Why Equipment Finance Matters for Growing Businesses
Whether you are a tradesperson needing a new excavator, a cafe owner upgrading your coffee machine, or a logistics company expanding your fleet, equipment is often the backbone of a small business. But purchasing it outright can tie up cash flow and limit your ability to grow.
Equipment finance allows you to acquire the assets you need while preserving working capital for day-to-day operations. With the right structure, it can also offer significant tax advantages.
Types of Equipment Finance
Chattel Mortgage
You take ownership of the equipment from the start, and the lender holds a mortgage over the asset until the loan is repaid. Interest payments and depreciation can typically be claimed as tax deductions, making this a popular choice for businesses registered for GST.
Finance Lease
The finance company owns the equipment and leases it to you for an agreed period. At the end of the lease, you can purchase the equipment for its residual value, re-lease it, or return it. Lease payments are generally tax-deductible as an operating expense.
Operating Lease (Rental)
Similar to a finance lease but typically shorter-term and without the option to purchase at the end. This suits businesses that need equipment for a specific project or want to upgrade frequently.
Equipment Loan
A straightforward loan specifically for purchasing equipment. You own the asset and repay the loan with interest over a fixed term. This is a simple option for businesses that want to own their equipment outright.
Tax Benefits to Consider
Australian businesses may be able to access several tax benefits through equipment finance:
- Instant Asset Write-Off - Depending on current ATO thresholds, eligible businesses may be able to claim an immediate deduction for the cost of depreciating assets
- Interest Deductions - Interest on business loans, including equipment finance, is generally tax-deductible
- GST Credits - If you are registered for GST, you may be able to claim the GST component of the purchase price
- Depreciation - Spread the cost of the asset over its useful life for tax purposes
Always consult with a qualified tax professional about your specific circumstances.
What You Need to Get Approved
Lenders generally assess the following when evaluating an equipment finance application:
- Business trading history - Most lenders want to see at least 12 months of trading
- Financial statements - Profit and loss, balance sheet, and recent BAS statements
- Credit history - Both business and personal credit records
- The equipment - Type, age, condition, and intended use
- Cash flow - Evidence that you can service the repayments
Getting the Best Rate
- Shop around - Rates can vary significantly between lenders. Working with a finance consultant gives you access to competitive rates from multiple lenders
- Offer a deposit - Even a small deposit can improve your rate and approval chances
- Keep your books clean - Up-to-date financial records make the process smoother
- Consider the total cost - The lowest rate is not always the best deal. Look at fees, balloon payments, and flexibility
How L&R Consultants Can Help
We help Australian small business owners understand their equipment finance options and connect them with finance professionals who specialise in business lending. With access to 40+ lenders, we can help you find competitive rates and structures that suit your business.
Submit an enquiry to get started, or explore our finance solutions to learn more about what is available.