How to Finance New Equipment for Your Business

Buying new equipment outright can put a serious dent in your operating capital.

When you're running a business in WA and need to acquire machinery, vehicles, or technology, equipment finance lets you spread the cost over time while keeping your cashflow intact. Instead of paying $80,000 upfront for a new excavator or $25,000 for IT systems, you make fixed monthly repayments that sit comfortably within your budget. The equipment itself typically serves as collateral, which means you're not tying up other business assets to secure the funding.

Equipment Finance Structures That Match How You Use the Asset

Two main structures dominate commercial equipment finance in Australia: chattel mortgage and hire purchase. Under a chattel mortgage, you own the equipment from day one and claim the full GST credit upfront if you're registered. You also claim depreciation as a tax deduction each year. With hire purchase, the lender owns the equipment until you make the final payment, and you claim your repayments as a tax deductible expense rather than claiming depreciation.

Consider a landscaping business in Joondalup that needs a $95,000 excavator. Under a chattel mortgage with a $5,000 deposit, they'd finance $90,000 over five years. They own the excavator immediately, claim the GST back in the next BAS, and depreciate the asset according to ATO guidelines. Their accountant calculates the annual depreciation at around $19,000, which reduces their taxable income each year. The monthly repayments sit at roughly $1,750 depending on the interest rate, and because they own the equipment, they can modify or sell it if their needs change.

The same business choosing hire purchase would make slightly higher monthly payments because the repayments include a component that's effectively renting the equipment. They'd claim those repayments as an operating expense, which can suit businesses that prefer to keep equipment off their balance sheet. At the end of the term, they'd typically pay a small residual to take ownership.

What You Can Finance Beyond the Obvious Machinery

Most people think of plant and equipment finance as tractors and trucks, but the scope runs much wider. Office equipment, computer equipment, printing systems, solar installations, food processing lines, automation equipment, and material handling gear all qualify. If the item has a defined lifespan and contributes to generating income, lenders will generally consider it.

A commercial kitchen in Fremantle recently needed to upgrade their food processing equipment to meet increased demand. The $42,000 investment covered new ovens, refrigeration units, and prep tables. Rather than draining their savings or delaying the expansion, they structured asset finance over four years with repayments of around $975 per month. The new equipment increased their output by 40%, which meant the additional revenue more than covered the repayments. They also claimed the full purchase as a tax effective equipment expense through depreciation, reducing their tax bill substantially in the first year.

How the Loan Amount Gets Calculated

Lenders assess your equipment finance application based on your business income, existing debts, and the value of the equipment you're acquiring. They'll typically finance between 80% and 100% of the purchase price, depending on your business financials and trading history. New businesses with less than two years of operation might need to contribute a larger deposit, while established businesses with solid revenue can often secure full financing.

The equipment you're buying serves as security, which means if it holds its value well, you'll generally receive more favourable terms. A $150,000 crane holds strong resale value, so lenders will readily finance it with minimal deposit. A highly specialised piece of manufacturing equipment that only suits your specific operation might require a 20-30% deposit because it's harder to resell if something goes wrong.

Your trading history matters more than you might think. Lenders want to see consistent income that comfortably covers your current expenses plus the new repayment. In our experience, businesses that can demonstrate three to six months of bank statements showing stable revenue will move through the approval process much faster than those with erratic income patterns. If you're also exploring other funding options, understanding your overall borrowing capacity helps you structure multiple facilities without overextending.

Managing Cashflow With Equipment Leasing

Equipment leasing differs from equipment finance because you never own the asset. You pay for the right to use it during the life of the lease, then either return it, upgrade to newer technology, or purchase it for the residual value. This approach suits businesses that need to stay current with technology or those that prefer lower monthly payments.

A Perth-based logistics company needed five new forklifts to service their warehouse operations. Buying them outright at $35,000 each would have cost $175,000. Instead, they leased them over three years at roughly $1,400 per month per unit. At the end of the lease, they returned the forklifts and upgraded to newer models with improved safety features and better fuel efficiency. The leasing structure meant they always operated modern equipment without the burden of depreciation or disposal.

Leasing works particularly well for computer equipment and work vehicles that need regular replacement. Technology depreciates rapidly, so locking yourself into ownership of IT systems that become outdated in 24 months rarely makes financial sense. Leasing lets you refresh your technology on a predictable cycle while claiming the full lease payment as a business expense.

The Application Process for Commercial Equipment Finance

You'll need recent business financials, bank statements covering at least three months, and a quote or invoice for the equipment you're purchasing. Lenders will review your ABN, confirm your GST registration if applicable, and assess whether your business income supports the repayment.

For newer businesses without extensive trading history, providing a solid explanation of how the equipment will generate revenue strengthens your application. If you're buying a truck that will immediately start earning $8,000 per month on a new contract, that context matters. Similarly, if you're adding automation equipment that will reduce labour costs by $3,500 monthly, lenders want to see those numbers.

The approval timeline typically runs between 24 and 72 hours for straightforward applications with established businesses. More complex scenarios or newer operations might take up to a week. Once approved, settlement can happen quickly, which means you're not losing out on time-sensitive equipment deals or supplier discounts. Many WA businesses combine equipment funding with other facilities like business loans or commercial loans to create an integrated funding structure that supports growth across multiple areas.

Tax Benefits That Make Equipment Finance Attractive

Depreciation and tax deductions form a significant part of the equipment finance equation. When you purchase equipment under a chattel mortgage, you claim depreciation as a tax deduction each year based on the asset's effective life. The ATO publishes depreciation rates for different asset types, and your accountant will apply these to reduce your taxable income.

Instant asset write-off provisions have varied over recent years, but the principle remains: eligible businesses can claim an immediate deduction for the full cost of equipment under certain thresholds. Even without instant write-off, standard depreciation delivers substantial tax savings over the life of the asset.

Under hire purchase or leasing, you claim the repayments as a business expense rather than claiming depreciation. For some businesses, this creates a more predictable tax deduction that matches their cashflow. Your accountant will model both scenarios to identify which structure delivers the most tax effective equipment acquisition for your specific situation.

Call one of our team or book an appointment at a time that works for you to discuss how equipment finance can support your business growth without compromising your working capital.

Frequently Asked Questions