Quick answer
There are five main ways to fund business equipment: pay cash, use equipment finance (chattel mortgage or hire purchase), lease it, take an unsecured loan, or borrow against property. Equipment finance usually suits long-life gear because the asset secures itself and repayments match its working life. Cash suits small purchases if it doesn't drain your buffer; leasing suits technology that dates quickly.
Key points
- Match the funding to how long the equipment will earn.
- Equipment finance keeps cash free and uses the asset as security.
- Leasing suits fast-dating technology you'll want to upgrade.
- Never buy something just for a tax deduction.
New gear is one of the most satisfying things to spend business money on. The machine that halves a job’s time, the oven that doubles capacity, the van that lets you take on more work. The question isn’t really whether to buy it — it’s how to pay for it without starving the rest of the business.
What are the ways to fund equipment?
| Option | How it works | Best for |
|---|---|---|
| Pay cash | Buy outright from your own funds | Smaller items when you have a healthy buffer |
| Equipment finance (chattel mortgage, hire purchase) | Loan secured by the equipment; you own it | Long-life gear you’ll keep |
| Lease | Use the equipment for a term; return, upgrade or buy at the end | Technology that dates quickly |
| Unsecured business loan | Lump sum sized on turnover | Lower-value items or a mix of purchases |
| Property-backed loan | Borrow against property equity | Big equipment packages bundled with other costs |
| Vehicle finance | Like equipment finance, for vehicles | Utes, vans, trucks, cars |
How do you decide which one fits?
Ask four questions:
- How long will it earn? Long-life gear suits longer finance; fast-dating gear suits shorter terms or leasing.
- How much cash would paying outright leave you? If it would drain your buffer, finance is safer.
- Do you want to own it? If yes, chattel mortgage or hire purchase. If you’d rather upgrade regularly, lease.
- What’s the total cost? Compare finance costs in dollars against the value of keeping your cash available.
Why not just pay cash?
Paying cash avoids finance costs, and for small purchases it’s often sensible. But cash is the most flexible asset a business has. Spend it on a machine and it’s locked up for years. If a big customer pays late or a quiet month arrives, that cash isn’t available. Equipment finance lets the machine pay for itself over its life while your cash stays ready for everything else. Many owners find the cost of finance is a fair price for that flexibility. Not sure where the line is for your business? Ask a real person.
How does equipment finance work?
The lender pays the supplier, registers its interest on the Personal Property Securities Register, and you repay over an agreed term. With a chattel mortgage you own the equipment from day one; with hire purchase you own it after the final payment. A balloon can lower regular repayments but leaves a lump sum at the end. Full details are on our equipment finance page.
What about the instant asset write-off?
The ATO’s instant asset write-off lets eligible businesses deduct the full cost of eligible assets under a threshold in the year they’re first used or installed. The ATO states the threshold is $20,000 for businesses with aggregated turnover under $10 million, from 1 July 2023. Rules have changed often, so check the ATO page for your income year and get your accountant’s advice. A tax deduction reduces tax on the purchase; it doesn’t make an unnecessary purchase worthwhile. See matching the loan to the job for more on timing.
What does it look like in practice? (illustrative)
A Ballarat bakery’s deck oven is fifteen years old and costing a fortune in repairs. A new oven would cut baking time and allow a wholesale bread run to local cafés. Paying cash would wipe out the bakery’s buffer before winter, its quietest season. Instead, the bakery uses a chattel mortgage over five years, with repayments roughly offset by lower repair bills and the new wholesale income. The cash buffer stays intact for the quiet months. Illustrative only.
What should you check before buying?
- Total cost of ownership — installation, training, servicing, consumables and insurance.
- Downtime — what happens to the business while it’s installed?
- Second-hand checks — condition, service history, and a PPSR search for existing finance.
- Supplier support — parts availability and service response times.
- Resale value — matters for both your balance sheet and your lender.
New or used — which is smarter?
New equipment comes with warranties, the latest efficiency and easier finance. Used equipment costs less and can be a bargain if it’s been well maintained. A few questions settle most decisions:
- How critical is uptime? If a breakdown stops the whole business, new or near-new is worth the premium.
- How fast is the technology changing? For gear that dates quickly, a newer model — or a lease — avoids being stuck with yesterday’s kit.
- What’s the service history? Ask for records, and have a qualified person inspect it.
- Is there finance owing? A PPSR search shows whether a security interest is registered against it. Buying equipment with someone else’s finance attached is a headache you don’t need.
- Will a lender fund it? Very old or unusual equipment may need a different structure, so check before you commit to a private sale.
How do you avoid overcommitting on equipment?
Add up every equipment repayment the business already has, then add the new one. Check the total still fits comfortably in a quiet month, not just a good one. If several pieces of equipment are coming off finance soon, it can make sense to time the new purchase for then. And if you’re buying several items in one go, consider whether staging the purchases would ease the pressure.
What documents will you need?
- Supplier quote or tax invoice
- Photo ID and ABN or ACN
- Recent business bank statements
- BAS and financials for larger purchases
- For new businesses: a plan showing how the equipment will generate income
Which other pages are worth reading?
- Equipment finance — the full explainer.
- Vehicle finance — utes, vans and trucks.
- Repayment structures explained — balloons and residuals.
Ready to upgrade your gear?
Great equipment can transform what your business can do. We’ll help you choose the funding route that keeps your cash healthy and your repayments comfortable.
Enquiring involves no credit check. Your details stay with our team rather than being sprayed across lenders, and a real person calls you. Please share the supplier quote, the cost and how the equipment will earn its keep so we can match you properly. See if you qualify.
Frequently asked questions
Is it better to pay cash or finance business equipment?
If paying cash would leave the business with a thin buffer, finance is often smarter even if it costs something, because it keeps cash available for wages, stock and surprises. If you have plenty of spare cash and the item is modest, paying outright avoids finance costs.
Should I lease or buy equipment?
Buying (including with equipment finance) suits gear you'll use for its whole life. Leasing suits equipment that dates quickly or that you'll want to upgrade. business.gov.au has a helpful comparison of leasing versus buying.
Can I finance second-hand equipment?
Often, yes. Lenders consider age, condition and resale value. Very old, highly specialised or privately sold equipment may need more checks or a different structure.
Does the instant asset write-off mean I should buy before 30 June?
Only if you need the equipment anyway. The ATO's instant asset write-off can bring forward a deduction for eligible assets, but a deduction is only a fraction of what you spend. Check current rules with the ATO or your accountant.