Quick answer
For a single item of equipment or a vehicle with a resale market, equipment finance usually wins: the item secures the loan, terms can match its working life and property stays out of it. A general business loan wins when you're buying several mixed items, second-hand or specialised gear lenders won't take as security, or want the freedom to spend on installation, training and working capital too.
Key points
- Equipment finance ties the loan to one asset; a business loan funds whatever you choose.
- The item's resale market decides how easy equipment finance is.
- A general loan can cover installation, training and extras in one go.
- Balloons on equipment finance lower repayments but raise the final bill.
- Single item with resale value
- Equipment finance
- Mixed, old or specialised gear
- General business loan
- Compare on
- Total cost in dollars
When you’re buying gear, the finance salesperson at the dealer will usually offer equipment finance. Your bank or a business lender might suggest a general business loan instead. Both can buy the same machine. Which one suits you depends on what you’re buying, how many things, and what else the money needs to cover.
What’s the core difference?
Equipment finance (including chattel mortgages, hire purchase and finance leases) is tied to a specific item. The lender takes security over that item, and the loan exists to buy it. Business.gov.au lists hire purchase, chattel mortgages and leasing among the common funding mechanisms for acquiring assets.
A general business loan gives you money to use for business purposes as you see fit. It may be unsecured, with a director guarantee, or secured against property.
Side by side
| Test | Equipment finance | General business loan |
|---|---|---|
| Security | The item being bought | Director guarantee, or property |
| What it can buy | The specific item (sometimes fitted accessories) | Equipment plus installation, training, stock, anything business-related |
| Term | Often matched to the item’s life | Unsecured: shorter. Property-secured: can be longer |
| Paperwork | Supplier invoice, ID, statements | Statements and ID; valuation if property-secured |
| Balloon option | Common | Less common |
| Suits | One item with resale value | Several items, older or specialised gear, broader projects |
Our verdict
Our verdict: equipment finance for one good asset, a business loan for everything else
- Equipment finance is best for
- A vehicle, machine or major tool from an established maker with a resale market, kept for most of its useful life.
- A business loan is best for
- A bundle of mixed items, used or custom-built equipment, imports, or a project where installation and training are a big share of the cost.
- Check before you sign
- Any balloon, who owns the item during the term, early payout terms and how the purchase is treated for tax.
Equipment finance wins for the textbook case: one valuable item, bought from a recognised supplier, with a resale market. The lender is comfortable because the item backs the loan, so the term can be longer and property stays out of it. Security interests are recorded on the national register, which AFSA describes as where security interests in personal property are registered and searched.
A general business loan wins on flexibility. If you’re kitting out a new workshop with a dozen tools, some second-hand, plus installation and a training course, equipment finance would mean several contracts or leave gaps. One loan covers the lot. If property is available as security, the term can be long too.
Read the best way to fund business equipment for the full range of options, including paying cash. Or ask a specialist about your purchase.
Illustrative examples
Illustrative only.
A courier company buys a new refrigerated van from a dealer. One item, strong resale market, kept for several years. Verdict: equipment finance.
A boutique brewery is buying a second-hand brewing system from overseas, plus local installation, plumbing and a new cold room. The system is specialised and imported, and a third of the cost is installation. Verdict: a general business loan, secured against the owners’ property for a longer term.
What should you weigh up beyond the structure?
- The balloon. Equipment finance often comes with an optional balloon. It lowers repayments but leaves a lump sum at the end. Know how you’ll pay it.
- Tax treatment. The structure can change how GST and depreciation are handled. 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 should confirm how it applies to you.
- Total cost. Put both offers into the total cost comparer using the full amount repayable, fees and any balloon.
- Future flexibility. If you might sell or upgrade early, check the payout terms on each.
For more on the structure, see our asset finance verdict. Buying vehicles? Read the best way to finance a fleet.
Can you use both?
Often, yes, and it’s frequently the best answer. A common pattern is equipment finance for the main machine, plus a small unsecured loan or line of credit for installation, freight, training and the first run of consumables. Each part of the purchase gets the structure that suits it, and the main asset’s longer term keeps the biggest repayment manageable.
Just make sure the combined repayments fit your cash flow in a quiet month, not only an average one.
What do lenders ask for in each case?
Equipment finance usually needs the supplier’s quote or invoice, details of the item (make, model, year, serial number for used gear), ID and some trading information.
A general business loan needs a clear purpose and amount, bank statements and ID, and for larger or secured loans, financial statements and property details.
Neither is complicated, but the paperwork differs. If speed matters, having the right documents ready for the structure you’ve chosen saves time.
Does the instant asset write-off favour one over the other?
Not directly. Eligibility depends on the asset and your business, not on whether you used equipment finance or a general loan, though the structure can affect when and how you claim. Ask your accountant before you choose.
Want a verdict on your purchase?
Tell us what you’re buying, new or used, and what else the project involves. Start a short enquiry and a specialist will tell you which structure suits.
No credit check is needed to ask, and your details won’t be handed around a lineup of lenders. Accurate details about the equipment, its age and the supplier help us give you the right answer straight away.
Frequently asked questions
Is equipment finance cheaper than a business loan?
Often, relative to the amount, because the equipment is security. But a balloon, fees and term length all affect the total. Compare actual offers in dollars.
Can a general business loan be secured?
Yes. A business loan can be unsecured (usually with a director guarantee) or secured against property. A property-secured business loan can fund equipment the lender wouldn't accept as security on its own.
Who owns the equipment under equipment finance?
It depends on the structure. With a chattel mortgage you generally own the item from the start and the lender holds security over it. With a lease, the lender owns it during the term. Check before you sign.
Can I finance used equipment?
Often, if it has a clear resale market and isn't near the end of its life. Very old or highly specialised used gear may be easier to fund with a general loan, particularly one secured against property.