Equipment finance glossary
Plain-English definitions of the equipment and asset finance terms you'll come across — no jargon, no sales pitch.
Equipment finance comes with its own vocabulary, and a lot of it is used loosely. Here's what the common terms actually mean, in plain English, so you can read a quote and know what you're looking at before you talk to anyone. This is general information, not advice.
Who it's for
Australian business owners, sole traders and contractors comparing equipment and asset finance.
Asset finance
An umbrella term for borrowing to acquire a business asset — a vehicle, truck, machine or piece of equipment — where the asset itself is the security for the loan. Equipment finance is asset finance for business gear.
Equipment finance
Finance used to buy equipment a business uses to earn — excavators, trucks, utes, machinery, IT and fit-out. It's usually secured against the equipment, so rates tend to be lower than an unsecured business loan.
Chattel mortgage
The most common structure for business equipment finance in Australia. You own the asset from day one; the lender takes a mortgage over it (the 'chattel') as security and releases it when the loan is repaid. Often suits businesses accounting on a cash basis and registered for GST. Speak to your accountant about the GST and depreciation treatment for your situation.
Finance lease
The lender buys the asset and leases it to your business for a fixed term. You use the asset and make lease payments; ownership and end-of-term options differ from a chattel mortgage. The right structure depends on your accounting and cash-flow needs.
Balloon payment (residual)
A lump sum left owing at the end of the term rather than spread across the repayments. A balloon lowers your monthly repayment and keeps more cash in the business, in exchange for a larger amount due at the end, which you refinance or pay out. Around 30% is common on many assets.
Low-doc finance
Finance approved without full financial statements — typically for an established ABN (often 2+ years), GST registered, with a director who owns property. It means less paperwork, not looser obligations. Whether low-doc or a full submission suits you depends on your circumstances.
Pre-approval
An indication from a lender of what they're prepared to fund before you've chosen the asset, usually valid for a set period (often around 90 days). It lets you negotiate as a cash-equivalent buyer. A pre-approval is conditional and subject to the lender's final assessment.
Sale and buyback
Financing an asset your business already owns by selling it to the lender and financing it back, freeing up the capital tied up in it. Usually available within a set window after purchase; terms depend on the asset and lender.
Equity release (capital raise)
Raising working capital against equipment your business already owns outright — commonly up to around 90% of the asset's current market value. A way to turn owned gear on the balance sheet into cash without selling it.
Secured vs unsecured
Secured finance is backed by an asset the lender can recover if the loan isn't repaid, which usually means a lower rate. Unsecured finance isn't tied to a specific asset and generally costs more. Most equipment finance is secured against the equipment.
Term
The length of the loan, usually one to seven years. A longer term lowers each repayment but increases total interest paid; a shorter term does the opposite. The term is often matched to the useful working life of the asset.
Instant asset write-off
An ATO measure that can let eligible businesses deduct the cost of an eligible asset in the year it's first used, rather than depreciating it over time. Thresholds and eligibility change and depend on your circumstances — confirm the current rules with your accountant.
Brokerage / origination fee
A fee for arranging the finance. It can be charged separately or built into the rate. Always ask for the rate you'll actually pay and how any brokerage is applied, so you're comparing quotes on the same basis.
Talk to a specialist
Get the right rate and the right structure for your next asset. No pressure to proceed, no credit-file hit to ask.
- Panel of commercial lenders
- Low-doc options for established ABNs
- Pre-approval before you buy
Work it out backwards.
Start with a repayment that keeps cash in your business and see what it finances — then we’ll line up the right rate to match.
A balloon lowers your monthly repayment and keeps cash in the business. ~30% is common; new vehicles can go to 40%.
Your rate depends on the asset, its age, your ABN and security. A guide, not a quote.
Estimate only, excluding fees and charges. Not a quote, offer, or credit assistance. Actual repayments depend on the lender’s assessment.
Common questions
With a chattel mortgage you own the asset from the start and the lender holds security over it until the loan is repaid. With a finance lease the lender owns the asset and leases it to you for the term. Which suits you depends on your accounting method and cash-flow needs — it's worth checking with your accountant.
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