Asset finance is a type of business funding used to purchase or access vehicles, machinery, equipment and other assets without paying the full cost upfront. Instead, the cost is spread over an agreed period through regular repayments.
For a business, financing an asset can help preserve cash for other expenses such as wages, stock and day-to-day operating costs. It can also make higher-value equipment more accessible without requiring a large upfront payment.
With asset finance, a business typically selects the vehicle, machinery or equipment it needs before applying for funding through a lender. The lender assesses the application, including the type and value of the asset and the financial position of the business.
If approved, the arrangement generally follows these steps:
Depending on the finance structure, the asset may act as security for the funding. This gives the lender a security interest in the asset and can allow it to take action against that asset if the borrower does not meet its obligations.
Ownership also varies between finance structures. With some arrangements, the business owns the asset from the outset. With others, the lender or finance provider retains ownership during the agreement.
Equipment finance can be used for a wide range of business purchases, from commercial vehicles and construction equipment to medical technology and commercial kitchen equipment. The available loan term, repayment structure and eligibility criteria will depend on the asset being purchased, the lender’s requirements and the financial circumstances of the business.
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The types of assets a business can finance will depend on the lender, the nature of the business and how the asset will be used. Some lenders may also have requirements around the age, condition and value of the item being purchased.
Common assets businesses may be able to finance include:
Machinery finance may be particularly useful when a business needs higher-value or specialised equipment that would otherwise require a significant upfront payment.
Both new and used assets may be eligible for funding. However, lenders can apply different criteria to used assets based on factors such as their age, condition and expected useful life. Businesses should check these requirements before committing to a purchase.
Buying vehicles, machinery or equipment can require significant capital. According to the Australian Bureau of Statistics, private businesses recorded around $25.1 billion in equipment, plant and machinery expenditure in the June 2026 quarter, up 18.7% from a year earlier.
Using asset finance can allow a business to spread a major purchase over time rather than using a large amount of cash upfront. This can leave funds available for wages, stock, tax obligations and unexpected costs.
The decision should still make financial sense. Businesses should consider whether the asset can improve capacity, replace ageing equipment or support additional revenue. These benefits need to be weighed against repayments and the total cost of borrowing.
When considering commercial finance, businesses should also compare financing with paying cash and assess which option better supports their cash flow and longer-term plans.
Businesses have several ways to fund vehicles, machinery and other equipment. The appropriate structure can depend on factors such as cash flow, the type of asset and whether the business wants to own the asset during or after the finance term.
With a chattel mortgage, the business owns the asset from the outset while the lender takes a security interest over it until the finance is repaid. It may suit businesses that want ownership while spreading the purchase cost over time.
Under a finance lease, the finance provider owns the asset while the business uses it and makes regular lease payments. Options at the end of the term depend on the agreement and may include purchasing or refinancing the asset.
With hire purchase, the business uses the asset and makes scheduled payments while the finance provider generally retains ownership. Ownership typically transfers to the business once the agreement and required payments are completed.
An equipment loan provides funding for a specific business purchase, with repayments made over an agreed term. Equipment finance can cover vehicles, trade equipment and specialised machinery. Rates, terms and security requirements can vary between lenders.
The right option will depend on the asset, your cash flow and your plans for ownership. Comparing each structure carefully can help you choose funding that supports the business without placing unnecessary pressure on its finances.
Before committing to asset finance, consider the purchase itself as well as the cost of funding it. These six factors can help determine whether the asset and finance structure make sense for the business.
Consider what the asset is expected to achieve. It might replace unreliable equipment, increase capacity or allow the business to take on more work. Focus on its commercial value rather than simply whether finance is available.
Used equipment may cost less upfront, but its age and condition can affect lender requirements and ongoing maintenance costs. When considering asset finance, businesses should also factor in the equipment’s expected useful life and when it may need to be replaced. Machinery finance requirements can also vary depending on the age, condition and value of the equipment.
Some finance arrangements may require an upfront contribution. Businesses should also budget for costs such as delivery, registration and installation where applicable. Include these expenses when calculating the total cost of acquiring the asset.
Consider the loan term, repayment frequency and whether a balloon or residual payment applies. Smaller regular repayments can appear more manageable but may not result in a lower overall cost. Repayments should also be realistic against expected business cash flow.
The interest rate is only one part of the cost. Establishment fees, ongoing charges, the loan term and total amount repayable should also be compared. This is particularly important when assessing different business loans and funding structures.
The finance structure and ownership of an asset can affect its tax and accounting treatment. GST, depreciation and potential deductions may apply differently depending on the arrangement and the business’s circumstances. A qualified accountant or tax adviser can provide advice based on your situation.
When assessing an asset finance application, lenders look at whether the business can manage the repayments and whether the proposed purchase meets their lending criteria. The assessment can include:
Documentation and eligibility requirements vary between lenders. An established business with a longer financial history may be able to provide several years of records, while a newer business has less trading history for a lender to assess.
Requirements can also differ across business loans and lenders. Preparing accurate financial information and details of the proposed purchase can help lenders assess the application more efficiently.
The right asset finance structure depends on what you are purchasing, your cash flow, current financial position and longer-term business plans. Before committing, consider the repayments, total borrowing cost and how long the asset is expected to remain useful to the business.
With different commercial finance options available, comparing lenders and finance structures can help you understand which approach suits your circumstances. ZEP Finance can help you assess suitable options from its lender panel and navigate the application process.
Planning a major equipment or asset purchase? Talk to ZEP Finance about your funding requirements and explore your options before you commit.
Potentially. Some lenders allow purchases from private sellers, but additional checks may apply compared with buying through an established dealer. The lender may require evidence of ownership, an independent valuation or other information about the seller and equipment before approving the transaction.
It may be possible, although imported equipment can involve additional considerations. A lender may assess where the equipment is located, how its value can be verified and whether it can be readily identified and registered as security in Australia. Businesses should investigate funding before committing to an overseas supplier.
It may be possible, although imported equipment can involve additional considerations. A lender may assess where the equipment is located, how its value can be verified and whether it can be readily identified and registered as security in Australia. Businesses should investigate funding before committing to an overseas supplier.
You generally cannot assume you can sell an asset that is subject to a lender's security interest without first dealing with the outstanding finance. The process may involve requesting a payout figure and having the lender's security interest released as part of the sale. Check the terms of the finance agreement before advertising or selling the equipment.
Potentially. A business purchasing several items may be able to finance them together or through separate arrangements. The appropriate approach can depend on the value and type of each item, when they are being purchased and the lender's requirements.
Some lenders may offer repayment structures that account for seasonal income patterns, depending on the product and circumstances. This can be relevant to businesses in industries where revenue varies significantly throughout the year. The total cost and conditions should still be assessed carefully before choosing a repayment structure.
