Which option saves you more money when buying business equipment?
Equipment finance: asset acts as security; typically lower rate than unsecured; often 0%-deposit on suitable assets; tax treatment varies by structure. Business loan: flexible — funds can go anywhere in the business; rate depends on whether secured or unsecured. For an asset purchase: equipment finance is usually cheaper. For mixed-use spend: a business loan is more flexible. Confirm rates with each lender.
Yes, equipment finance payments are usually 100% tax deductible as operating expenses, plus potential instant asset write-offs.
With hire purchase, you own it after final payment. With operating leases, you return it or buy for residual value.
Most equipment finance allows early payouts, but may include early termination fees or interest penalties.
You're still liable for payments. Consider warranty, insurance, and maintenance agreements when comparing options.
| Factor | Equipment Finance | Business Loan | Winner |
|---|---|---|---|
| Interest rates | Typically lower (asset is the security) | Higher (especially unsecured) | Equipment finance |
| Security required | The asset itself | Often unsecured | Depends |
| Deposit required | Often low — many lenders offer 0% on suitable assets | Varies by lender + use | Equipment finance |
| Flexibility of use | Equipment only | Any business purpose | Business loan |
| Tax treatment | Differs by structure (chattel mortgage / HP / lease) — see your accountant | Standard interest deductibility on business borrowing | Depends on structure |
| Ownership | Depends on structure — chattel mortgage = immediate, HP / lease = after term | Immediate (borrower owns purchased asset) | Business loan |
| Approval speed | Confirm with lender | Confirm with lender | Similar |
| Maximum financing | Often up to 100% of asset value | Capped by serviceability + security | Equipment finance (for asset purchases) |
| Early termination | Confirm with lender (break costs may apply) | Confirm with lender | Confirm both |
| Best for | Single asset purchase | Multiple / mixed purposes | Depends |
Quick Answer: Equipment finance is a loan specifically for buying business equipment where the equipment itself acts as security for the loan.
With equipment finance, the lender provides funds to purchase specific equipment, and the equipment serves as collateral. You make regular payments over 2-7 years. There are several types:
Use the SMELoans equipment finance calculator with the lender's quoted rate to model monthly cost and total interest for your asset.
Compare against the same purchase priced as a generic business loan using the business loan calculator.
Excavator, truck, machinery, IT equipment
Makes the admin worthwhile
Don't want to tie up cash
Equipment security reduces cost
Operating lease = 100% deductible
Office fit-out, mixed inventory
May change equipment needs
Admin costs outweigh benefits
Lender restrictions may apply
Early termination fees costly
Use business loans when you need maximum flexibility or are buying equipment as part of a larger business investment.
Use the SMELoans business loan calculator with the lender's quoted rate to model monthly cost and total repayment.
Benefit: Own immediately, can sell anytime, use leftover cash for working capital
Tax treatment can significantly impact the real cost of your financing option:
Equipment finance can be structured as a chattel mortgage, hire purchase, finance lease, or operating lease — each with different ownership, depreciation, and deductibility profiles. A generic business loan funding the same asset purchase has its own treatment.
Tax treatment is not a substitute for tax advice. The right structure depends on your tax position, asset class, and intended hold period. Speak to your accountant or tax adviser before deciding.
Use the SMELoans calculators with each lender's quoted rate to compare scenarios:
SMELoans does not maintain a live rate feed — every rate quoted on the site is indicative. Always run your modelling against the actual rate the lender quotes for your application.
Recommended: Equipment Finance
Heavy machinery holds value, lower rates important for thin margins, equipment finance standard industry practice
Recommended: Operating Lease
Rapid depreciation, regular upgrades needed, 100% tax deductibility valuable
Recommended: Equipment Finance
Vehicles hold value, fuel efficiency improvements, structured replacement programs
Recommended: Hire Purchase
Long-term assets, customization needed, depreciation benefits important
Recommended: Business Loan
Mixed equipment needs, installation costs, ongoing working capital requirements
Recommended: Business Loan
Multiple suppliers, fit-out costs, inventory funding also needed
Lower payments might mean longer terms and higher total cost. Always compare total cost of ownership including tax benefits.
A business loan might be cheaper overall but strain cash flow with higher payments. Equipment finance spreads the cost longer.
Tax benefits can change the real cost by 20-30%. Get advice from your accountant before deciding.
Equipment finance may restrict modifications, relocation, or early termination. Business loans offer more flexibility.
Rates vary significantly between lenders. Always compare at least 3 options for equipment finance AND business loan alternatives.
Always get quotes for both options. Equipment finance companies often beat business loan rates, but business loans offer more flexibility. The best choice depends on your specific situation and cash flow needs.
Get personalized quotes for both equipment finance and business loans to find your best option