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Most business borrowing problems are matching problems. A business takes a short-term product to fund a long-term need, or locks long-term debt against a short-term gap, and the finance fights the business instead of fueling it. The fix is to start from the job the money has to do — smooth a cash-flow dip, buy equipment, fund growth, carry debtors — and choose the structure built for that job. Here is how the main types of business finance work, what lenders actually assess, and how to put together a file a credit team can say yes to.
Term loans are the classic: a lump sum repaid over a fixed period, typically one to five years unsecured or longer when secured against property. They suit one-off, defined purposes — an acquisition, a fit-out, an expansion — where the amount is known and the repayments can be planned. Rates may be fixed or variable, and secured term loans are generally the cheapest business money available.
Working capital finance is shorter-term funding for the gap between paying your costs and getting paid — stock builds before a busy season, a large order that needs materials upfront, a tax bill landing in a slow month. Terms are commonly measured in months rather than years. It is the right tool for temporary gaps and the wrong tool for permanent shortfalls: if the business needs working capital finance continuously, the underlying problem is usually margins or debtor terms, and rolling short-term debt only defers it.
Lines of credit and overdrafts give you an approved limit you can draw, repay and redraw, paying interest only on what is outstanding. They shine for businesses with lumpy or seasonal cash flow because the facility flexes with the cycle. The disciplines that matter: undrawn limits often carry line fees, and a line of credit that stays fully drawn year-round has quietly become an expensive term loan that never amortises.
Invoice finance (debtor finance) advances you most of the value of your unpaid invoices, with the balance, less fees, paid when your customer settles. It suits businesses that invoice other businesses on 30 to 90 day terms and grow faster than their debtors pay — labour hire, wholesale, transport, manufacturing. The facility scales with your sales rather than your property equity, which is its great advantage for businesses without real estate security. Costs are typically higher than property-secured lending, and some facilities involve your customers being notified while others remain confidential — check which you are signing.
Secured business lending is backed by an asset — commercial or residential property, equipment, or the business's debtor book. Security lowers the lender's risk, which buys you lower rates, larger amounts and longer terms. Many small-business loans are secured against the owner's home, and that deserves a clear-eyed decision: it is often the difference between approval and decline, or a materially cheaper rate, but it puts the family home behind the business's performance.
Unsecured business lending relies on the strength of your trading history and cash flow. Approvals can be fast — sometimes days — and no specific asset is pledged, though almost all unsecured business loans require director's guarantees, meaning you remain personally liable if the business cannot pay. Unsecured money is faster and more expensive; amounts are smaller and terms shorter. It suits urgent, high-return uses where speed is worth the premium, not slow-burn projects.
Business lending is mostly unregulated by the NCCP's consumer protections, but lenders still assess hard. Their questions cluster into four areas:
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Most declined applications fail on preparation, not on the underlying business. A lendable file typically includes:
Two habits raise approval odds more than anything else: fix the bank-statement conduct three to six months before you need the money, and disclose problems before the lender finds them. Credit teams forgive a disclosed ATO arrangement far more readily than a concealed one.
Compare business finance on the whole cost, not the headline. Establishment fees, line fees on undrawn limits, monthly account fees, valuation and documentation costs on secured loans, and early repayment terms all move the real price. Shorter-term products sometimes quote factor rates or simple totals instead of annualised rates — always convert the offer into total dollars repayable over the term so you are comparing like with like.
Before signing anything, check the match: the finance term should not outlive the thing it funds, and the repayment source should be obvious. Stock for a season should be repaid by that season's sales, not amortised over five years. Equipment that earns for a decade should not be funded on a twelve-month facility that needs refinancing twice. When the term, the purpose and the repayment source line up, the loan tends to look after itself. You can see the full range of structures on our business loans page, and if equipment is the purpose, asset finance is usually the sharper tool.
A broker who works across business lenders can tell you quickly which structure fits the job, which lenders suit your trading history and security position, and what your file needs before it goes in. Get in touch — a short conversation before you apply usually beats a decline on your credit file.
A term loan is a lump sum repaid on a fixed schedule over a set period — suited to one-off, defined purposes like a fit-out or acquisition. A line of credit is a reusable limit you draw and repay as needed, paying interest only on the drawn balance — suited to fluctuating working capital. A line that stays permanently drawn is a sign the debt should be restructured as a term loan.
Yes. Unsecured business loans rely on your trading history and cash flow, and invoice finance uses your debtor book as the backbone of the facility instead of real estate. Expect higher pricing, smaller amounts and shorter terms than property-secured lending, and note that unsecured business loans almost always require a director's personal guarantee.
Around two years of trading under your ABN opens the widest range of lenders and products. Younger businesses can still borrow — some lenders accept shorter trading histories, particularly with strong bank statement conduct or security — but the field is narrower, amounts are smaller and pricing is generally higher until the trading history matures.
Conduct and capacity. They look for regular income deposits, an account that is not constantly overdrawn, no dishonoured payments, wages and ATO obligations paid on time, and a balance trend that is stable or growing. Clean statements over three to six months before applying materially improve both approval odds and pricing.
Not necessarily, but it must be handled properly. A disclosed ATO debt on a formal payment plan that your cash flow clearly supports is workable with many lenders. An undisclosed debt discovered during assessment, or lodgements that are behind, damages credibility across the whole application. Disclose early and show the plan.
It generally costs more than property-secured lending, with fees based on the invoices funded and how long they take to be paid. Whether it is worth it depends on the alternative: for a growing business without property security, being able to fund confirmed sales rather than declining orders often outweighs the cost. Compare facilities on total dollars, and check whether the facility is disclosed or confidential to your customers.
This article is general information only and doesn't consider your personal objectives, financial situation or needs — it isn't personal credit advice, and lending criteria, rates, fees and government schemes change. Before acting, speak with a licensed MakeMyLoan broker or credit representative who will assess your circumstances and provide a credit guide before any credit assistance is given.
