Asset Finance vs a Business Loan: Which Is Cheaper?

Asset finance typically costs less than an unsecured business loan — rates start from around 6.59% compared to 7.95% or higher for unsecured products. But cheaper isn't always better. The right choice depends on what you're buying, whether a lender will accept it as security, and how quickly you need the funds. Here's how to decide.

Why the rate gap exists

The difference in cost comes down to risk. With asset finance, the equipment, vehicle, or machinery you're purchasing acts as security — if you default, the lender can recover the asset. That lower risk means lower rates for you. A chattel mortgage or hire purchase on a $100,000 excavator might come in at 6.59% to 10%, while an unsecured business loan for the same amount could sit between 7.95% and 20%+.

On a $100,000 loan over 5 years, the difference between 7% and 14% is roughly $19,000 in total interest. That's not a rounding error — it's a real cost difference that makes asset finance the default choice when it's available.

But "when it's available" is the key phrase. Asset finance only works when the asset qualifies.

When asset finance is the cheaper option

Asset finance wins on cost in most straightforward equipment and vehicle purchases. If you're buying a new or near-new truck, excavator, car, medical equipment, or manufacturing machinery from an Australian supplier, asset finance will almost always offer the lowest rate and longest term.

The sweet spot for asset finance

The ideal scenario: a clearly identifiable asset, purchased from a known dealer or supplier, less than 5 to 7 years old, with an established resale market. Lenders love these deals because the security is strong — they know exactly what the asset is worth and how to sell it if they need to.

For these purchases, you can typically access rates from 6.59%, terms up to 84 months, and loan amounts from $5,000 to $2,000,000. Funding settles in 24 to 48 hours. Most lenders require an active ABN, GST registration (if applicable), and Australian citizenship or permanent residency.

When an unsecured business loan makes more sense

There are several common situations where asset finance either won't work or isn't the best option — and an unsecured business loan fills the gap.

The asset is too old

Most lenders have age limits on financed assets. A common rule is that the asset can't be older than 10 to 15 years at the end of the loan term. If you're buying a 12-year-old forklift and want a 5-year term, many lenders won't touch it — the asset would be 17 years old at maturity, which is beyond their risk appetite.

In these cases, an unsecured business loan lets you buy the older equipment without worrying about age restrictions. You'll pay a higher rate, but you'll actually get approved.

The asset is niche or hard to value

Lenders need to be confident they can resell an asset if you default. Standard vehicles, excavators, and medical equipment have well-established secondhand markets. But what about specialised manufacturing jigs, custom-built trailers, niche agricultural attachments, or bespoke IT infrastructure?

If a lender can't easily value or resell the asset, they're unlikely to accept it as security. These are often called tertiary assets — they have value to your business but limited value on the open market. An unsecured loan removes the security question entirely.

You're importing equipment from overseas

This is one of the most common scenarios where businesses need both products. If you're importing machinery or equipment from another country, you typically need to pay the supplier before the asset arrives in Australia. At that point, there's no asset for a lender to take security over — it's on a ship somewhere.

The practical solution: use an unsecured business loan to fund the purchase and get the equipment into Australia. Once it arrives and is registered or installed, refinance to asset finance at a lower rate. You pay the higher unsecured rate for a few months, then lock in the cheaper secured rate for the long term.

You need speed

Unsecured business loans can be approved and funded within 24 hours through automated lenders. Asset finance, while also fast, requires the lender to verify and value the specific asset — which can add a day or two. If a deal is time-sensitive, unsecured funding gets you there faster.

Side-by-side comparison

The combination strategy: unsecured now, secured later

The import scenario isn't the only time it makes sense to use both products. Any situation where you need the funds before the security is available — whether that's a pre-order, a build-to-spec asset, or a purchase from a private seller who won't wait — can follow the same pattern.

Start with unsecured finance to get the deal done. Once the asset is in your possession and the lender can register a security interest, refinance to asset finance at a lower rate. Your broker can often arrange this as a planned two-step process, so both loans are set up from the start.

The key number: how many months will you pay the higher unsecured rate? If it's 2 to 3 months on $100,000, the extra interest cost might be $500 to $1,500 — well worth it if the alternative is missing the purchase entirely.

How to decide

Ask these three questions:

1. Will a lender accept this asset as security? If the asset is new or near-new, from a recognised manufacturer, and has a clear resale market — yes. If it's old, niche, or not yet in the country — probably not.

2. How much will the rate difference cost me? Run the numbers on both options. On shorter terms or smaller amounts, the rate gap matters less. On a $200,000 loan over 5 years, it matters a lot.

3. Do I need both? If you're importing, pre-ordering, or buying something that doesn't qualify for security today but will later, the unsecured-to-secured refinance path can give you the best of both worlds.