The Essentials: What Is Equipment Finance?

Nathalie Jones

Monday, 28 May 2018

Having the right equipment is vital to small business success.

In order to service your customers, take on larger orders, and be prepared when requests come flowing in, you need to be in a constant cycle of equipment maintenance and renewal. Fortunately, there is a specific type of finance that can smoothen the impact on your cash flow and keep your equipment on the road and in the workforce.

Introducing: Equipment Finance

In many industries, equipment is vital to the running of the business. In the construction industry, if you don't have access to articulated trucks, bulldozers, excavators and forklifts, it can be very difficult to complete a job for a paying client. How will you transport your materials to the site? Perhaps you're able to rent for a short time, but the cost of renting equipment adds up very quickly.

Similarly, if you're a dentist, it would be difficult to work without the appropriate medical appliances to treat your patients effectively. How would you safely and legally treat patients without well-maintained medical equipment that adheres to Australian standards?

It can be expensive to purchase, maintain and repair equipment. As a business owner, you want to be spending the bulk of your time serving your customers, because that's what brings money into the business. Spending time researching equipment might feel like a distraction, but we're here to tell you that it's a necessary time investment and it's possible to finance an equipment purchase in a cost-effective way. The best part? The equipment doesn't even have to be new.

Let's put things into perspective

Consider this.

Imagine you run a printing business. You take a day away from the office in order to research, test and price-up some new printing equipment. You think about what the business needs, decide on the approach you're going to take, and price up your financing options.

In the short term, this will slow down the orders of four or five existing customers and perhaps it will take you one extra day to ship their orders.

In the long term, it allows you to focus on mapping out your business growth trajectory and setting yourself up with the right equipment to achieve those goals. What physical assets will you need in order to realise your projections? Is it possible to get second-hand equipment that has been well maintained? Taking that time to forward-plan - whether it's a day or a week - will help you meet your long-term business goals.

Going forward, this may mean that you're able to take on jobs that you would've previously turned down due to high volumes of orders or needing specialised equipment. The more jobs you are able to take on, the more money you will have coming into the business. Further, the more diverse jobs you're able to say yes to, the more your customer base grows and the likelihood of repeat work and word-of-mouth recommendations increases.

So, what is equipment finance?

Equipment finance is where you take out a secured loan in order to purchase equipment, with the equipment acting as the security (also called 'collateral') for the loan. For example, when you take out a residential mortgage, you purchase a house, with the house acting as collateral for the loan. As there is a form of security attached to the loan, the risk to the lender is lower and therefore the interest rate is reduced.

The benefit of equipment finance is that the lender is able to take back the equipment in the event that you default on the loan, so the interest is much lower than if you took out an unsecured loan in order to purchase the equipment. With equipment finance, the rates can be much lower and the term of the loan can be longer, resulting in smaller monthly repayments.


Equipment finance has a number of benefits that make it a sensible choice if you're looking to invest in equipment for business purposes. If you're looking to buy a vehicle, piece of machinery, or other business-related equipment, you don't need to use your family home as security.

A lot of people are pretty used to equipment finance with things like cars and trucks, but the truth is that any time you buy any sort of equipment, you should be thinking: "Can I get equipment finance on this?" Equipment finance will often be less expensive than financing the purchase through an unsecured loan. Equipment can include IT equipment, office equipment, or any sort of machinery that you use in your business.

Providing security for the loan generally attracts a lower interest rate, because the lender feels confident that they will be able to liquidate those assets in the event of a default. However, there's no need to look to your family home or personal assets when financing an equipment purchase, because the equipment can become the security.

Securing a loan with the equipment you are purchasing is a great way to improve the flexibility of the loan terms and the loan repayment structure. If you secure the loan against other business assets or your personal property, it prevents those assets being used for other purposes. It can prevent you from seeking funding to promote growth in other areas of the business.

If you have any uncertainty about whether or not the type of equipment you're thinking of buying might be the subject of equipment finance, give us a call or check out the platform in order to see what kind of loan options would be available to buy that equipment.

Are you buying a vehicle, machinery or business-related equipment? Let the equipment become the security and avoid putting your family home on the line. Call us on 1300 780 568 or visit our website to explore your equipment loan options.

Nathalie is the Communications Manager at Valiant Finance. She has a double degree in Journalism and Law, and a background in the fintech space, hailing from Asia's largest fintech hub, Stone & Chalk.

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