Getting Equipment Finance After a Credit Blip or ATO Debt

You can still get equipment finance after a credit blip or an ATO debt, but it won’t be a “tick and flick” approval. Lenders will want to see that the issue is under control, that your cashflow supports repayments, and that the new gear will genuinely lift income. The key is sequencing: fix the right things first, then apply in a way that fits how lenders think.

In this guide, we’ll step through what credit blips and tax debts actually mean to equipment lenders, which options are realistic, and what you can do this week to improve your chances – without automatically putting your home on the line.

Start by understanding your real position: cashflow, ATO debts and credit history.

1. How lenders see credit blips and ATO debt

1.1 What counts as a “credit blip”?

For equipment finance, a “credit blip” is anything that suggests you might struggle to meet future repayments. Common examples:

• Late payments on credit cards, personal loans or business facilities
• Overdrawn business accounts or regular dishonours
• Small paid defaults (telco, utilities, supplier)
• A prior arrangement to pay with a lender
• One-off missed BAS or super payments

A serious impairment is a step up from that:

• Unpaid defaults or judgments
• External administration, Part IX/X, bankruptcy
• Multiple recent arrears across facilities

Some mainstream equipment lenders will decline serious impairments outright. But specialist and “near-prime” lenders exist for exactly this space – they just price and structure for the risk.

1.2 How ATO debt changes the conversation

Nearly every small business has had a tight period where PAYG or GST slipped. For lenders, ATO debt is less about morality and more about priority:

1. The ATO sits above other unsecured creditors.
2. If things go wrong, the ATO gets paid before the lender.

So lenders want to know:

• Is there an ATO debt now?
• Is there a formal payment plan in place?
• Have the last 3–6 payments been made on time?
• Has the ATO ever issued recovery action (garnishee, director penalty notice)?

A disclosed, well-managed ATO plan is usually better than a hidden or erratic one. Trying to bury it will often backfire once bank statements and tax portals are reviewed.

1.3 The three questions every lender asks

Behind all the policy, most equipment lenders are asking:

1. Can you pay? – Cashflow, not just turnover, after expenses and owners’ drawings (see fact 14).
2. Will you pay? – Your conduct: bank statements, repayment history, ATO behaviour.
3. If you don’t, what can we recover? – The resale value and liquidity of the gear.

When you’ve had a blip or an ATO issue, you can’t change the past. But you can work hard on the next two: strong, stable cashflow and a cleaner story from today.

2. What’s still possible – and what probably isn’t

2.1 Likely scenarios after a credit blip

Depending on how recent and serious your issues are, your equipment finance options generally fall into four buckets:

All pricing ranges are indicative only and will vary by lender, asset and risk profile. They are not quotes or promises.

2.2 New vs used gear when credit is impaired

When your file isn’t perfect, lenders are more sensitive to the underlying asset:

• New, standard gear (vans, common machinery, mainstream medical equipment) is easier. Resale is strong, so lenders are more comfortable funding 100% for good operators.
• Used gear often attracts lower maximum LVRs, shorter terms and higher pricing because of weaker resale value and higher reliability risk (see fact 12).
• Specialised or one-off assets are harder again – you may need more cash in or additional security.

If your credit is bruised, prioritise equipment that is easy to value and sell. It keeps more lenders on the table.

2.3 Will they want your home as security?

Some lenders will ask to secure the loan against your home, especially if:

• You’re a start-up with limited trading history
• You want a high LVR on older or niche equipment
• You have significant past arrears or unpaid defaults

Using home equity can shave the rate slightly, but it materially increases the risk of losing the family home if the business fails (see fact 11 and /insights/using-property-security-mascot-business-equipment-risks-alternatives).

For many owners, it’s safer to:

• Use stand-alone equipment finance over 3–7 years that matches the asset life (facts 2 and 6)
• Keep home and business debt ring‑fenced, even if the headline rate is a bit higher

A broker who works across home, business and tax can help you stress-test the trade-offs.

Choosing the right structure and term for your equipment can offset past credit blips.

3. Fix these three things before you apply

3.1 Stabilise your cashflow – even if it slows you down

Lenders assess equipment finance serviceability based on business cashflow after expenses and owners’ drawings, not just turnover (fact 14). Before you apply:

• Trim avoidable expenses for 2–3 months
• Smooth drawings – avoid large, erratic transfers to personal accounts
• Clean up recurring dishonours and overdrawn days

A simple worked example:

• You want a $80,000 chattel mortgage over 5 years
• At an indicative 10% p.a. rate, repayments are roughly $1,700/month
• Lenders usually want your free cashflow to cover this by 1.3–1.5x
• So they’re looking for at least $2,200–$2,600/month of consistent surplus after expenses and drawings

If you’re not there yet, the loan will feel tight – and lenders will see that in your statements.

3.2 Get on the front foot with the ATO

If you have tax debt, your next move matters more than the balance itself.

This week:

1. Log into your online ATO account – know the exact amounts (GST, PAYG, income tax).
2. Talk to your accountant about a realistic payment plan – not the most aggressive one you wish you could manage, the one you can keep.
3. Call the ATO to formalise a plan if there isn’t one.
4. Make the first payment before you apply for finance.

For many prime and near-prime equipment lenders, a live, well-maintained ATO plan with 3–6 months of on-time payments is acceptable. They’d rather see that than sporadic lump sums and missed lodgements.

3.3 Clean the easy credit wins

You may not be able to fix everything, but you can usually:

• Pay out small defaults (telco, utility) and keep evidence of settlement
• Close unused credit cards and overdrafts to reduce total limits
• Update direct debits so minimum payments never miss

If there are genuine errors on your credit file, start the correction process now. Even if it doesn’t finish before this application, it sets you up for cheaper finance in 6–12 months.