Equipment Finance for Self-Employed Operators in Australia
By Sonja Pfitz
Self-employed tradies and business operators get equipment finance approved every day. What you'll need to provide depends on how much you're borrowing. For smaller purchases, like a ute or standard equipment, many lenders offer low-doc finance with less paperwork. For larger assets, expect a full-doc application with tax returns and financial statements, just like any other business loan.
Know which one you're in before you apply, and the approval is usually straightforward. Get it wrong and you'll be told no, often without being told why.
Can you get equipment finance if you're self-employed?
The myth I hear most often goes like this: "My accountant keeps my taxable income low, so no lender will touch me."
Half right. It depends on the size of the purchase.
For smaller purchases, the equipment does a lot of the work. A late-model ute or a standard trailer is easy for a lender to value and recover, so many lenders will approve it on a low-doc basis: your credit score (credit file), GST registered, trading more than 2 years, recent BAS statements and business bank statements instead of tax returns. Low-doc finance exists precisely because self-employed people don't fit the payslip model.
Larger assets and equipment are different. Once you're financing a prime mover, an excavator or a fleet, the lender wants full financials and assesses whether your declared income can service the repayments. That's where a low taxable income bites. If a big purchase is coming in the next year or two, talk to your accountant now about how your returns will read to a lender, not just to the ATO.
And whatever the size, no paperwork fixes a three-month-old ABN, unlodged BAS or defaults on your credit file.
What do lenders actually check?
From my years on credit committees, these are the things that decide an equipment finance application. In roughly this order.
How long your ABN has been active. Two years opens most doors. Twelve months still works with many lenders, often with a deposit. Under twelve months, the options narrow quickly.
GST registration. Being registered for GST tells a lender your turnover is above $75,000 and that you're lodging BAS. Many low-doc products require it.
Your credit file. Defaults, judgments and a string of recent credit enquiries all count against you. Five online applications in a fortnight looks like desperation, even when it's just shopping around.
ATO debt. This is the one sinking more applications right now. Tax defaults are on the rise and lenders have noticed. An undisclosed ATO debt that turns up later can end an approval outright. Here's why ATO debt matters to lenders.
Whether you own property. Lenders call homeowners "asset-backed". Your house isn't the security for the loan, but owning one gets you better rates, larger low-doc limits and often no deposit.
The equipment itself. A late-model ute or a common excavator holds its value and sells easily. A highly specialised machine or a 15-year-old truck is harder to fund, because the lender can't easily recover it.
Low-doc or full-doc: which fits you?
Low-doc applies to smaller purchases, typically a vehicle or standard equipment up to the lender's low-doc limit. You provide less documentation: recent BAS statements, business bank statements and a good credit score. Each lender sets its own cap, and homeowners usually get a higher one.
Full-doc applies once you go over that limit, or when you're buying high-value machinery or several assets at once. Expect to provide two years of tax returns and financial statements, and sometimes management accounts plus ATO statements. The lender assesses whether your income services the debt. It's more paperwork, but it's the route for larger assets, and strong financials usually earn a sharper rate.
This is where how your income is presented matters. A good broker will look at add-backs, such as depreciation, one-off costs and interest on loans being paid out, which can lift the income a lender assesses.
One thing to watch with vehicles: for a business loan the asset or vehicles must be used for business purposes. A declaration to state this is required by most lenders. A family car with a toolbox in the boot isn't a work vehicle.
Chattel mortgage, lease or rental?
Most tradies end up on a chattel mortgage, and for good reason. You own the equipment from day one, the lender holds security over it, and if you're registered for GST you can generally claim the GST on the purchase price in your next BAS. Interest and depreciation are generally deductible too.
A finance lease or rental means the lender owns the equipment and you pay to use it. It can suit businesses that upgrade technology often, or that want a fixed monthly cost with no ownership.
The tax treatment differs for each, so confirm the right structure with your accountant before you sign. The right finance and the wrong structure can cost you more than a higher rate.
A word on balloon payments. A balloon lowers your monthly repayment by leaving a lump sum at the end. It's useful, but only if the equipment will still be worth that amount when the balloon falls due. A 40% balloon on a truck doing 200,000 kilometers a year is just a workaround that bites you in five years. You also have to the funds to pay the balloon payment at the end unless there is an option to refinance the balloon. Avoid contracts with big balloon payments at the end!
What mistakes get tradies declined?
Applying everywhere at once. Each application leaves a mark on your credit file. Shop through one experience commercial broker, not five websites.
Hiding ATO debt. It will be found. Disclose it, show a payment plan, and many lenders will still say yes.
Buying privately without checks. Always check the ownership and whether money is still owed on the equipment before you hand over cash. Here's why broker checks matter on private sales.
Using a personal car loan for a business vehicle. You may miss the GST claim and the tax benefits of business finance.
Leaving it until June. Everyone wants equipment before 30 June. Dealers run out of stock and lenders slow down.
Why use a broker for equipment finance?
Banks see self-employed applicants through one lens. Specialist lenders use another. Some prefer trades, some prefer transport, some will fund a business that's 20 months old and some won't look at it. A broker knows which is which before your credit file takes the hit.
I've sat on both sides of that desk. Most declines I see aren't about the business. They're about the application going to the wrong lender, in the wrong order, with the wrong story. Here's why Australian businesses still get told no.
If you're planning to buy a vehicle or equipment in the next few months, talk to us before you apply anywhere. Start with our Asset & Equipment Finance page, or make an appointment with us to discuss your options.