A guide to equipment finance for business owners.
Whether you’re running a business, expanding a fleet, upgrading tools, or investing in machinery, equipment finance can be a smart way to preserve cashflow while still acquiring the assets you need.
Equipment finance is broader than most people realise — it covers everything from work vehicles and trailers to heavy machinery, medical equipment, IT infrastructure, farming equipment, and even commercial fit-outs.
At Lumo, we help clients choose the right structure based on tax benefits, cashflow needs, asset type, and long-term business planning.
What is equipment finance?
Equipment finance allows you to purchase or use business equipment without paying the full cost upfront.
The lender funds the asset, and you repay it over time while benefiting from ownership or usage rights depending on the product structure.
Common assets financed include:
Cars, utes, vans and commercial vehicles
Trucks and trailers
Construction equipment (excavators, loaders, forklifts, cranes)
Agricultural machinery (tractors, harvesters, irrigation systems)
Medical and dental equipment
Office and IT fitouts
Manufacturing machinery
Hospitality and café equipment
Tools of trade
Gym, salon or studio equipment
Every asset class has its own rules, risk profile and lender appetite.
The main types of equipment finance
The term “equipment finance” is a broad umbrella. Here are the major product types and how they differ.
1. Chattel mortgage (the most common)
A chattel mortgage is the most widely used form of equipment finance in Australia, especially for vehicles.
How it works:
You own the asset from day one
The lender takes security over the asset
You claim tax deductions based on business use
Balloon/residual options are available
Tax treatment:
You can claim GST upfront via the BAS (if registered)
Interest and depreciation are tax-deductible
Immediate asset write-off may apply depending on tax rules at the time
Good for:
Businesses wanting ownership
Clients wanting tax efficiency
Assets with long life expectancy
Fleets and work vehicles
2. Finance lease
A finance lease allows you to use the asset while the lender retains ownership.
How it works:
The lender buys the equipment
You lease it for a fixed term
At the end, you can pay the residual to own it, refinance the residual, or return the asset
Tax treatment:
Lease payments are tax-deductible
GST applies to lease payments rather than upfront
Good for:
Assets that depreciate quickly
Businesses wanting predictable cashflow
Situations where ownership at the start is not important
3. Hire purchase (Commercial Hire Purchase – CHP)
Very similar to a chattel mortgage but structured differently.
How it works:
The lender owns the asset until the final instalment
You make repayments over time and take ownership at the end
Tax treatment:
Interest and depreciation are deductible
Unlike leasing, GST applies upfront and is claimable
Good for:
Clients wanting eventual ownership without upfront GST complications
Vehicles and long-term assets
4. Operating lease (rental)
This structure is more like renting equipment rather than buying it.
How it works:
You rent the asset for a set term
You do not own it at any point
You return it or upgrade at the end
No residual risk — the finance company carries it
Tax treatment:
Rental payments are fully deductible
Good for:
Equipment that becomes obsolete quickly (IT, tech, medical gear)
Businesses wanting no residual value risk
Short-term or project-based assets
5. Novated lease (for employees)
Commonly used for work vehicles.
How it works:
The employee leases the vehicle
The employer makes lease payments from pre-tax salary
The employee can take the vehicle to future employers
Benefits:
Significant tax advantages for some employees
Running costs can be bundled (fuel, servicing, insurance)
Flexible terms and vehicle choice
Good for:
Employees using salary packaging
Business owners who want clean employee vehicle arrangements
6. Unsecured equipment finance
Some lenders offer finance for smaller equipment purchases without taking security over the asset.
How it works:
No asset security
Higher interest rate
Faster approval
Often suited for smaller ticket items (tools, laptops, fitout items)
Good for:
Small businesses needing fast access to equipment
Situations where specialised security is impractical
Balloon and residual payments
A balloon (or residual) is a lump sum due at the end of the loan.
Why use one?
Reduces monthly repayments
Aligns with expected resale value
Improves cashflow
Considerations:
Larger balloon = lower monthly repayments but higher end payment
You can refinance the balloon, pay it out, or trade-in the asset
This is one of the main levers in shaping business cashflow.
Documentation levels and lender appetite
Lenders offer a range of assessment types:
Full-doc
Financial statements
Tax returns
BAS
Best for larger purchases or specialised equipment.
Low-doc
Bank statements
Accountant’s declaration
Used for smaller assets and simpler deals.
No-doc
ABN and GST registration
Basic identification
Often available up to a certain limit (e.g., $150k) for established businesses.
Lender appetite varies across industries. For example:
Strong appetite: transport, construction, medical, agriculture
Moderate appetite: hospitality, retail
Cautious: start-ups without trading history
Common terms for equipment finance
Loan terms generally range 2–7 years
Deposits may or may not be required
Interest may be fixed for the term
Security is typically the equipment itself
Why equipment finance is so powerful
Equipment finance helps businesses:
Preserve cash for operations
Avoid large upfront capital outlay
Take advantage of tax benefits
Upgrade equipment frequently
Position for growth
It can be far more strategic than simply spreading out repayments.
Let’s chat.
If you’re considering purchasing equipment — whether it’s vehicles, machinery, tools, medical equipment, or agricultural assets — we can help you choose the structure that maximises tax benefits, improves cashflow, and aligns with your business goals. Let’s chat.
This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.