Business equipment loans: costs, terms and eligibility
A business equipment loan is finance used to buy a specific business asset, secured against that asset. Terms typically run one to seven years, funding is available from small purchases up to several million dollars, and because the loan is secured, rates are generally lower and approval easier than for an unsecured business loan of the same amount.
- Match the loan term to how long the asset will earn, not to the lowest repayment.
- Secured against the asset, so property security is usually unnecessary.
- Most lenders want to see 6 to 12 months of trading and consistent deposits.
- A balloon payment lowers repayments but raises total cost.
When an equipment loan is the right tool
Equipment loans exist for a specific job: converting a large one-off asset purchase into predictable monthly cost. If the purchase is a definable piece of equipment that will still be worth something in three years, an equipment loan is almost always cheaper than drawing on a line of credit or an unsecured loan.
If the spend is diffuse, such as a fit-out spread across trades, stock, or wages during a slow quarter, equipment finance is the wrong instrument, and a working capital facility fits better.
How much you can borrow
Loan size is driven by the asset value, the business capacity to service the repayment, and the lender appetite for that asset class. BizLend arranges business facilities from $50,000 to $5 million.
Where the asset is newer and bought through a dealer, lenders will often fund the full purchase price including GST. Where it is older, specialised or privately sold, expect to contribute a deposit or accept a shorter term.
Choosing a term
The test is whether the asset will still be productive when the last repayment is made. A five-year term on a truck expected to run ten years is sensible. A five-year term on a laptop fleet is not, because you will still be paying for equipment you have replaced.
What it costs
Total cost has four components: the interest rate, the fees, the residual, and the term. Changing any one of them changes the others.
- Rate, driven by asset type and age, loan size, term, and the strength of the business and director credit file.
- Establishment fee, charged once at settlement.
- Ongoing fee, usually monthly.
- Residual or balloon, an amount deferred to the end of the term. It lowers monthly repayments and increases total interest paid.
Ask for the total cost of finance over the full term on every quote you compare. It is the only number that makes two structurally different offers comparable.
Eligibility
Requirements vary across a lender panel, but most equipment lenders are looking for the same core evidence.
| Requirement | What lenders typically want |
|---|---|
| ABN | Registered and active |
| GST | Registered, where turnover requires it |
| Trading history | Commonly 6 to 12 months, though some lenders fund earlier |
| Bank statements | Usually 3 to 6 months, showing consistent deposits |
| Director credit | No recent unexplained defaults; adverse history narrows options rather than ending them |
| The asset | Identifiable, valued, with a resale market |
If your business does not meet one of these, it usually means fewer lenders will consider the application rather than none. That is precisely where a broker with a wide panel is useful.
Documents to have ready
Applications stall on missing paperwork more often than on credit issues. Assembling the following before you apply typically removes days from the process.
- A written quote or invoice from the supplier, showing the asset, the price and the GST.
- Photo identification for every director and guarantor.
- ABN and, where applicable, GST registration details.
- Three to six months of business bank statements as PDFs downloaded from your banking portal, not photographs or screenshots.
- Recent lodged BAS.
- Financial statements and tax returns if you are applying on a full documentation basis.
- For a used or private purchase, the serial or VIN number, photographs, and hours or kilometres.
- A short summary of existing finance commitments and their monthly repayments.
If the business trades through a trust or a company within a group, have the structure documents available too. Lenders need to know which entity is borrowing, which entity owns the asset, and who is guaranteeing the facility. Sorting that out at the start avoids re-documenting an approval later.
Common mistakes worth avoiding
Taking a term longer than the asset will last
It lowers the repayment and looks attractive on a quote. It also means paying for equipment you have already replaced, and it ties up serviceability you will want for the next purchase.
Accepting a balloon without a plan
A residual is a deferred debt, not a discount. Decide now whether it will be met by sale, trade-in or refinance, and check what the payout figure looks like if the asset is worth less than expected.
Buying before finance is approved
Lenders fund suppliers directly. If you have already paid, the transaction may need to be structured as a refinance of an owned asset, which is a different product with different pricing.
Overlooking insurance and registration costs
Comprehensive insurance is generally a settlement condition, and heavy vehicles carry registration and compliance costs that are not part of the finance. Budget for them alongside the repayment.
Comparing rates across different products
An equipment loan, a line of credit and an unsecured loan are priced on different risk. Compare within a structure, then compare structures on total cost.
Applying through a broker
A direct application to a single lender gives you one answer. If it is a decline, the enquiry sits on your credit file and you start again elsewhere.
BizLend is an accredited broker with more than 70 lenders on panel. We assess where the application is most likely to succeed before it is submitted, and present the options side by side. There is no cost to get a quote.
Frequently asked questions
What is the difference between an equipment loan and a business loan?
An equipment loan is secured against a specific asset and can only be used to buy it. A general business loan can be used for any business purpose but, being unsecured or secured against property, usually carries a higher rate.
Can a new business get an equipment loan?
Some lenders fund businesses with under six months of trading, typically with a deposit, a stronger director credit profile, or a lower loan amount. Options are narrower but they exist.
Should I take a balloon payment?
A balloon reduces monthly repayments and suits businesses managing cashflow tightly, but it increases the total interest paid and leaves an amount owing at the end of the term. Only take one if you have a plan for it: sale, trade-in or refinance.
Does an equipment loan affect my ability to borrow elsewhere?
Yes. It is a commitment on your file and reduces serviceability for future applications. Sequence major borrowing deliberately.