Capital considerations, cash-flow, equipment lifetimes, business seasonality, tax implications and a range of other issues can make the concept of equipment finance daunting. Read on to find out more about financing equipment, it could make sense for your business.

Financing new equipment gives you a practical and cost effective way acquiring business-boosting assets without draining your cash flow. Rather than an upfront cost, you pay the finance back over time in fixed monthly payments which are structured to suit your operating needs and free up lines-of-credit and other sources of funding.

You can also utilise this type of finance on equipment you already own, to raise capital or generate cash via a sale and lease back. This structure allows your business to sell existing equipment and lease it back with the benefit of associated tax deductions^.

Many business owners approach their bank to review equipment finance options and find that they require cross-collateralised security on the loan in the form of real estate or other assets. The only hard security for equipment finance should be the equipment itself, and a specialist equipment finance lender operates under this provision.

Historically, the small pool of specialist lenders operating in the equipment finance space had high interest rates (some up to 30%) and deposits of up to 30% of the purchase price required. These days there are a number of specialist lenders are emerging in the market who offer ‘outside the box’ products at reasonable rates, taking into consideration the structure and performance of a business as opposed to the level of security an applicant can offer.

Interest rates for equipment finance are dependent on a number of factors, including the actual financing option, the type and age of the equipment and the term of the finance agreement.

What equipment can be financed?

Equipment which is contributing to, or for use by, your business can be financed.

  • Office & IT: Desktop, laptop and netbook computers, audio visual equipment, data projectors, network routers, scanners, printers, copiers, furniture, servers, storage and more.
  • Catering: Espresso machines, commercial ovens, fridges, cool rooms, furniture and a range of commercial kitchen equipment.
  • Fitness: Cross trainers, weights and equipment utilised in a gym or fitness centre.
  • Security: Alarms, cameras, intercoms and other security equipment.
  • Medical Aesthetics: IPL, phototherapy, high-tech infusion, laser, and microdermabrasion equipment.
  • Retail: POS systems, security equipment and more.

What are the options?

Commercial Finance Lease

For a commercial finance lease, the lender purchases the equipment at your request and leases it to you for an agreed monthly payment. The lender retains ownership of the equipment and you lease it from them. At the expiry of the lease, you pay a pre-determined residual amount to own the equipment outright.

This structure is ideal for equipment that doesn’t have to be replaced frequently such as commercial ovens and cool rooms, POS systems and medical aesthetic equipment like lasers. You are unable to claim GST or depreciation on the items, however the rental payments are generally 100% tax deductible^.

Rental/Operating Lease

Under a rental agreement or operatinf lease, the lender purchases the equipment at your request and rents it to you for an agreed monthly payment which can be structured to suit your business’ cash flow.

If you’re looking to raise capital through a sale and lease back structure, it will be through a rental or operating lease. This type of finance is suitable for short term arrangements or for equipment which requires regular replacement.

The lender owns the equipment and you rent it from them, utilising tax deductions for rental payments which are generally 100%^. At the expiry of the lease, there may be an option to purchase the equipment for a fixed price or percentage of the initial cost.

Commercial Hire Purchase

Under a hire purchase agreement, the lender purchases the equipment at your request and you buy it from them in periodic installments.

The lender retains ownership until all payments under the agreement agreement have been made, then ownership is transferred to you. The interest on the periodic payments and depreciation of the equipment are generally both tax deductible^.

Chattel Mortgage

A chattel mortgage is a secured loan where you source and own the equipment, with the lender placing a charge over the items as security against monthly payments.

This structure is ideal for equipment which will not be replaced regularly and has a useful life beyond the financed term, generally for longer term arrangements with lower interest rates. The interest portion of the finance and depreciation of the asset are generally both tax deductible under a chattel mortgage.

Does it take long?

Equipment finance applications with specialist lenders can generally be processed faster than a traditional business loan or line-of-credit application with a bank.

Businesses who have had their ABN registered for a minimum of two years run by a director who has personal assets will generally experience fast processing and approvals, subject to specific lender criteria.

For new businesses, you’ll need a detailed business plan which includes explanations for assumptions in the cash flow projection. In addition, the director of the applicant entity should provide a detailed profile and background on their business experience to ensure timely processing. Different lenders will have specific criteria for start-ups, so check with a lending specialist to ensure you are prepared.

Many businesses may also be eligible for super-fast processing with specialist lenders for up to $50,000 without the need for supporting financials.

Does equipment finance make sense for your business? Contact the team at iFinance Global with your requirements, email:

^ Tax deductions may apply. iFinance Global does not provide legal, tax or accounting advice. See your tax advisor for details.