Equipment finance comes with its own language and if you’re not in the industry every day, terms like “balloon payment” or “chattel mortgage” can be confusing. Whether you’re financing a delivery van, a commercial oven, or a fleet of IT hardware, understanding the terminology helps you compare offers with confidence and avoid surprises down the track.
This glossary breaks down the most common equipment finance terms used by Australian lenders and brokers:
A
Amortisation The process of gradually paying off a loan through regular instalments that cover both principal and interest, until the debt is fully repaid by the end of the loan term.
Asset Finance An umbrella term for any finance arrangement used to acquire business assets — vehicles, machinery, equipment, or technology — rather than paying for them outright in cash. Chattel mortgages, finance leases, and hire purchase agreements all fall under this category.
Approved Supplier A vendor or dealer that a finance provider has pre-vetted, often allowing for faster approval and settlement when you purchase equipment through them.
B
Balloon Payment A larger-than-usual final payment due at the end of a finance term. Structuring a loan with a balloon payment lowers your regular repayments, but leaves a lump sum owing (or requiring refinance) at the end.
Business Activity Statement (BAS) While not strictly a finance term, lenders often request recent BAS lodgements as part of assessing a business’s income and GST position when applying for equipment finance.
C
Chattel Mortgage A common finance structure where the business borrows money to buy equipment outright and owns it from day one. The lender takes a “mortgage” over the asset (the chattel) as security until the loan is repaid.
Commercial Finance Finance products designed specifically for businesses rather than individual consumers, covering everything from equipment and vehicles to working capital and property.
Comprehensive Insurance Insurance covering an asset against damage, theft, and third-party liability. Most equipment finance agreements require the financed asset to be comprehensively insured for the life of the loan.
D
Deposit An upfront payment made toward the purchase price of an asset, reducing the amount that needs to be financed. Not all equipment finance products require a deposit.
Depreciation The gradual reduction in an asset’s value over time due to wear, age, or obsolescence. Depreciation is relevant to both the residual value of financed equipment and potential tax deductions.
E
Equipment Finance Finance specifically used to acquire business equipment — anything from vehicles and machinery to computers and commercial appliances — allowing businesses to access assets without paying the full cost upfront.
Equity The portion of an asset’s value that a business actually owns, calculated as the asset’s current value minus any outstanding finance owed against it.
F
Finance Lease An agreement where the lender purchases the equipment and leases it to the business for an agreed term and rental. At the end of the lease, the business typically has the option to make a final payment to own the asset, extend the lease, or return it.
Fixed Interest Rate An interest rate that stays the same for the life of the loan, meaning repayments remain predictable regardless of market rate movements.
G
Guarantor An individual (often a business owner or director) who agrees to be personally responsible for a business’s finance repayments if the business itself is unable to pay.
GST on Equipment Finance Depending on the finance structure chosen, GST may be payable upfront on the full purchase price or spread across repayments — a key consideration when comparing chattel mortgages to leases.
H
Hire Purchase An agreement where the lender buys the equipment and hires it to the business over a set term. Ownership transfers to the business once all repayments (including any final payment) are made.
I
Interest Rate The cost of borrowing, expressed as a percentage of the loan amount, charged by the lender over the life of the agreement.
Instant Asset Write-Off An Australian Taxation Office (ATO) provision allowing eligible businesses to immediately deduct the cost of eligible assets, rather than depreciating them over several years. Eligibility and thresholds change regularly, so it’s worth checking current ATO guidance before financing.
L
Lease Term The agreed length of a finance lease or hire purchase agreement, commonly ranging from one to seven years depending on the asset type.
Lender The bank, non-bank financier, or specialist finance provider supplying the funds for an equipment purchase.
Low-Doc Finance A finance option requiring less documentation than a standard application — often used by businesses that may not have extensive financial statements, subject to other risk assessments by the lender.
M
Mortgage over Chattel See Chattel Mortgage. The formal legal term for the security interest a lender holds over financed equipment.
O
Operating Lease A lease arrangement where the business rents equipment for a period shorter than its useful life, with no obligation (and often no option) to purchase the asset at the end of term. Common for equipment that dates quickly, such as IT hardware.
Origination Fee A fee charged by a lender for establishing a finance agreement, sometimes called an establishment fee.
P
Personal Property Securities Register (PPSR) A national online register where lenders record their security interest over financed assets. Checking the PPSR before buying used equipment helps confirm it isn’t still owed as security on someone else’s loan.
Principal The original amount borrowed, excluding interest and fees.
R
Residual Value The estimated value of an asset at the end of a lease term, used to calculate a balloon or final payment. Also called the “residual” or “balloon.”
Refinance Replacing an existing finance agreement with a new one, often to access better terms, consolidate debt, or manage a balloon payment.
Repayment Frequency How often loan repayments are made — typically weekly or monthly — which can be tailored to match a business’s cash flow cycle.
S
Secured Loan A loan where the lender holds a security interest over an asset (usually the equipment being financed), which they can repossess if repayments aren’t met. Most equipment finance is secured this way.
Settlement The point at which finance funds are released and the equipment purchase is finalised.
Soft Asset Assets with less resale value or a shorter useful life, such as software, fit-outs, or signage. Some lenders finance soft assets differently to hard assets like vehicles or machinery.
T
Term The total length of a finance agreement, from settlement to final repayment.
Trade-In Using an existing asset’s value as part or full payment (or as a deposit) toward new equipment finance.
V
Variable Interest Rate An interest rate that can rise or fall over the life of the loan in line with market movements, meaning repayments may change over time.
