The best way to fund business equipment

New equipment is one of the few borrowing decisions where the thing you’re buying can do a lot of the work for you. A well-chosen machine pays for itself, holds some value, and can secure its own finance. Pick the wrong structure, though, and you can end up with repayments that outlast the gear or a cash balance too thin to run the business.

Here’s how the main options stack up, and our verdict for the most common situations.

What are the realistic ways to pay for equipment?

There are four routes most Australian owners weigh up:

1. Asset or equipment finance. The lender funds the item and takes security over it. Variants include a chattel mortgage, hire purchase and finance leases. Terms are usually set to match the useful life of the equipment.
2. Property-secured term loan. You borrow against residential or commercial property and use the money to buy the equipment outright.
3. Unsecured business loan. A set amount sized on your turnover and bank statements, with no property or asset security (usually with a director guarantee).
4. Cash from the business. No lender, no fees, but no buffer either.

Leasing outright, where you never own the item, is a fifth option. The government’s guide to leasing or buying vehicles and equipment lays out the trade-off: lower upfront cost and easier upgrades with leasing, ownership and potential long-term savings with buying.

How do the options compare side by side?

Test	Asset finance	Property-secured loan	Unsecured loan	Cash
Security needed	The equipment	Residential or commercial property	Usually a director guarantee	None
Suits	Items with a resale market	Old, imported or specialised gear	Small items, deposits, extras	Small buys with a big buffer left
Paperwork	Moderate: invoice, ID, statements	Higher: valuation and legal steps	Lighter: statements and ID	None
Total cost factors	Term, any balloon, fees	Term, fees, legal and valuation costs	Shorter terms, frequent repayments	Lost buffer and flexibility
Biggest risk	Balloon at the end	Property on the line	Repayments squeezing cash flow	Running short later

Our verdict: which is best, and for whom?

Asset finance wins because it lines up the loan with the thing it pays for. The item secures the debt, so you don’t put property on the line, and you can set the term to roughly match how long the equipment will earn money. Lenders record their interest on the Personal Property Securities Register, which is also where you can check that second-hand gear isn’t already owed money on.

The runner-up is a property-secured term loan. If you’re buying an older excavator, a refurbished imported press or a one-off fabrication rig, lenders may not want the item as security. Borrowing against property sidesteps that, and can also fund several pieces at once. The cost is more paperwork and your property becoming the security.

An unsecured loan earns a place for the edges of a purchase: the deposit, freight, installation, training, or a few smaller tools that don’t justify their own finance. Trying to fund a large machine unsecured usually means a shorter term and repayments that bite.

Not sure which camp you’re in? The Best Biz Loan Finder ranks the three structures that suit your answers, or you can ask a specialist to look at your purchase directly.

Illustrative example: a civil contractor’s new excavator

Illustrative only. A civil contractor that has traded for six years wins a council works package and needs a mid-size excavator. The machine is new, from an established brand, with a strong resale market.

• Asset finance over a term close to the machine’s expected working life keeps repayments in step with the contract income and leaves the business’s cash for fuel, wages and the first month of operating costs.
• A property-secured loan would work, but would put the owner’s home on the line for an item that can secure itself.
• Paying cash would drain most of the working capital right when the new contract adds costs.

Verdict for this owner: asset finance, with a small unsecured facility for the attachments and transport costs.

What should you check before signing an equipment deal?

• The total repayable in dollars, including fees and any balloon. Put competing offers through our total cost comparer.
• The balloon. It lowers repayments now and raises the bill later. Plan how you’ll pay it.
• Ownership during the term. With a chattel mortgage you generally own the item from the start; with a lease you don’t.
• Tax. The ATO’s instant asset write-off page lists a $20,000 threshold for eligible small businesses with aggregated turnover under $10 million. Your accountant can tell you how it applies to your purchase and the structure you pick.
• Insurance. Most lenders require the item to be insured for the full term.

For a closer look at the structure itself, read our verdict on asset finance and the head-to-head on equipment finance versus a general business loan. If vehicles are part of the purchase, our page on funding a vehicle fleet covers the extra wrinkles.

Ready to see what fits your purchase?

You know the machine you want and roughly what it costs. The next step is finding out which structure is genuinely available for your business, on what term and at what total cost. Start a 60-second enquiry and a specialist will look at it properly.

Asking won’t touch your credit file, and your details aren’t fired off to a list of lenders hoping one bites. Give us the real figures, the make and age of the equipment, and an honest picture of your trading, and the first verdict you hear will be one you can act on.