For many Australian small to medium-sized businesses, purchasing vehicles, machinery, or equipment outright isn’t always practical. Asset finance offers an alternative—allowing you to access what you need while keeping your cash flow in check.
However, not all finance options are the same. Whether you’re looking at a chattel mortgage, hire purchase, or equipment lease, understanding how each structure works can help you make the right call for your business goals.
In this article, we break down these common finance options to help you choose the most suitable structure for your business needs.
What is Asset Finance?
Asset finance is a form of business finance used to purchase or lease business-critical assets—like vehicles, machinery, or technology—without having to pay the full cost upfront. This makes it easier to manage working capital, improve productivity, and access the equipment you need, when you need it.
Depending on the finance structure you choose, you may own the asset immediately, gain ownership after payments are complete, or lease it for a fixed term.
Chattel Mortgage
A chattel mortgage is a loan agreement where a business purchases an asset and the lender takes a mortgage over it as security. The business owns the asset from day one, and the mortgage is released once the loan is repaid.
How it works:
- You purchase the asset, and the lender provides funds for the purchase.
- The lender takes a mortgage over the asset as security.
- You make regular repayments until the loan is paid in full.
Benefits:
- You own the asset immediately.
- GST on the purchase price may be claimable upfront if you’re registered for GST.
- Interest and depreciation may be tax-deductible.
- Flexible loan terms and balloon payments available to suit your cash flow.
Consider if you:
- Are registered for GST and want to maximise tax benefits.
- Want to own the asset outright from the start.
- Prefer more control over the asset’s use and eventual disposal.
Hire Purchase
Hire purchase is a finance agreement where the lender owns the asset during the term, and you gain ownership after the final payment is made.
How it works:
- You “hire” the asset by making regular repayments.
- Ownership transfers to you once the final payment is made.
Benefits:
- No large upfront payment required.
- Fixed monthly repayments make budgeting easier.
- Interest and depreciation may be tax-deductible.
- You end up owning the asset after the final payment.
Consider if you:
- Want to eventually own the asset but need to preserve working capital.
- Prefer predictable monthly costs.
- Are comfortable gaining ownership at the end of the term.
Equipment Lease
An equipment lease is a rental agreement where you use the asset for a set term while the lender retains ownership. At the end of the lease, you may return, upgrade, or purchase the asset.
How it works:
- You lease the asset and make monthly payments.
- Ownership remains with the lender throughout the lease term.
- Options at the end of term include returning, upgrading, or purchasing the asset.
Benefits:
- No upfront cost—great for managing cash flow.
- Lease payments may be fully tax-deductible as an operating expense.
- Flexibility to upgrade equipment at the end of the lease.
- Avoids risk of asset obsolescence.
Consider if you:
- Want to access equipment without owning it.
- Regularly upgrade or replace business assets.
- Need to keep upfront costs low.
How to Choose the Right Option
The best finance structure depends on your business goals, cash flow, and how you plan to use the asset. Here are a few key questions to help guide your decision:
| Ask Yourself | Best Fit |
| Do I want to own the asset immediately? | Chattel Mortgage |
| Can I wait until the end of the term to take ownership? | Hire Purchase |
| Do I just need access to the asset without owning it? | Equipment Lease |
| Is managing cash flow my top priority? | Equipment Lease or Hire Purchase |
| Do I want the ability to claim GST upfront? | Chattel Mortgage |
Still unsure? Speaking to an experienced equipment finance broker can help match your business with the right lender and product.
Get Expert Help with Asset Finance
Choosing the right asset finance structure can make a significant difference to your business’s financial health and growth potential.
At Capital Plus Finance, we specialise in matching Australian businesses with the right finance solutions for their needs. With access to over 40 lenders and deep experience in small business loans in Australia, our team can help you find the right structure—whether that’s a chattel mortgage, hire purchase, or equipment lease.
Talk to us today to explore your options and keep your business moving forward.
