Equipment Line of Credit vs Chattel Mortgage: How to Choose
An equipment line gives approved capacity you draw against again. A chattel mortgage is contract-based finance over specified assets. Compare cost and fit.
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Equipment finance · Repeated purchases · Chattel mortgage
The real choice is not simply one product against another. It is whether you need finance for the purchase in front of you, or approved capacity ready for the next purchase as well.
Quick Answer
An equipment line of credit gives a business approved capacity it can draw against for eligible equipment purchases. A chattel mortgage is contract-based finance over specified assets.
An equipment line usually fits a business that expects to buy equipment repeatedly and wants the credit limit organised before each supplier invoice arrives. A chattel mortgage usually fits 1 large purchase, or several assets bought together, where the business wants a contract structured around those assets.
The important qualification is that "equipment line" is a facility label, and a master asset finance agreement is not automatically the same thing as a revolving limit. A true revolving limit restores available capacity as principal is repaid; a bulk or non-revolving limit may not. Ownership, security, residuals, fees and drawdown rules still depend on the documents behind the facility, so read them rather than the brochure.
Also called: revolving equipment finance options vs chattel mortgage, equipment line vs equipment loan.
Also called: equipment line, revolving equipment limit. Related but not automatically the same: master asset finance agreement, bulk equipment limit.
| What is going on | What actually decides it | Read this |
|---|---|---|
| Your accountant said chattel mortgage, a broker has offered a line | Whether the advice was about the assets or about your books | Does the tax treatment change |
| You have been offered a facility and are not sure what it is | Whether repaid principal actually restores your capacity | Master agreement or revolving limit |
| You are working out how much cash you need up front | Whether a deposit is asked for, and what is not funded | Deposit and cash before settlement |
| You buy tools, plant or machines several times a year | Buying cadence, and whether 1 approval can carry all of it | Buying several times a year |
| One large machine, truck or ute you plan to hold for years | Asset size, and whether a residual suits your cashflow | One large asset, used or auction |
| A bank declined because the machine is too old | Asset age and class rules, which differ between the 2 structures | Buying several times a year |
| You already hold chattel mortgages and are buying again | Whether you can run both without disturbing what you have | Buying again on existing contracts |
What is the difference between an equipment line of credit and a chattel mortgage?
An equipment line of credit is approved capacity for eligible equipment purchases, while a chattel mortgage definition is finance documented over specified assets. The practical difference appears when you buy again. A line can let the next purchase draw against capacity that is already approved, subject to the facility still being in good standing and the new asset meeting its rules. A later purchase under ordinary chattel finance usually needs another contract, facility drawdown or credit decision.
A chattel mortgage is not necessarily limited to 1 physical asset. Several vehicles, machines or pieces of equipment bought together can be financed under the same transaction, subject to lender policy. The better distinction is reusable facility versus contract-based asset finance, not "many assets versus one asset". The underlying structure is set out in the chattel mortgage guide.
Ownership also needs 1 qualification. Under a conventional chattel mortgage, the business generally owns the asset while the financier takes a security interest and registers it on the PPSR register. Where the advance was used to buy the asset itself, that registration is what the national register calls a purchase money security interest. An equipment line can use an asset-loan or chattel-style drawdown, but the label alone does not prove the legal form, so read the drawdown documents to confirm who owns the asset, what security is registered and whether a residual applies.
Is a master asset finance agreement the same as a revolving equipment line?
No. A master agreement and a revolving limit solve different problems. A master agreement can reduce paperwork on later asset-finance contracts or drawdowns. A revolving limit goes further: repayments of principal increase the unused credit available again while the facility remains current. The ABS definition of revolving credit uses that same repay-and-redraw test.
The distinction matters commercially, because a shorter-term bulk limit may not be reusable once drawn, while a revolving limit can be redrawn as repayments are made. The 2 can also be combined, with a master agreement sitting over a revolving limit to reduce paperwork. So before accepting a facility, ask 1 question directly: "Is the limit actually revolving, and does repaid principal restore my available capacity?"
| Decision point | Equipment line of credit | Chattel mortgage |
|---|---|---|
| Best fit | Repeated purchases where you want approved capacity ready before each invoice arrives | 1 purchase, or a group of assets bought together, with a contract structured around those assets |
| Future purchases | Usually draw against available capacity without a full new business application, subject to facility and asset rules | A later purchase normally needs a new contract, drawdown or credit decision |
| Number of assets | Many, across the life of the facility | Not limited to 1, but the assets are specified in the transaction |
| Ownership during the term | Depends on the drawdown form, commonly the business owns the asset | The business generally owns the assets from settlement |
| Residual or balloon | Depends on the drawdown terms, check whether one applies | Commonly written with a balloon or residual to pay or refinance |
| Soft costs and works | Often fundable alongside the equipment under the same limit | Generally confined to the assets specified in the contract |
| Ongoing conditions | Facility conditions apply for its life, commonly including a continuous bank feed link | Assessed at application, per contract |
Are you sure it is equipment finance you are looking for?
The phrase "line of credit" covers 2 quite different products, and searching it is how a lot of people end up on the wrong page. An equipment line funds assets and pays suppliers. A business line of credit or overdraft puts cash in the trading account for wages, stock and the gaps between invoices. If what you actually want is money in the account rather than machines paid for, you are looking at the second one, on a different assessment.
| Product | What the money does | Who holds title during the term |
|---|---|---|
| Equipment line of credit | Funds eligible equipment purchases, commonly settled direct to the supplier | Depends on the drawdown form, commonly the business |
| Business line of credit or overdraft | Puts cash in the trading account for wages, stock and cashflow gaps | No asset is funded, so nothing changes hands |
| Chattel mortgage | Funds specified assets under 1 contract | The business, generally from settlement |
| Hire purchase | Funds specified assets, hired to the business over the term | The financier, with title passing at the end |
| Finance lease or rental | The financier buys the asset and leases it to the business | The financier, for the whole term |
Only the first 3 commonly leave the business owning the asset while it is being paid for. That is why a lease sits on a different axis from this comparison rather than inside it, and the trade-offs there are set out in the fleet leasing guide.
Which is better if you buy equipment several times a year?
An equipment line usually suits a business buying several times a year, because the credit assessment happens once and later purchases draw against capacity that is already approved. After that the buying decision is a commercial one about the equipment, rather than a fresh credit question about the business each time.
The practical benefit is timing. Settlement can commonly be paid direct to the supplier once the invoice is provided, so suppliers get paid on the rhythm the business buys on. Smaller purchases fit as well as large ones, and the structures available on smaller purchases under $80k are worth reading alongside this.
Cadence is also what makes a facility more forgiving on the assets themselves. Where a facility carries no asset age or class restriction, an older machine, an unusual one and a piece of production plant can all sit under the same approval. That is the answer for anyone who arrived here after a bank declined a purchase on the age of the machine rather than on the business behind it. Asset rules vary between facilities, so confirm them rather than assuming.
From our broking, indicative
Market-typical non-bank shapes we see on revolving equipment limits, as at 26 August 2026:
- Limits to $500k where the facility is asset backed and a continuous bank feed link is in place, with applications considered to $2m
- A $100k cap where the facility is not asset backed, and a $2k minimum per transaction
- 5-year term per transaction, repayments monthly in advance, no establishment fee
- Facilities without asset age or class restrictions, and soft costs on fitouts funded without a separate cap
- Documentation that is genuinely revolving rather than a master agreement over one-off drawdowns, which is the thing we check first
Indicative only, based on deals we have placed and current as at 26 August 2026. Not a quote, an offer or an approval likelihood. Terms vary between facilities and lenders, and actual terms depend on lender policy and your circumstances at the time of application. Not financial advice.
What is actually pre-approved, and what can still stop the next drawdown?
An approved limit settles the credit question about the business. It does not guarantee that every future purchase will be funded. A drawdown can still be affected by the asset itself failing the facility's rules on age, type or condition, by the facility falling out of good standing, by conditions such as a bank feed link lapsing, or by a material change in how the business is trading since the limit was set.
That is worth knowing before you rely on a limit at an auction or with a supplier deposit already paid. Ask what the facility's asset rules are, what would cause a drawdown to be declined, and whether the limit has an expiry or review date attached to it.
Can you add a line if you already have chattel mortgages?
Yes, and existing contracts do not have to be unwound to do it. A chattel mortgage runs over the assets it names, so a new facility generally sits alongside it rather than through it, and assets already financed stay where they are. What does change is the assessment: existing commitments and their repayments are counted when a limit is sized, so several contracts already running will show up in what the business is offered.
Whether to refinance older contracts into a new facility is a separate question. It can simplify paperwork and free up capacity, and it can also cost money in payout figures on contracts most of the way through their term. Ask for the payout figures first, then decide, rather than consolidating on the assumption that fewer contracts is automatically cheaper.
Which is better for one large asset, used equipment or an auction purchase?
A chattel mortgage usually suits 1 large asset the business intends to hold for the full term, because the contract is priced and structured around the assets it names. One transaction, one assessment, one repayment line, and a term set to match how long the business expects to run the machine, the truck or the vehicle.
Asset size is the practical dividing line. A facility is built to carry many transactions, so a purchase big enough to absorb most of a limit in 1 go removes much of the reason to hold a limit at all. A dedicated contract also lets the structure be tuned to those assets, including a balloon or residual set against expected value at the end of the term, which is the lever that moves the monthly figure most.
What about utes, vans and light commercials?
Work vehicles are the most common single asset behind this question, and they usually sit on the chattel mortgage side for the same reason a large machine does: held for years, with a residual set against expected resale value. The choice between the vehicle types has its own trade-offs, covered in the ute against van comparison, and how a business vehicle contract differs from a consumer car loan is set out in chattel mortgage against car loan.
The exception is a business replacing vehicles on a rolling cycle rather than 1 at a time. At that point the vehicle stops behaving like a single large asset and starts behaving like repeat buying, which is the case a facility is built for.
What changes if the equipment is used, bought privately or bought at auction?
The structure question stays the same, but the checks around it get heavier. A private or auction purchase means the seller's own finance may still be registered against the asset, so a PPSR search comes before anything else, and any existing interest has to be paid out and released as part of settlement rather than afterwards. The national register sets out how this goes wrong in its own case study on buying second-hand machinery. Dealer and supplier purchases carry an invoice the financier can settle against, which is why they tend to move more predictably.
Auction timing is the other pressure. A hammer price is generally payable on a short clock, which is a poor moment to begin an application, so the practical answer for anyone who buys at auction regularly is to have finance organised before bidding rather than after winning. Confirm in advance that the facility will fund that type of asset bought that way.
What about imported equipment, staged supplier payments and fit-out costs?
Imported machinery paid in stages before it lands is where a facility often earns its keep, because overseas suppliers can commonly be paid direct, and the valuation question that follows is covered in landed cost against valuation. Works, installation and other fit-out finance costs sit in the same category, and how they are funded alongside equipment is set out for a cafe fit-out.
| Situation | Better fit | Why |
|---|---|---|
| Several purchases across a year, spread over months | Equipment line | 1 assessment carries the later purchases, subject to facility rules |
| 1 large asset held for the full term | Chattel mortgage | Priced and structured around the assets it names |
| Several assets bought at the same time | Either | 1 chattel transaction can cover them, so cadence decides rather than count |
| 1 ute, van or truck kept for years | Chattel mortgage | A residual can be set against expected resale value |
| Vehicles replaced on a rolling cycle | Equipment line | Repeat buying rather than a single asset decision |
| Fit-out works and soft costs alongside equipment | Equipment line | Soft costs are often fundable under the same limit |
| Imported equipment paid in stages before it lands | Equipment line | Overseas suppliers can commonly be paid direct |
| Buying at auction or privately on a short clock | Equipment line | Capacity is in place before bidding, subject to asset rules |
| Lowest possible monthly cost with a residual accepted | Chattel mortgage | A balloon or residual reduces the monthly figure |
Which costs less: an equipment line of credit or a chattel mortgage?
Neither is reliably cheaper, because the 2 are not priced on the same basis, so a straight rate comparison is the wrong test. A facility is commonly priced on the strength of the business and its turnover. A chattel mortgage is priced around the assets, their age, the term, the residual and the credit profile behind it. The same business can be quoted very differently under each, for reasons that have nothing to do with which product is cheaper in general.
| Annual turnover band | Indicative rate, commission inclusive | What the pricing is set against |
|---|---|---|
| Above $10m | About 11.95 per cent p.a. | The strength of the business, not the individual asset |
| $1.5m to $10m | About 14.95 per cent p.a. | The strength of the business, not the individual asset |
| $250k to $1.5m | About 16.95 per cent p.a. | The strength of the business, not the individual asset |
| Chattel mortgage | Quoted per transaction, no single comparable figure | The assets, their age, the term, the residual and the credit profile |
Those bands are indicative market-typical non-bank shapes as at 26 August 2026, subject to assessment, and are not a quote, an offer or a rate any particular business will be given. Pricing moves with lender policy and with your circumstances at the time you apply.
The structural points often matter more than the rate. Where a facility fully amortises with no residual, it costs more per month and less at the finish than a contract ending in a balloon, which is a different question from which one carries the higher rate. Fees also sit in different places: establishment, drawdown, account-keeping and early termination charges are not always visible in a headline figure.
What should be on a like-for-like quote comparison?
Ask for each of these in writing, on both options, before comparing anything:
- the total amount financed, and exactly what is included in it
- the term, and the repayment amount and frequency
- any residual or balloon, as a figure rather than a percentage
- every fee: establishment, drawdown, account-keeping, and any early termination or break cost
- for a facility, whether the limit is revolving, whether it expires or is reviewed, and what conditions must be maintained
- what security is being registered, and over what
- the total you will have paid by the end under each option
The last one is the honest comparison. A business buying repeatedly is weighing 1 approved facility against a series of separately priced contracts, and the real cost of the second option includes the time and the paperwork of arranging each one.
Do you need a deposit, and how much cash do you need before settlement?
Equipment finance is commonly written against the full invoice price, so a deposit is not the default requirement it is on a property purchase. The reason is structural: the assets funded are themselves the security and the financier registers its interest over them, so there is no loan-to-value gap for a deposit to fill in the way there is on a mortgage. Where a contribution is asked for, it is usually about something specific in the deal rather than a fixed policy percentage.
| What is being weighed | When a contribution is more likely to be asked for |
|---|---|
| The assets | Older, highly specialised or hard to resell equipment, where the security is worth less than the price paid |
| Trading history | A newer or thinner business without a record the financier can read |
| Credit conduct | Dishonours, arrears or a weak director score on the file |
| How it is being bought | Private sale or auction, where there is no supplier invoice and the seller's finance may still be registered |
| Whether the facility is asset backed | A limit that is not asset backed is indicatively capped at $100k regardless of the purchase |
| Price against value | Where the price paid runs ahead of what the asset would realise, the gap generally sits with the business |
Those are indicative shapes as at 28 August 2026, subject to assessment. Nothing here is a commitment that any particular purchase will be funded in full.
What does 100 per cent funding not cover?
This is the part that catches people out, because a purchase funded at the full invoice price still needs cash on the day. Funding the invoice is not the same as funding the acquisition. Budget separately for:
- registration and transfer costs where the asset is a vehicle
- insurance, which a financier will generally require in place before settlement
- delivery, installation and commissioning where these are not written into the funded amount
- the timing of the GST on the purchase, which is a question for your registered tax agent
- any gap between what you agreed to pay and what the financier assesses the assets as worth
Scope matters here too. A facility that can fund soft costs and fit-out works alongside the assets puts more of the real cost inside the funding. A contract confined to the assets it names generally leaves those outside it, which means the same headline "100 per cent" can leave a much bigger cash requirement on the day.
What does a lender usually ask for?
| What is asked for | Why it is asked for | Where it differs between the 2 |
|---|---|---|
| Entity and identity details | ABN, entity structure and director identification | Same under both |
| Trading history | Bank statements, financials or BAS, to read how the business trades | Assessed once for a facility, again per transaction for chattel finance |
| The assets | Supplier invoice or quote, serial or identification numbers, age and condition | Supplied per drawdown under a facility, per application under a contract |
| Existing commitments | Current contracts and balances, which are counted in the assessment | Same under both, and sizes the limit where one is being set |
| Ongoing facility conditions | Commonly a continuous bank feed link held for the life of the facility | Applies to a facility, not to a single contract |
Requirements vary by lender and by the size of the exposure, so read this as the shape of the conversation rather than a fixed checklist. Where the business is a company, equipment finance is also commonly written with a director guarantee, which is a personal commitment sitting alongside the company's. Read it carefully and take your own legal advice before signing.
How long does equipment finance take?
The first approval takes broadly similar work under either structure, because both are assessed on the business before anything is funded. The difference shows on the second purchase and every one after it: under a facility the credit decision is already made, so buying no longer waits on an assessment, while a new contract restarts the process each time.
If the purchase in front of you is urgent and nothing is in place, neither structure is instant, and the practical move is to organise the approval ahead of the next purchase rather than during it. Timeframes depend on the lender, on how complete the information is and on the asset itself, so treat any promised turnaround as case by case rather than a product feature.
Does the tax treatment change between an equipment line and a chattel mortgage?
Where both leave the business owning the assets, the starting point your accountant works from does not change: the business owns them and the funding sits against them as a liability. What follows from that is a question for your own registered tax agent, and it is not settled by the facility label.
This is worth saying plainly because of how most people arrive at this comparison. An accountant names a chattel mortgage, a broker offers a facility, and the business owner assumes the 2 pieces of advice are in conflict. Usually they are not. Accountants reach for the chattel mortgage because it is the familiar ownership structure, and an equipment facility drawn down in asset-loan or chattel-style form leaves the business in the same ownership position. The disagreement is normally about which suits the buying pattern, which is a broking question rather than a tax one.
Where the treatment genuinely does differ
The real dividing line is not facility against contract. It is between structures where the business owns the assets and structures where it does not. A chattel mortgage and a chattel-style drawdown both leave the business as owner. A finance lease leaves title with the financier for the whole term, and a hire purchase passes it only at the end. That difference in who owns what, and when, is what changes how an asset and its funding are recorded, which is why the comparison your accountant is really making is often lease against ownership rather than facility against contract.
This is also exactly why the drawdown documents matter. If a facility is not advancing in a form that leaves the business owning the asset, the tax conversation is a different one, and the label on the facility will not tell your accountant which it is.
What should you ask your accountant before signing?
Ask these before you sign either, rather than assuming the answer carries across from the last purchase:
- how the GST on the purchase is treated and when it is claimed, noting the ATO's guidance on claiming GST credits
- whether the financier funds the GST-inclusive price or the price excluding it, since that changes what the business needs on the day
- how depreciation runs, and whether any instant asset write-off rules apply in the year you are buying
- how the interest component is treated across a facility against a single amortising contract
- how soft costs, installation and fit-out works are treated where a facility funds them
- what changes if a residual is refinanced at the end of the term rather than paid out
- whether anything differs because the asset is a vehicle rather than plant
Deduction, GST and depreciation outcomes depend on your entity, your registration position and your circumstances, and write-off rules change between years. Nothing on this page is tax advice, and the structure you choose should be checked against your own agent's answer rather than the other way around.
What happens after settlement, and what are the downsides of each structure?
After settlement the 2 structures diverge on obligations rather than on ownership: a facility carries conditions you have to keep meeting, while a contract carries a fixed schedule and, commonly, a residual waiting at the end. Both are manageable. Both catch people who did not read for them.
What are the downsides of an equipment line of credit?
The downsides are mostly the conditions attached to holding the facility rather than the cost of using it. A continuous bank feed link is commonly required for the life of the facility, not just at application, so the business is agreeing to an ongoing connection rather than a point-in-time assessment. Where a facility is not asset backed, the limit is indicatively capped at $100k. Limits may also carry expiry or review dates, and a facility that is not genuinely revolving will not restore capacity as you repay.
| What is looked at | Indicative market-typical shape |
|---|---|
| Trading history | 2 or more years of trading |
| Turnover | $250k or more annually |
| Credit conduct | Clean credit with no dishonours |
| Director credit score | An Equifax score of 550 or better on the 2.0 Comprehensive scale |
| Sector | Commonly not offered for property development, mining exploration and services, or primary agriculture |
| Ongoing condition | A continuous bank feed link held for the life of the facility |
Those thresholds are indicative as at 26 August 2026 and subject to assessment. A younger or thinner business is often better served by contract-based finance while it builds a record, and the wider funding picture is usually what settles it.
What happens if the bank feed drops out?
Because the connection is a condition of holding the facility rather than a step in the application, anything that breaks it becomes a servicing matter rather than an administrative one. Changing banks, closing a trading account, or a feed that silently stops updating are all worth raising with the financier before they happen rather than after, since a facility meant to be available when you next buy is only useful if its conditions are intact at that moment.
What are the downsides of a chattel mortgage?
The downsides are structural rather than financial: a fresh contract and credit decision for each later purchase, a residual that has to be paid or refinanced at the end of the term, and funding generally confined to the assets named rather than the soft costs or works around them.
The residual is the one that surprises people. It lowers the monthly figure during the term and then arrives as a lump sum to be paid out, refinanced or covered by selling the asset, so the decision made at the start reappears at the end. There are 3 ways out and all are easier arranged early: pay it from cash, refinance it into a new term, or sell the asset with the proceeds covering the figure. The failure case is reaching the date with none of the 3 organised, because a refinance is an application like any other and takes the condition of the business at that moment rather than when the original contract was written.
None of that makes the structure wrong. For assets a business intends to hold for the full term, a fixed contract priced around them is the right answer, and the fixed shape that looks like a limitation on a fast-moving buying programme is exactly what makes it predictable on a long-held machine.
What if you sell, trade or refinance the equipment before the finance ends?
Because the contract runs over the assets it names, selling or replacing them before the term ends means settling the payout or refinancing the contract, and where the sale price falls short the difference stays with the business. Ask the financier for a payout figure, and for any break cost or early termination charge, before you commit to a sale rather than after. Under a facility, check whether an individual drawdown can be paid out early and on what terms, since that is set by the drawdown documents rather than by the limit.
Will equipment finance affect the next loan you apply for?
Yes, and it is worth knowing before you commit rather than at the point you next apply for something. Equipment commitments and their repayments are read by other lenders when they assess the business or the owner, which is covered in detail in how equipment finance affects a one doc home loan and, where vehicle and equipment debt is already on foot, in how existing ute and equipment debt affects servicing. For a business weighing plant purchases against its wider borrowing power, the plant and borrowing power piece covers the same ground from the manufacturing side.
An equipment line and a chattel mortgage can both leave the business owning its equipment with a security interest on the register. What separates them is reusability. A facility approves capacity once and lets later purchases draw against it, priced on the strength of the business, carrying conditions for its life, and only genuinely revolving if repaid principal restores what you can draw. A chattel mortgage documents finance over specified assets, priced around them, often with a residual, and repeated as a fresh decision each time the business buys again months later.
Key takeaway: buying once and holding it, take the contract; buying again and again, take the capacity, and check that it actually revolves.Frequently Asked Questions
Yes. Several assets bought at the same time can be financed under one chattel transaction, subject to lender policy, so a chattel mortgage is not limited to a single asset. The constraint is timing rather than quantity: assets bought months apart usually need a further contract, drawdown or credit decision each time. An equipment line works the other way, giving approved capacity a later purchase can draw against while the facility remains in good standing and the new asset meets its rules. Buying cadence, not asset count, decides the structure.
It depends on the legal form of the drawdown rather than on the facility label. Where the drawdown is an asset loan or chattel-style advance, the business generally owns the asset from settlement and the financier registers a security interest, the same position as a conventional chattel mortgage. Other structures behave differently, so read the drawdown documents to confirm who holds title, what security is registered and whether a residual applies before you sign.
Usually yes, with the assets funded acting as the security and the interest registered on the PPSR. As an indicative market-typical shape, asset-backed limits run to $500k where a continuous bank feed link is in place, applications are considered to $2m, and a facility that is not asset backed is capped at $100k. Those are indicative only, subject to assessment and to lender policy at the time of application. Some facilities also take wider security, so check what is being registered.
A revolving equipment facility is an approved equipment limit where repayments of principal restore the capacity available to draw again while the facility remains current. That repay-and-redraw test is what makes a limit revolving. A master asset finance agreement is not the same thing: it can reduce paperwork on later contracts without making capacity reusable, and a bulk or non-revolving limit may not be redrawn once it is used. Ask directly whether repaid principal restores your available capacity.
The contract runs over the assets it names to its term, so an early sale means the payout is settled from the proceeds or the contract is refinanced. Where the sale price falls short of the payout, the difference stays with the business. Payout figures, break costs and any early termination charge are set by your own contract, so read it or ask the financier for a payout figure before you commit to a sale.
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