For many Australian business owners, tradies, and contractors, acquiring the right machinery is a non-negotiable part of generating revenue. But not every business has property or existing assets available to pledge as security when they need a loan. That is where unsecured machinery loans come into the picture — offering a pathway to fund equipment purchases without tying collateral to the deal.
Whether you are a sole trader looking to upgrade a workshop lathe, a construction contractor expanding your fleet, or a manufacturer investing in production line upgrades, understanding how a machinery loan without collateral works can open up options you might not have considered. Working with an experienced equipment loan broker is one of the most practical ways to navigate the range of lenders and products available across the Australian market.
This guide covers how unsecured equipment financing works, who it suits, what the trade-offs are, and how to put yourself in the best position to get approved.
How Unsecured Machinery Loans Work
Most equipment finance in Australia is structured as a secured loan. Products like chattel mortgages, hire purchase agreements, and equipment leases all use the machinery being purchased as security against the loan. If you default, the lender can repossess the asset to recover their losses. This arrangement lowers the lender’s risk, which is why secured loans typically come with lower interest rates and longer repayment terms.
An unsecured machinery loan works differently. No asset — whether the equipment itself, a vehicle, or real property — is pledged as collateral. Instead, the lender evaluates your business on its own merits: trading history, cash flow, revenue, credit profile, and overall financial health. If approved, you receive the funds and repay the loan in fixed instalments over an agreed term. Speaking with an asset finance broker can help clarify which structure makes the most sense for your specific situation.
Because the lender carries more risk with no security backing the facility, unsecured loans generally attract higher interest rates. Terms may also be shorter than their secured counterparts. However, the trade-off is flexibility and speed — there is no asset valuation process, and approval can often happen within 24 to 48 hours. For businesses needing to move quickly on an opportunity, this can be a significant advantage. If you are weighing up whether secured or unsecured equipment finance is the right fit for heavy assets, this guide on financing heavy machinery offers useful context.
Who Benefits From a Machinery Loan Without Security?
Unsecured machinery financing is not the right fit for every business, but it serves a clear purpose in several common scenarios.
Businesses purchasing equipment that does not hold its value well — such as specialised software, niche technology, or older second-hand plant — may find that lenders are unwilling to accept the asset as security. In these cases, an unsecured loan may be the only viable option. Similarly, business owners who already have existing assets encumbered by other finance arrangements may not have additional collateral to offer.
Self-employed operators, contractors, and tradies who need quick access to funds for time-sensitive purchases can also benefit. The streamlined approval process of an unsecured loan means less paperwork and faster turnaround compared to a traditional secured facility. Small businesses that want to preserve their existing asset base — avoiding any risk of repossession on their current plant and machinery — may prefer the peace of mind that comes with an unsecured arrangement, even at a higher cost.
It is worth noting that unsecured business loans can also be used for purposes beyond a single equipment purchase. Some operators use them to cover the costs of delivery, installation, and commissioning of machinery, or to fund a combination of equipment and working capital needs. For a broader overview of how asset finance products compare in Australia, Money.com.au’s asset finance comparison (opens in a new tab) provides a useful starting point.
Key Considerations Before Applying
Before committing to an unsecured machinery loan, there are several practical factors every business owner should weigh up carefully.
Interest Rates and Total Cost
Interest rates on unsecured equipment loans in Australia can range from approximately 8% to 30% per annum, depending on the lender, your creditworthiness, and the loan amount. This is noticeably higher than secured alternatives, where the equipment itself mitigates the lender’s risk. Over the life of the loan, the difference in interest can add up substantially. It pays to calculate the total cost of the loan — not just the monthly repayment — before signing anything.
Eligibility and Documentation
Lenders offering unsecured machinery finance will typically require an active ABN, a trading history of at least 6 to 12 months, recent business bank statements, and a credit file free from significant defaults. Some lenders may also want to see BAS statements or financial reports. The stronger your business’s financial position, the more competitive the rates and terms you are likely to be offered. Newer businesses with limited trading history may find it harder to qualify for unsecured lending and could benefit from exploring secured options as an alternative.
Repayment Structure and Cash Flow Impact
Because unsecured loans often carry shorter terms — commonly 6 to 36 months — the monthly repayment can be higher than a longer-term secured facility for the same loan amount. It is essential to model the repayments against your business cash flow to ensure they are sustainable. Some lenders offer flexibility in repayment frequency, allowing weekly, fortnightly, or monthly schedules to better align with your revenue cycle.
Tax Implications
Interest on a business loan used for income-producing purposes is generally tax-deductible in Australia. If you purchase machinery with an unsecured loan and deploy it in your business, the interest component of your repayments may be claimable. You may also be eligible for depreciation deductions or the instant asset write-off, depending on current thresholds set by the ATO. Always seek advice from a qualified accountant to confirm what applies to your circumstances.
FAQ
What is an unsecured machinery loan and how does it work?
An unsecured machinery loan allows you to purchase equipment, plant, or machinery without pledging the asset or any other property as collateral. The lender assesses your business’s financial strength, cash flow, and creditworthiness rather than relying on asset security. Repayments are structured as fixed instalments over a set term, and interest rates tend to be higher than secured alternatives because the lender carries more risk.
Can I get equipment financing without providing collateral?
Yes. Several Australian lenders offer unsecured business loans that can be used for equipment purchases. Eligibility typically requires a trading history of at least 6 to 12 months, healthy cash flow, and a clean credit file. The loan amount, rates, and terms will depend on your business’s overall financial health. A broker can help match you with suitable lenders.
What are the eligibility requirements and interest rates for unsecured machinery loans?
Common requirements include an active ABN, a minimum of 6 to 12 months trading, business bank statements, and no major defaults on your credit file. Interest rates generally range from about 8% to 30% per annum, depending on the lender and your financial profile. Stronger businesses with higher revenue and clean credit histories will typically receive more competitive rates.
What is the difference between secured and unsecured equipment finance?
Secured equipment finance uses the machinery being purchased as collateral, resulting in lower interest rates and longer terms. Unsecured equipment finance requires no collateral — the lender assesses your business’s financials instead. Unsecured options offer faster approval and protect your asset base from repossession risk, but come at a higher cost due to the increased risk to the lender.
How long does it take to get approved for an unsecured machinery loan?
Many lenders can provide conditional approval within 24 to 48 hours for straightforward applications, and some offer same-day decisions. The timeline depends on how quickly you supply the required documents — typically bank statements, identification, and business financials. There is no asset valuation step, which helps speed up the process compared to secured loans.
Are unsecured machinery loans suitable for startups or new businesses?
Most unsecured lenders require a minimum of 6 to 12 months trading history and evidence of consistent revenue. Very new businesses may find it difficult to qualify and could be better served by secured equipment finance, where the machinery acts as collateral. Some lenders assess newer businesses on projected financials, so it is worth discussing your options with a broker.
Can I use an unsecured loan to buy second-hand machinery?
Yes. Because unsecured loans are not tied to a specific asset, you can use the funds to buy second-hand plant and machinery from private sellers or dealers. This flexibility is one of the advantages over some secured products, where lenders may restrict the age or type of equipment eligible for financing.
What are the risks of taking out an unsecured machinery loan?
The main risks include higher interest costs than secured finance, shorter repayment terms leading to larger monthly instalments, and the potential impact on your credit file if you default. While no specific asset is at risk of repossession, the lender may pursue legal recovery action. Always ensure your business revenue can comfortably support the repayments before proceeding.
How much can I borrow with an unsecured machinery loan in Australia?
Borrowing limits typically range from $5,000 to $500,000, depending on the lender, your business turnover, and credit profile. Some lenders cap unsecured facilities at lower amounts due to the higher risk. For larger machinery purchases, secured finance may provide access to higher loan amounts at more competitive rates.
Is an unsecured machinery loan tax-deductible in Australia?
The interest on a business loan used for income-producing purposes is generally tax-deductible. You may also be able to claim depreciation on the machinery or access the instant asset write-off, depending on current ATO thresholds. Tax treatment depends on your individual circumstances, so consult a qualified accountant or tax adviser for specific guidance.
If you are considering an unsecured machinery loan or want to compare it against secured alternatives, the right advice makes a real difference. Speak to the team at Unconditional Finance to find the equipment financing solution that fits your business.