Asset finance lets you acquire the equipment your business needs without paying the full amount upfront.
Whether you run a fishing operation needing a new truck and trailer, a medical practice upgrading diagnostic equipment, or a hospitality venue replacing kitchen machinery, paying cash for these purchases can drain your working capital when you need it most. Asset finance spreads the cost across the period you'll actually use the equipment, matching your repayments to the income that equipment helps generate.
How Asset Finance Works in Practice
Asset finance uses the equipment itself as security for the loan. You select what you need, arrange funding, and begin using the asset while making regular repayments over an agreed term. The lender holds an interest in the equipment until you've completed the payments.
Consider a construction business in Ulladulla needing an excavator valued at $120,000. Rather than withdrawing that amount from business savings, they arrange asset finance with a deposit of $24,000 and monthly repayments over five years. The excavator starts earning revenue immediately on coastal development projects around Burrill Lake and Milton, while the business preserves $96,000 in working capital for wages, materials, and unexpected costs.
Chattel Mortgage and Tax Treatment
A chattel mortgage provides ownership of the equipment from day one, with the lender holding a mortgage over it until the loan is repaid. You claim the GST on the purchase price upfront, deduct interest as a business expense, and claim depreciation on the full asset value.
For the excavator example above, the business claims the GST credit in the first BAS, reducing the effective purchase price. They also claim depreciation annually based on the equipment's diminishing value. This tax treatment often makes a chattel mortgage suitable for businesses with consistent taxable income who want to maximise deductions. Our asset finance specialists can walk through how this applies to your particular situation and equipment type.
Equipment Lease Structures
A finance lease differs because you don't own the equipment during the lease term. You make fixed monthly repayments that cover the equipment's depreciation, and at the end of the lease you typically have the option to purchase it for a residual amount, extend the lease, or return it.
Operating leases work similarly but are structured so the repayments don't cover the full value. At lease end, you return the equipment or purchase it at market value. These arrangements suit businesses that need to stay current with technology or manage regular upgrade cycles, such as medical practices replacing imaging equipment every few years or hospitality venues updating point-of-sale systems.
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Hire Purchase Arrangements
Hire purchase lets you use the equipment immediately while making regular repayments, with ownership transferring once the final payment is made. You can't claim GST upfront because you don't technically own the asset yet, but you claim the GST component of each repayment. You also claim the interest portion of each repayment as a deduction.
This structure works when you want eventual ownership but prefer spreading the GST claim across the contract term. For businesses managing quarterly BAS obligations, this can smooth out cashflow compared to a large upfront GST claim that ties up funds until the credit is processed.
Balloon Payments and Residual Values
Many equipment finance arrangements include a balloon payment, which is a lump sum due at the end of the term. Setting a balloon payment reduces your fixed monthly repayments during the contract, preserving cashflow while you're using the equipment to build revenue.
If you financed a $90,000 truck with a 30% balloon payment, you'd repay $63,000 across the monthly instalments and owe $27,000 at term end. You can pay that amount from accumulated revenue, refinance it into a new contract, or trade the vehicle and use its value to offset the balloon. The Australian Taxation Office sets maximum balloon amounts based on the asset type and contract length, so your broker will ensure the structure meets those requirements.
Vendor and Dealer Finance Options
Vendor finance comes directly from the equipment supplier or manufacturer, often promoted at the point of sale. Dealer finance works similarly, arranged through the dealership selling the equipment. These can appear convenient, but the interest rate and terms are fixed by a single provider.
Accessing business loans and asset finance options from banks and lenders across Australia means we compare multiple structures and rates based on your business circumstances, not just what one supplier offers. For businesses in Ulladulla where major equipment purchases might happen every few years, getting the structure and rate right can mean tens of thousands of dollars difference across the life of the contract.
Local Business Applications
Businesses along the Princes Highway corridor often need specialised equipment that doesn't fit standard lending categories. A tractor and slasher for rural maintenance work, a crane for marine construction projects, or refrigeration units for seafood processing each have different usage patterns and depreciation schedules.
Asset finance adapts to these variations. You're not locked into a generic loan product that ignores how your equipment actually generates income. The collateral is the equipment itself, so lenders focus on the asset's value and your business's ability to service the repayments, rather than requiring additional property security.
If you're looking at buying new equipment, upgrading existing machinery, or adding work vehicles to your operation, speaking with a local broker who understands both the funding structures and the regional business environment makes the process more direct. We work with clients across Ulladulla, Mollymook, and the surrounding areas who need everything from medical equipment finance through to commercial vehicle arrangements for tourism operators.
Call one of our team or book an appointment at a time that works for you to discuss which asset finance structure fits your business needs and equipment type.
Frequently Asked Questions
What types of equipment can I finance through asset finance?
You can finance almost any business equipment including vehicles, trucks, trailers, construction machinery like excavators and cranes, medical and dental equipment, hospitality kitchen equipment, office technology, and specialised tools. The equipment itself serves as security for the loan.
What is the difference between a chattel mortgage and a hire purchase?
With a chattel mortgage you own the equipment from day one and can claim the full GST upfront, while the lender holds a mortgage over it. With hire purchase, ownership transfers after the final payment and you claim GST on each repayment instead of upfront.
How does a balloon payment affect my monthly repayments?
A balloon payment is a lump sum due at the end of your finance term. Setting a balloon payment reduces your fixed monthly repayments during the contract, which helps preserve cashflow while the equipment is generating revenue for your business.
Can I claim tax deductions on equipment financed through asset finance?
Yes, you can typically claim depreciation on the equipment value and deduct the interest component of your repayments as a business expense. The specific tax treatment depends on the structure you choose, such as chattel mortgage, hire purchase, or lease.
Do I need to provide property as security for asset finance?
No, the equipment itself serves as collateral for the loan. Lenders focus on the asset's value and your business's ability to make repayments rather than requiring additional property security.
