Business Loan Types: A Complete Australian Guide
ADS Team
Author
August 7, 2026
3 months ago
356
views
In short: Australian business finance splits into two questions: is it secured, and is it a lump sum or a revolving facility. Secured lending against property is the cheapest and slowest. Unsecured lending is the fastest and dearest. Revolving facilities - overdrafts and lines of credit - suit fluctuating working capital, while term loans suit a defined purchase.
Key takeaways
- Security, not the loan's name, is what drives the rate.
- Match the facility to the need: a term loan for an asset, a revolving facility for cash-flow gaps.
- Unsecured lending settles in days but can cost several times a secured rate.
- Directors' guarantees are near-universal outside the largest facilities.
The main options
| Facility | Best for | Typical security | Speed |
|---|---|---|---|
| Secured term loan | Large purchases, acquisitions | Property | Weeks |
| Unsecured term loan | Smaller, urgent needs | Director guarantee | Days |
| Overdraft | Short-term cash-flow smoothing | Property or GSA | Weeks |
| Line of credit | Recurring working capital | Property or GSA | Weeks |
| Equipment finance | Machinery, vehicles | The asset | Days |
| Invoice finance | Long debtor days | The receivables | Days |
| Trade finance | Importing stock | The goods | Days-weeks |
Matching the facility to the problem
The most common and expensive mistake is using the wrong shape of finance. Funding a long-term asset with a short-term facility creates a repayment cliff; funding recurring cash-flow gaps with successive term loans stacks fixed repayments that do not flex when revenue dips.
- Buying something that lasts years - a term loan or equipment finance over a similar period.
- Bridging a gap between paying suppliers and being paid - a revolving facility or invoice finance.
- Funding growth in stock or wages ahead of revenue - working capital, sized against the cash conversion cycle.
What lenders look at
- Serviceability from cash flow - usually EBITDA against total debt service, with a buffer.
- Trading history - two years of financials is the mainstream benchmark; less is possible on low doc terms.
- ATO position. An unmanaged tax debt is one of the fastest routes to a decline; a documented payment plan is treated far more sympathetically.
- Security available, and whether directors will guarantee.
Frequently asked questions
How much can a business borrow?
Secured lending is typically sized against the security - commonly up to 70% of commercial property value - and then tested against cash flow. Unsecured lending is usually capped as a multiple of monthly turnover, often one to three months.
Do I have to give a personal guarantee?
For most small and medium business lending, yes. It is worth understanding exactly what you are signing: a guarantee makes you personally liable if the business cannot pay.
Does an ATO debt stop me borrowing?
Not automatically. An unmanaged debt is a serious obstacle, but many non-bank lenders will lend where there is a formal payment arrangement in place and it is being met.
Related reading
- Chattel Mortgage vs Hire Purchase vs Lease: Which and Why
- Equipment Finance Explained: Funding Assets Without Draining Cash
- Truck Finance in Australia: A Complete Guide for Owner-Drivers
Sources
- Business finance and funding options — business.gov.au
- Payment plans for tax debt — Australian Taxation Office
Information current as at 2 September 2026.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
Related Posts
Earn-Outs in Business Acquisition Finance: How Lenders Treat Deferred Payments
An earn-out in business acquisition finance is part of the price that is paid only if the business hits agreed targets after settlement. It cuts what you borrow upfront, because the lender funds a...
Commercial Loans for Retail Shops and Strata Offices: Small-Lot Lender Appetite
Lenders fund small shops and strata offices, but they treat them more cautiously than larger buildings. Commercial loans on small lots usually come with lower LVRs, closer attention to the tenant a...
Commercial Property Loans for Industrial and Warehouse Assets
Lenders generally like standard industrial property: simple buildings, broad tenant demand and land that holds value. Commercial property loans on warehouses are sized at the lower of an LVR on the...