There are around 2.7 million actively trading businesses in Australia, and 97% of them are small businesses with fewer than 20 employees (ABS, June 2025). For most of these businesses, growth comes down to one question at some point: how do you fund the next vehicle, the next piece of equipment, or the next fit-out without draining the cash you need to keep running?
That’s where asset finance comes in. It’s a way of paying for the things your business needs to operate, spread out over time, with the asset itself usually acting as the security for the loan.
This article walks through what asset finance actually is, the main types of asset finance used in Australia, what to think about before signing up, and where the lending part of the conversation fits in. The tax and accounting side of any asset finance decision is one your accountant needs to be part of, and we’ll come back to that throughout.
What is asset finance?
Asset finance is a loan used to buy or use a specific item that your business needs. The loan is secured against the item itself, which is one reason rates tend to be more competitive than an unsecured business loan.
Common items funded through asset finance include:
- Cars, utes, vans, and trucks
- Tools, machinery, and trade equipment
- Computers, servers, and IT hardware
- Office furniture and fit-outs
- Medical and dental equipment
- Specialist gear like coffee machines, kitchen equipment, or salon fit-outs
The basic idea is the same across all of them: instead of paying cash upfront, the business spreads the cost out over the working life of the asset, while still using it from day one.
How asset finance works in Australia
There isn’t one single product called “asset finance.” It’s a category that covers a few different loan types, each one structured a bit differently. The right fit depends on the asset, the business, and how you want it to look on your books. Your accountant is the right person to settle that question.
A worked example
Let’s say Sam runs a small landscaping business. He needs a $60,000 ute to replace the one that’s on its last legs. He could pay cash, but that would leave the business short on working capital.
Instead, Sam takes out asset finance for the ute. He puts a small deposit down, and the lender funds the rest. The ute is the security for the loan. Sam’s business makes monthly repayments over (say) five years. He drives the ute from day one and uses it to earn money the whole time.
That’s the pattern for most asset finance arrangements. What changes between the different loan types is who owns the asset during the loan, how the repayments are structured, and how the whole thing is treated for tax. Sam’s accountant is the one who would walk him through those differences for his situation.
The three main types you’ll come across
Most asset finance in Australia falls into one of three main types. Each one is structured differently and treated differently by the ATO.
Chattel mortgage. The business owns the asset from day one. The lender holds a mortgage over it as security until the loan is paid off, then the mortgage is removed. This is one of the most common structures for vehicles and equipment.
Finance lease. The lender owns the asset and the business leases it for a set period. At the end of the lease, the business can usually buy the asset for a residual amount, return it, or trade it for a new one.
Operating lease. Similar to a finance lease, but the asset is fully returned at the end. There’s no buyout option. This works for assets that go out of date quickly (IT hardware) or where the business never wants to own the item.
There are other variations on top of these (novated leases for employees, hire purchase, rental agreements), but those three cover most of what businesses use day to day. Which one suits your business depends on the asset, your tax position, and your cash flow. Your accountant is the right person to walk you through the differences for your situation.
What lenders look at
When you apply for asset finance, the lender usually wants to see:
- How long the business has been running
- Recent business activity statements (BAS) and tax returns
- Recent bank statements showing cash flow
- What the asset is and how it will be used in the business
- Existing debts and how the business has handled them
For smaller asset finance applications (typically under $150,000 to $250,000 depending on the lender), some lenders use “low-doc” or “no-doc” arrangements where the paperwork is lighter. The trade-off is usually a higher rate. As a guide, asset finance loan terms run from one to seven years depending on the asset’s expected working life.
Who needs to be involved
An asset finance arrangement usually involves:
- Your accountant, who decides which loan structure makes sense for your tax position and how the asset gets treated on your books
- A mortgage broker or lender, who arranges the loan once the structure has been chosen
- The supplier of the asset (the dealer, equipment provider, or fit-out company)
- You and your business, as the borrower making the final call
Things to consider before taking on asset finance
Asset finance is useful, but it’s not free, and it’s not always the right move. Things worth thinking about:
- The total cost over the loan term. A monthly repayment of $1,200 looks easy. Over five years that’s $72,000 in repayments on a $60,000 asset. The interest is the price of spreading the cost out, and it’s worth seeing the total before signing.
- Match the term to the asset’s working life. Financing a piece of equipment over seven years when the equipment is only good for four leaves you paying off something you no longer use. Most lenders won’t structure it that way, but it’s a common error when terms are pushed too long for the wrong reasons.
- Cash flow stress. Adding another monthly payment to the business needs to fit inside your existing cash flow. If the asset takes time to start earning (a fit-out for a new location, for example), you might need a few months of repayments before the asset is paying for itself.
- Residual values on leases. Finance leases usually have a balloon payment at the end (the residual). It can make the monthly repayment look smaller, but you still owe the residual at the end, and that needs to be planned for.
- Early payout costs. If you want to pay the loan off early or sell the asset, there can be break costs. Worth knowing what they look like before you sign.
- Personal guarantees. For smaller businesses, lenders often ask the directors or owners to personally guarantee the loan. That means if the business can’t pay, the lender can come after you personally. This is normal for small business lending, but worth knowing it’s on the table.
- The tax treatment is not a lending question. Whether a chattel mortgage or a lease suits your business is mostly a tax and accounting question, not a lending one. Your accountant is the right person to settle which structure fits your situation. A broker’s job is the lending side once that decision has been made.
A good asset finance conversation includes a frank look at all of these. If a broker is leading with the monthly repayment without working through the total cost, the term, and which structure suits, that’s a red flag.
Who asset finance suits
Asset finance tends to make sense for:
- Businesses that need a specific asset to operate or grow (vehicles, equipment, fit-outs)
- Businesses with steady cash flow that can absorb a regular monthly repayment
- Owners who’d rather keep working capital available than tie it up in one big purchase
- Businesses replacing or upgrading equipment they already use day to day
- Owners working with an accountant who can advise on the right loan structure
It tends to be the wrong fit when:
- The business doesn’t actually need the asset (the want is bigger than the need)
- Cash flow is already tight and another monthly repayment would put pressure on the business
- The asset is going to be obsolete or worn out well before the loan term ends
- The business is brand new and hasn’t built enough trading history for a lender to assess
The right answer depends on the full picture. Your business, your cash flow, the asset itself, and which loan structure fits your tax position all play a part.
How Equity Cube can help
If you’ve worked through the structure with your accountant and you’re ready to look at the lending side, the next step is comparing what’s available across the asset finance lender market.
That’s the kind of conversation we have at Equity Cube. We compare options across our lending panel for vehicles, equipment, and other business assets, and walk you through the trade-offs in plain language. If asset finance isn’t the right move for your business right now, we’ll tell you that too.