Smart ways to finance plant and equipment in 2026

If you need a new excavator, a bakery oven, or a fleet of utes for your trades business, the last thing you want to do is hand over $80,000 from your operating account. That money is doing actual work in your business, and pulling it out to buy an asset creates problems you don't see until three months later when cashflow gets tight.

Plant and equipment finance lets you fund machinery, vehicles, and business gear without gutting your working capital. You borrow against the asset itself, spread repayments over time, and keep the cash in the business where it belongs. The structure you pick, whether it's a chattel mortgage, a hire purchase, or a lease, will affect your tax position and how much control you have over the asset.

Chattel Mortgage for Businesses That Want to Own the Asset

A chattel mortgage is a loan secured against the equipment you're buying. You own it from day one, make fixed monthly repayments, and claim depreciation and interest as tax deductions. At the end of the term, there's usually a balloon payment, which is a lump sum that lets you keep monthly costs lower during the loan.

Consider a Wentworthville concreting business buying two trucks and a small excavator for $120,000. They set up a chattel mortgage with a 20% balloon payment, which means they owe $24,000 at the end of the five-year term. Monthly repayments are lower because that final chunk is deferred, and the business claims GST upfront if registered, then deducts depreciation each year. When the balloon is due, they either pay it off, refinance it, or sell the equipment and clear the balance.

The GST treatment matters. If you're registered, you claim the full GST back in your next Business Activity Statement, not across the life of the loan. That upfront refund helps with cashflow in the first quarter.

Hire Purchase When You Want Predictable Ownership

A hire purchase means you don't technically own the equipment until the final payment is made, but you control it from the start and the lender holds the title as security. Repayments are fixed, the loan amount typically covers the full purchase price, and you claim depreciation once ownership transfers.

This structure suits businesses that want certainty and aren't fussed about early ownership for balance sheet reasons. A Wentworthville electrical contractor buying $45,000 worth of test gear, cable tools, and a van might prefer hire purchase because the repayments are fully predictable and the GST is included in the financed amount, so there's no big upfront claim or separate payment.

You're also protected from residual risk. With a balloon payment, you're on the hook if the equipment's resale value drops. With hire purchase, once the term ends and the final payment is made, you own it outright with no further obligations.

Equipment Leasing for Upgrading and Flexibility

A finance lease or operating lease gives you access to equipment without ownership. You make lease payments, use the asset, and at the end of the term you either return it, upgrade, or buy it out for a residual value. Lease payments are usually tax-deductible as an operating expense, but you don't claim depreciation because you don't own the asset.

This works well for businesses that need the latest equipment or want to avoid obsolescence. A medical practice in Wentworthville leasing diagnostic imaging gear for $8,000 a month can upgrade to newer models every three years without worrying about resale or disposal. Hospitality businesses leasing kitchen equipment or point-of-sale systems follow the same logic, the gear stays current and the lease payments come out of revenue.

Operating leases don't usually appear as debt on your balance sheet, which can matter if you're applying for other finance or selling the business. The flip side is you never own the asset unless you buy it out, and lease terms can be less flexible than a loan if your circumstances change.

Vendor and Dealer Finance

Some equipment suppliers offer finance directly, either through their own books or via a panel lender. This can feel convenient because it's bundled with the purchase, but the interest rate and terms are often less competitive than what you'd get by arranging your own asset finance through a broker who can compare options from multiple lenders.

Vendor finance is worth considering when the dealer is running a promotional rate or the equipment is niche and hard to value for a mainstream lender. Otherwise, it's usually worth getting a quote from a broker before you sign anything at the dealership.

How Balloon Payments Affect Cashflow and Exit Strategy

A balloon payment is a lump sum due at the end of the loan term, typically 20% to 40% of the original loan amount. It reduces your monthly repayments, which helps cashflow during the term, but you need a plan for when it comes due.

You can pay it from trading income, refinance it into a new loan, or sell the equipment and settle the balance. The problem is when the equipment's market value drops below the balloon amount, you're stuck covering the shortfall. That's more common with vehicles and tech gear than with heavy machinery, which tends to hold value if it's been maintained.

If you're buying a $60,000 truck with a $12,000 balloon, make sure you're realistic about what it'll be worth in five years. If it's a high-kilometre work vehicle, it might only fetch $8,000, and you'll need to find the extra $4,000 from somewhere.

Tax Deductions and Depreciation

What you can claim depends on the structure. With a chattel mortgage or hire purchase, you own the asset and claim depreciation based on its effective life as set by the Australian Taxation Office. You also claim the interest portion of each repayment.

With a lease, you claim the full lease payment as an operating expense, but no depreciation. For some businesses, especially those with fluctuating income, the lease deduction is more useful because it's predictable and doesn't require tracking the asset's written-down value.

Instant asset write-off rules can also apply, depending on your business size and the asset value, but those thresholds change regularly. Your accountant should confirm what's claimable before you commit to a structure.

Collateral and Approval

The equipment you're buying is the collateral. Lenders will assess its resale value, your business financials, and your ability to service the repayments. If you're buying a $200,000 excavator, the lender knows it can be sold if you default. If you're financing $30,000 worth of office furniture, they might want a director's guarantee or a second asset as security.

Approval for equipment finance is usually faster than a commercial property loan because the risk is lower and the asset is easier to value. Most brokers can get a conditional approval within a few days if your financials are in order.

Fleet Finance for Multiple Vehicles

If you're funding several vehicles at once, fleet finance bundles them into a single facility with one set of repayments. This is cleaner than managing five separate loans and gives you more flexibility to add or remove vehicles as your business grows.

A Wentworthville plumbing business running six vans might set up a fleet facility with a revolving limit, so when they sell an old van and buy a new one, the balance adjusts without needing a fresh application. The interest rate is usually better than retail car loans because it's a commercial facility secured against multiple assets.

When to Borrow and When to Pay Cash

If you've got $50,000 sitting in the business account and you need a $50,000 piece of equipment, it's tempting to just buy it outright. But that leaves you with no buffer if revenue dips or an unexpected cost comes up.

Financing the equipment means you keep that $50,000 as working capital. You'll pay interest, but the cost is predictable and the cashflow cushion is worth more than the interest you'd save by paying cash. The calculus changes if interest rates are unusually high or if the equipment will only be used for a short-term project, but in most cases, preserving capital makes more sense.

Call one of our team or book an appointment at a time that works for you. We'll run through what you're buying, what you need the repayments to look like, and which lenders are most likely to back it.

Frequently Asked Questions