Business lending in Australia is not one product but a family of them, each solving a different cash flow problem. Choosing the wrong type is more expensive than choosing the wrong lender.
No asset is pledged as collateral. The lender relies on your trading history and revenue, which is why rates sit at the higher end of the range and terms are usually shorter. Approval is often quick. Most lenders will still require a personal guarantee from the directors, which means the loan is not truly risk-free to you personally.
Backed by an asset such as commercial property, equipment, or in some cases residential property. Because the lender's risk is lower, rates are materially lower and terms longer. The trade-off is obvious: default puts the pledged asset at risk.
A revolving facility you draw on as needed and repay, paying interest only on the drawn balance. Suited to smoothing irregular cash flow rather than funding a one-off purchase. The discipline required is real, because a revolving facility that is never repaid becomes permanent expensive debt.
An advance against invoices you have issued but not yet been paid for. This addresses the specific problem of long customer payment terms. Cost is usually expressed as a fee rather than an interest rate, which can make it appear cheaper than it is when annualised.
The asset being purchased serves as the security. Structures include chattel mortgage, finance lease, and hire purchase, and the choice affects both your balance sheet and how you claim deductions. This is worth discussing with your accountant before signing, not after.
For purchasing business premises. Deposits required are typically larger than residential lending, terms are often shorter, and lenders assess the property's ability to service the debt alongside your business income.
Advertised business loan rates in Australia span a very wide band, and where you land within it depends on factors largely set before you apply.
Compare on the comparison rate where one is provided, and always calculate the total cost over the full term. A short-term facility quoting a low weekly fee can carry a very high effective annual rate.
Preparation is what separates a fast approval from a slow decline. Most Australian business lenders will ask for some combination of the following.
Lenders are principally testing serviceability: whether the business generates enough surplus cash to meet the repayment without strain. Presenting clean, reconciled accounts materially improves both the answer and the speed.
The tax treatment of business borrowing is frequently misunderstood, and the misunderstanding is expensive.
The loan principal is not deductible. Borrowing money is not an expense. Repaying the principal is not an expense either — you are returning capital, not incurring a cost.
Interest is generally deductible to the extent the borrowed funds are used for business purposes that produce assessable income. Where a loan is used partly for private purposes, only the business-use portion of the interest is deductible, and you need a reasonable basis for the apportionment.
Borrowing costs such as establishment fees and loan documentation charges may be deductible, though the deduction is generally spread over the shorter of the loan term or five years rather than claimed immediately.
Asset write-off provisions apply to the asset, not the loan. If you borrow to purchase eligible equipment, any immediate deduction available relates to the cost of the asset. The loan itself is a separate matter, and its interest is deducted over time as it accrues. Financing an asset does not change what you can claim on the asset; it changes when you pay for it.
The structure of equipment finance also matters. A chattel mortgage, a finance lease, and a hire purchase agreement can each produce different deduction and GST outcomes. Confirm the treatment with a registered tax agent before committing.
Business lending in Australia is a spectrum running from cheap, slow, and secured through to expensive, fast, and unsecured. Most borrowing mistakes are made by picking a point on that spectrum without realising there was a choice.
Match the product to the actual problem, annualise every quote before comparing, understand exactly what the personal guarantee obliges you to, and confirm the tax treatment before you sign rather than after. This guide is general information only. Speak with a registered tax agent about deductibility, and a finance broker or your lender about the facility itself, before committing.
What are the main types of business loans in Australia?
Australian business lending products include: unsecured business loans (no collateral, 7-25% p.a.), secured business loans (asset-backed, 5-12%), business lines of credit (revolving facility), invoice financing (advance against outstanding invoices), equipment finance (asset purchase), and commercial property loans. Each suits different cash flow needs and business stages.
How much can a small business borrow in Australia?
Unsecured small business loans typically range from $10,000 to $250,000, with amounts based primarily on business revenue rather than personal credit alone. Secured loans and commercial mortgages can be much larger. Many online lenders use open banking data (bank statements via API) to assess borrowing capacity quickly - some offer approvals within hours.
Does the ATO instant asset write-off apply to loans for equipment?
The asset write-off applies to the cost of eligible assets, not the loan used to purchase them. However, if you use a loan to purchase an eligible asset and claim the full cost as a deduction in the year of purchase, the tax saving effectively subsidises your loan. For a $50,000 piece of equipment at a 30% marginal rate, the tax saving is $15,000 in the year of purchase.
What documents do Australian business lenders require?
Typical requirements include: 2 years of business tax returns and financial statements, 6-12 months of business bank statements, proof of ABN registration (usually 2 or more years active), BAS lodgement history, and for secured loans, proof of ownership of the asset used as collateral. Some online lenders use open banking connections and can approve with bank statements alone.
Illustrative ordering. Both methods pay minimums on every debt; they differ only in where the extra payment goes first.