Your practical guide to equipment finance eligibility in Australia

Equipment finance is one of the most useful tools for Australian small businesses, but most owners only discover it when a dealer pushes finance at the last minute. That’s the worst time to be thinking about structure, eligibility and how it affects your bigger goals like buying a home or investment property.

This guide walks through equipment finance basics, what lenders actually look at, and the steps you can take this week to lift your chances of approval and better terms.

In Australia, most lenders will approve equipment finance where:

• your business has a clear purpose for the asset and a reasonable trading history;
• projected cashflow can comfortably cover repayments; and
• the asset is standard, re‑saleable and sensibly priced.

If your financials are messy or you’re newer in business, there are still options—but you need to be more deliberate about structure and documentation.

Matching your equipment purchase and finance to your business cashflow is critical.

1. Equipment finance in plain English

1.1 What is equipment finance?

Equipment finance is a loan or lease used to buy income‑producing assets for your business—vehicles, machinery, technology, medical equipment, fit‑outs and more. The lender usually takes security over the asset itself instead of your home.

Instead of paying $150,000 upfront for a truck or machine, you might:

• borrow 80–110% of the purchase price (including GST in some cases);
• repay it over 3–7 years; and
• match repayments to the income the asset generates.

Unlike a personal loan or credit card, equipment finance is designed around the asset’s working life and business use.

1.2 Common types of equipment you can finance

Most lenders are comfortable funding standard business gear, including:

• Vehicles: utes, vans, trucks, trailers, some yellow goods (excavators, skid steers).
• Plant and machinery: manufacturing lines, CNC machines, forklifts, agricultural machinery.
• Technology: servers, laptops, point‑of‑sale systems, phone systems.
• Medical and professional equipment: dental chairs, diagnostic equipment, printing presses.
• Fit‑outs: shop, office or hospitality fit‑outs where items can be clearly itemised.

The more specialised, custom or hard‑to‑resell the asset is, the more the lender will lean on your business strength and your contribution (deposit or additional security).

1.3 How equipment finance differs from overdrafts and term loans

You can fund equipment with a general business loan or overdraft, but it’s usually not ideal.

Key differences:

• Security: Equipment finance is usually secured by the asset; overdrafts often use property or directors’ guarantees.
• Rate: Because the loan is tied to a hard asset, rates are often sharper than unsecured business loans (exact rates vary and are always indicative only).
• Term: The term is matched to the asset’s life (say 3–7 years), which keeps repayments predictable. Overdrafts are technically repayable on demand.
• Tax and accounting: Different structures (chattel mortgage vs lease) have different GST and deduction rules. Your accountant should guide this.

If vehicles are your main need, it’s worth reading our dedicated guide on smart vehicle finance options for tradies and small businesses alongside this article.

2. How lenders assess equipment finance applications

Regardless of the lender or structure, most equipment finance approvals come down to five pillars.

2.1 Pillar 1 – Your business story

Lenders want to understand:

• What your business does and how the new asset helps you make money or reduce costs.
• How long you’ve traded: 2+ years is ideal, but some lenders will consider well‑documented start‑ups.
• Who runs it: your experience in the industry and track record.

A clear one‑page summary of your business, with simple numbers and no jargon, can do more than a thick business plan nobody reads.

2.2 Pillar 2 – The asset itself

The asset is the lender’s primary security, so they care about:

• Type and condition: new is easier than second‑hand; mainstream brands are easier than niche imports.
• Useful life vs loan term: a 7‑year term on equipment that will be scrap in 4 years is a red flag.
• Price: they’ll compare the invoice to market values to make sure you’re not overpaying.

If you’re buying used gear, expect the lender to cap the age and the combined age + term (e.g. vehicle not older than 12 years at the end of the loan).

2.3 Pillar 3 – Serviceability (can you afford it?)

Serviceability is simply your ability to meet repayments with a buffer.

A lender might look at your last two years’ financials and year‑to‑date performance, then ask:

• After normal business expenses and owners’ drawings, is there enough surplus to cover the new repayment?
• What happens if interest rates rise or income dips temporarily?
• Are you already stretched servicing other loans and credit cards?

Example:
You run a plumbing business with $450,000 revenue and $320,000 expenses. Your net profit before tax and your wage is $130,000. You want a $70,000 ute over 5 years at an indicative 9% p.a.

Approximate monthly repayment: about $1,455.

If your household living costs and other debts are under control, a lender will often view this as manageable—because the ute helps generate income and the repayment is a modest slice of your profit.

2.4 Pillar 4 – Equity and security

Lenders are more comfortable when you have skin in the game:

• A deposit (say 10–20%) or a trade‑in.
• Strong retained profits in the business.
• In some cases, additional security (e.g. second charge over another business asset).

For stronger businesses and mainstream assets, many lenders will fund up to 100% of the purchase price, sometimes plus soft costs (stamp duty, accessories). For newer businesses or weaker assets, expect to contribute more.

2.5 Pillar 5 – Credit history and conduct

Two things matter here:

• Credit reports: defaults, judgments, too many recent enquiries.
• Account conduct: late payments on existing loans, overlimit credit cards, dishonoured business debits.

A single old phone default isn’t necessarily fatal, but a pattern of missed repayments is. If you know there are blemishes, front‑foot them with an explanation and show that the behaviour has changed.