simply read the machine more closely. Age at the end of the term, hours, service history and how liquid the resale market is all feed the assessment. A well-documented used machine from a recognised brand is a routine deal; an obscure import with no paper trail is a harder conversation.

Auctions compress everything into a deadline. The sensible sequence is to have the finance conversation before you bid, so you know your ceiling and the paperwork is staged. Lenders will want the auction invoice and clear title, and a PPSR check protects you from buying someone else's encumbered gear. Specialists coordinate inspections and settlement against the auction house's payment terms — a detail that matters, because winning the lot and then scrambling for funds is how good buys become expensive ones.

Lenders weigh the business and the asset together. On the business side: time trading, financial statements or business activity statements, existing commitments and the conduct of your accounts. Established businesses with clean records see the widest panel. Newer operators are still financed regularly — industry experience, a deposit and lined-up work all help — and low-doc options exist in general terms for straightforward asset purchases, with the trade-offs explained in our low-doc guide. Honest disclosure up front beats optimistic surprises during assessment every single time.

On the asset side, the equipment is the lender's security, so its identity and value matter: make, model, age, hours and how readily it could be resold if things went wrong. This is why readily traded assets finance more easily than bespoke one-offs, and why a specialist's knowledge of which lender genuinely likes which asset class is worth having. Placement is half the outcome — the same application can be a decline at one lender and a clean approval at another.