Key takeaways

• What it does: Funds production plant so you can modernise output without draining the working capital your factory runs on.
• Most common structure: A chattel mortgage, where you own the machine from settlement and the lender registers security on the PPSR.
• Rate range: Secured equipment finance commonly runs from around 6.5% p.a., with most established businesses paying between 7% and 10%.
• Balloon sweet spot: On a 5-year chattel mortgage, a balloon of 15 to 25% of the price is the typical range for production plant.
• Watch the lease trap: Lease rentals can total more than chattel interest plus depreciation over the same term, so run the numbers both ways.

Why financing beats paying cash for production plant

A press brake, a CNC machine or a production line is the engine of your output, and it is rarely cheap. Paying cash for a six-figure machine ties up the capital you need for materials, payroll and the daily demands of running the floor. Financing lets you put the plant to work immediately and pay for it as it generates revenue.

Demand is strong and broad-based. Business investment in equipment and machinery rose 11.5% in the December 2025 quarter, with non-mining sectors up 13.0%, according to ABS data cited by Emu Money. The chattel mortgage is the structure most manufacturer equipment loans default to in 2026, accounting for the majority of equipment finance among SMEs, because ownership and the tax benefits start on day one.

The job is to match the structure, term and balloon to how long the machine will run and how your cash flow moves.

The main finance structures

There is no single right answer; it depends on your tax position and whether you want ownership. The table below sets out the main options:

Choose a chattel mortgage when the machine has a long useful life and you intend to keep it. You own it from settlement, claim the GST on the full price in your next BAS, and depreciate from day one. It is the lowest overall cost for core production plant and sits within broader equipment finance options.

Choose an operating lease when the equipment becomes obsolete quickly and you want to upgrade on a fixed cycle. For most production plant with a 7 to 15 year life, though, leasing usually means paying a premium for flexibility you never use. If working capital between purchases is the real need, working capital finance can sit alongside the equipment loan.

Getting the balloon and structure right

On high-value production plant, the balloon and structure choices change the total cost meaningfully. A few principles help:

• Aim for the sweet spot: On a 5-year chattel mortgage, a balloon of 15 to 25% of the price is typical. On a $400,000 press brake that is roughly $60,000 to $100,000 at maturity, payable from cash flow, refinance or sale.
• Avoid an oversized balloon: Balloons above 35% can leave the lump sum close to the machine's market value at maturity, narrowing your exit options if resale softens.
• Run the lease maths: Over 5 years on a $400,000 asset, the cost difference between structures can be 3 to 8% depending on the residual, which is meaningful on a production-line purchase.
• Mind the exit fees: A sharp headline rate can carry steep early-termination costs, which matter if you sell or upgrade before the term ends.

Tax treatment depends on structure, so confirm the detail with your accountant: ownership structures let you claim depreciation and interest, while lease and rental payments are deductible as an expense instead.

A realistic scenario

Picture a metal fabrication business that needs a new $400,000 press brake to take on larger contracts. The machine will run for well over a decade, and paying cash would gut the working capital needed for steel orders and wages.

A 5-year chattel mortgage funds the press brake, with ownership and the GST claim from settlement and depreciation running from day one. The owner sets a 20% balloon, around $80,000, keeping monthly repayments manageable while leaving an exit small enough to clear from cash flow or refinance. The machine is producing from the first week, the cost is matched to the revenue it generates, and the business keeps its cash free for the contracts that justified the purchase.

Is manufacturing equipment finance the right choice?

Equipment finance suits most manufacturers, but the right structure depends on your situation. Use this to sense-check yours:

• The plant has a long working life: Core production machinery you will keep for years suits ownership through a chattel mortgage.
• You want upfront tax benefits: If claiming GST, depreciation and interest matters, an ownership structure is the stronger fit.
• The technology changes fast: If the equipment dates quickly, an operating lease lets you upgrade without disposal risk.
• You have modelled the structures: Run chattel against lease before committing, since the total cost can differ by several percent on a large asset.

Frequently asked questions

What manufacturing equipment can I finance?

Virtually any income-producing production asset, from CNC machines and press brakes to packing lines and robotics. Both new and used plant can be financed, subject to age and condition.

What balloon should I choose?

For a 5-year chattel mortgage on production plant, 15 to 25% of the purchase price is the typical range. The right figure depends on the machine's expected residual value and your monthly cash flow.

Is a lease or chattel mortgage cheaper?

For long-life plant a chattel mortgage is usually cheaper overall, since lease rentals can exceed chattel interest plus depreciation across the same term. Model both before deciding.

Can I claim tax deductions on financed equipment?

Yes. Under a chattel mortgage or hire purchase you claim depreciation and deduct interest, while under a lease the full payment is deductible. Your accountant should confirm the treatment for your entity.

How long does approval take?

Approvals for standard equipment typically take a few days once you provide a quote, financials and details of existing debts. Low-doc options can be faster for established businesses.

What matters most

Manufacturing equipment finance lets you modernise production without draining the cash your factory runs on. The decisions that matter are choosing ownership for long-life plant, setting a balloon in the 15 to 25% range so the exit stays manageable, and modelling chattel against lease before you sign, since the total cost can differ by several percent on a large machine. Get those right and the equipment pays its way from the first production run.

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