Two lenders offer your business $50,000. One quotes 18% per annum. The other quotes a factor rate of 1.15 over six months. Which is cheaper?
The second one looks cheaper. It is roughly three times more expensive.
Business lending in Australia is quoted in at least three incompatible formats, and unlike consumer credit there is no mandated comparison rate to level the field. That leaves business owners comparing numbers that cannot be compared. This guide shows you how to convert any offer into a figure you can actually weigh against another.
To compare business loan offers properly, ignore the advertised rate and ask every lender for one number: the total dollar amount repayable over the full term, including all fees. That figure is directly comparable between offers. Advertised rates are not.
Be especially careful with factor rates. A factor rate of 1.15 on a six-month loan is not a 15% cost. Because you repay the principal progressively while the fee is calculated on the full amount, the equivalent annualised cost is roughly 50% or more. As a rough guide, a factor rate cost over a 12-month term works out to around double the headline figure once annualised, and over a six-month term around three times.
Also confirm whether repaying early actually saves you money. With many short-term facilities, it does not.
Before you can compare anything, you need to know which format you are looking at.
| Format | How it works | Comparable across offers? |
|---|---|---|
| Simple or nominal interest rate | Interest charged on the outstanding balance, which falls as you repay. Quoted per annum | Partly. It excludes fees, so two loans at the same rate can cost differently |
| Annual percentage rate | Interest plus most fees, expressed as an annualised percentage | Yes, this is the closest thing to a like-for-like figure |
| Factor rate | A multiplier applied to the amount borrowed. 1.15 on $50,000 means $57,500 repayable, with no time dimension in the number itself | No. It says nothing about the term, so it cannot be compared to a rate |
One thing worth knowing: the mandated comparison rate you see on home loans and other consumer credit comes from consumer credit law. Business lending sits largely outside that regime, so there is no legal requirement for a business lender to give you a comparison rate at all. Some do voluntarily. Many do not.
A factor rate looks like a percentage cost, and business owners naturally read it as one. The problem is that the fee is calculated on the full amount borrowed, while you repay that amount progressively over the term.
By the final month you may only owe a fraction of the original principal, but you are still paying a fee that was calculated on all of it. On average across the term you have use of roughly half the money, so the effective cost is roughly double what the headline suggests, and worse on shorter terms.
| Offer on $50,000 | Total repayable | Monthly repayment | Approximate equivalent annual rate |
|---|---|---|---|
| Factor 1.15 over 6 months | $57,500 | $9,583 | Around 63% |
| Factor 1.20 over 12 months | $60,000 | $5,000 | Around 41% |
| 18% p.a. over 24 months | $59,909 | $2,496 | 18% |
Look at the second and third rows. The total repayable is almost identical, around $60,000 in both cases. But one gives you the money for a year and the other for two years, so the annualised cost of the first is more than double. Total dollars alone is not the whole story either. You need total dollars and the term.
These figures are illustrative and exclude establishment and ongoing fees. The equivalent annual rates are calculated as the effective annual return implied by equal monthly repayments over the stated term. You can reproduce them in a spreadsheet using the RATE function: enter the number of repayments, the monthly repayment as a negative, and the amount borrowed, then multiply the result to annualise it.
This is the detail that catches out the most business owners, and it follows directly from how factor rates work.
With a conventional interest-bearing loan, interest accrues on the outstanding balance. Repay early and you genuinely save the interest you would have paid over the remaining term.
With a factor rate, the total is fixed at the outset. Depending on the contract, repaying in month three of a twelve-month term may cost you exactly the same as running it to term. Some lenders offer a partial rebate. Others offer none at all.
This matters because “we will refinance it as soon as cashflow improves” is one of the most common reasons business owners accept expensive short-term funding. If early repayment saves nothing, that plan does not work, and the effective cost of the facility is locked in from day one.
Ask the question directly and get the answer in writing: if I repay this in full after three months, what is the total amount payable?
The advertised rate is rarely the whole cost. Ask specifically about each of these, because a fee not mentioned is not a fee that does not exist:
A useful sense check: on a modest facility, fees can add several percentage points to the effective cost. An offer at 14% with a 4% establishment fee on a twelve-month term is not cheaper than an offer at 17% with no fees.
Short-term business lenders frequently debit weekly or even daily rather than monthly. This is often presented as a convenience, and the weekly figure certainly sounds smaller than a monthly one.
Two effects follow. More frequent repayment reduces the average outstanding balance faster, which on a factor-rate product means you are paying the same fixed fee for even less use of the money, pushing the effective rate higher still. And frequent debits put more pressure on your account, increasing the chance of a dishonour and its associated fee.
When comparing offers, convert everything to the same basis. A $600 weekly repayment is roughly $2,600 a month, not $2,400, because most months contain more than four weeks.
You do not need to be a finance professional to compare offers properly. You need the same four data points from every lender.
Any lender unwilling to give you the first three answers plainly has told you something useful about the offer.
Having argued for rigorous cost comparison, it is worth saying that the lowest cost is not automatically the correct choice.
A cheaper facility that takes four weeks to settle is worthless if the supplier discount expires on Friday. A longer term at a higher annual rate may produce a repayment the business can actually sustain, where a sharper short-term deal would not. And a facility that ties up an asset you may need as security later carries a cost that does not show up in the pricing.
The right test is not which offer is cheapest in isolation, but which offer costs least while still doing the job on the timeline you actually have. That is a different question, and it is the one worth answering.
A business needs $40,000 for stock and receives two offers.
Offer A: factor rate 1.18 over nine months, weekly repayments, $1,200 establishment fee. Total repayable is $47,200 plus the fee, so $48,400. Cost of $8,400 over nine months, or roughly $933 per month of funding.
Offer B: 19% per annum over 18 months, monthly repayments, no establishment fee. Repayments of roughly $2,556 a month, total repayable around $46,000. Cost of about $6,000 over 18 months, or roughly $333 per month of funding.
Offer A has a lower total repayable than many would expect and a shorter commitment, which some owners will prefer. But per month of funding it costs nearly three times as much, and the weekly debits are far larger. Unless the business genuinely needs to be free of the debt within nine months, Offer B is the better commercial decision despite its higher headline rate.
Figures are illustrative. The method, not the numbers, is the transferable part.
Comparing business finance offers is difficult by design. Different formats, different terms, different fee structures and different repayment frequencies make like-for-like comparison harder than it needs to be.
Ezy Pzy Finance helps Australian businesses compare funding options on a consistent basis, across unsecured business loans, secured business loans, low doc business finance, equipment finance, working capital facilities and tax debt funding, so you can see what each option actually costs before you commit.
If you have an offer in front of you and want it explained plainly, get in touch with Ezy Pzy Finance. You may also find our guides to how much you can borrow and low doc versus full doc applications useful.
This article contains general information only and does not take into account your objectives, financial situation or needs. It is not financial advice and nothing here is an offer of credit. All rates, fees and repayment figures are illustrative examples for the purpose of demonstrating a comparison method, and are current as at the date of publication. Actual pricing is set by individual lenders on assessment. Speak with a qualified adviser about your circumstances.
Yes, in many cases. Adverse credit narrows your options and raises your cost, but it rarely closes the door entirely, particularly where the business is trading well now.
What matters is being realistic about which lenders will consider you, what the funding will cost, and how to avoid the parts of this market where business owners get hurt. This is the corner of Australian lending with the fewest borrower protections, and it attracts operators who take advantage of that.
This guide covers what lenders actually do with adverse credit, what it costs in dollars, the warning signs worth taking seriously, and how to decide whether to borrow now or wait.
Business loans are available with bad credit through non-bank and specialist lenders, who weight recent trading performance and bank account conduct more heavily than credit history. Approval generally depends on consistent revenue, clean recent bank statements, current ATO lodgements, and often security or a personal guarantee.
The trade-off is cost. Adverse credit pushes you toward the upper end of the market rate range and toward shorter terms, which can mean paying two to three times the interest a clean-file borrower would pay for the same amount.
Before signing anything, ask whether the lender is a member of the Australian Financial Complaints Authority. Lenders that only provide commercial loans are not legally required to be, and if they are not, you have very limited avenues for redress if something goes wrong.
“Bad credit” covers everything from a forgotten phone bill to a current court judgment. Lenders treat these very differently, so the first useful step is identifying what is actually on your file.
| What is on your file | How lenders generally view it | Practical effect |
|---|---|---|
| A few late payments, no default | Minor, especially if the pattern has stopped | Often little impact beyond pricing at mainstream lenders |
| Paid default, three or more years old | Explainable and largely historical | Many non-bank lenders will look past it |
| Paid default, recent | Relevant but survivable where trading is strong | Narrows the panel, raises the rate |
| Unpaid default | A live problem, not a historical one | Many lenders will require it cleared as a condition |
| Multiple defaults across providers | A pattern rather than an incident | Significantly narrows options, specialist lenders only |
| Court judgment | Serious adverse event | Most mainstream and many non-bank lenders will decline |
| Unpaid ATO debt, especially PAYG withholding or super | Treated as more serious than most commercial defaults | Often needs addressing before funding is available |
| Current or undischarged bankruptcy | Disqualifying for most lenders | Very limited options while it remains on foot |
The single biggest distinction is paid versus unpaid. A paid default still sits on your file for five years, but it tells a lender the matter was resolved. An unpaid one tells them it was not. If you can only do one thing before applying, clear outstanding defaults.
For how listings work, how long they last and how to check your file, see our guide to business credit scores in Australia.
Specialist business lenders are not primarily score-driven. They are cashflow-driven. In rough order of what moves a decision:
That last point is underused. Volunteer the explanation upfront with supporting documents rather than waiting to be asked. It will be found regardless, and an explanation offered before a decline carries far more weight than one offered after.
Most articles describe the cost of bad credit vaguely. It is more useful to see it in dollars. The table below shows a $50,000 loan repaid over 24 months at three points across the current market range.
| Indicative rate | Monthly repayment | Total interest | Total repaid |
|---|---|---|---|
| 10% p.a. | $2,307 | $5,374 | $55,374 |
| 18% p.a. | $2,496 | $9,909 | $59,909 |
| 30% p.a. | $2,796 | $17,096 | $67,096 |
These are illustrations to show the shape of the cost, not quotes, and they exclude establishment and ongoing fees. Actual pricing depends on the lender and your full profile.
The point is the spread. Moving from the lower end of the market to the upper end costs roughly an extra $4,500 on this loan. Moving to short-term impaired-credit pricing costs roughly $11,700 more than the clean-file position, on identical borrowings.
One further trap: many short-term lenders quote a factor rate or a flat fee rather than an annual percentage rate. A charge that sounds modest expressed as a percentage of the amount borrowed can be a very high effective annual rate once the short term is accounted for. Always ask for the total dollar amount repayable over the full term, and compare that figure between offers.
Borrowers with damaged credit are the most targeted group in Australian business finance, because they are the least able to walk away. Treat these as reasons to slow down:
This is the part most business owners are surprised by, and it matters more when your credit is impaired because you have less ability to shop around.
| Protection | Consumer borrower | Business borrower |
|---|---|---|
| National Credit Code responsible lending obligations | Applies | Generally does not apply to credit for business purposes |
| Australian credit licence required | Yes | Not required for lenders providing only commercial loans |
| AFCA membership | Mandatory | Not legally required for commercial-only lenders, though many join voluntarily |
| Unfair contract terms law | Applies | Applies to standard form small business contracts, with conditions including an upfront price cap |
| Misleading conduct provisions | Applies | Applies |
| Banking Code of Practice | Applies to subscribing banks | Applies to subscribing banks for eligible small businesses only |
Business lending is not lawless. The ASIC Act still governs lender conduct, unfair contract terms in standard form small business contracts have been unlawful since November 2023 and now carry civil penalties, and misleading conduct provisions apply throughout. But the consumer protections most people assume exist largely do not.
The most useful single question is whether the lender is an AFCA member. AFCA has publicly warned that business owners borrowing from non-members have limited options for redress, noting that a substantial share of the small business finance complaints it had to close in 2024-25 fell outside its rules because the lender was not a member. You can ask a lender directly, and you can check AFCA’s membership register yourself.
Also read the personal guarantee before you sign it, not after. Full, limited and joint guarantees carry very different exposure, and the guarantee is where a business problem becomes a personal one.
Sometimes waiting is the better commercial decision, and it is worth saying so plainly.
Borrowing now usually makes sense when the funding protects revenue or prevents a larger cost. Stopping an ATO debt from being disclosed, keeping a key supplier on terms, meeting payroll, or taking a genuinely time-limited opportunity with a calculable return. In those cases paying more for funding is often cheaper than the alternative.
Waiting usually makes sense when the purpose is discretionary and can be deferred a few months, when an unpaid default could be cleared in that window, when an adverse listing is close to its five-year expiry, or when the repayment would consume so much cashflow that a single slow month puts you in default.
The question that cuts through it: if this funding does not produce a return greater than its cost, what happens when the repayments start? Expensive funding used to buy time without fixing the underlying problem tends to produce the same shortfall next quarter, with a repayment sitting on top of it.
A minor issue. Several non-bank lenders will look straight past a small paid default of this age where recent bank conduct is clean. Expect pricing above the sharpest available but well short of impaired-credit territory.
Worth pausing before applying. Clearing the defaults first will likely widen the panel and reduce pricing by more than the $8,000 costs to settle. Applying first and clearing later is usually the more expensive order.
Mainstream lenders will almost certainly decline. Secured lending against the property is the realistic route, which changes the risk profile considerably since the asset is then exposed. Worth weighing carefully rather than treating as a workaround.
Self-inflicted and common. There is no adverse listing, but the enquiry pattern reads as distress. The best move is usually to stop, let a few months pass, and apply once through a broker rather than repeatedly and directly.
With an impaired credit file, the order you do things in matters as much as who you approach. Applying to several lenders directly is the most common way business owners make their position worse.
Ezy Pzy Finance works with Australian businesses that have adverse credit history, matching one set of information against a lender panel rather than generating an enquiry with every attempt. Options include unsecured business loans, secured business loans, low doc business finance, working capital facilities and tax debt funding.
If your credit file is imperfect and you want to understand what is realistically available, get in touch with Ezy Pzy Finance. You may also find our guides to protecting your credit file and how much you can borrow useful.
This article contains general information only and does not take into account your objectives, financial situation or needs. It is not legal, tax or financial advice, and nothing here is an offer of credit or a guarantee of approval. Rates and repayment figures are illustrative only and current as at the date of publication. Regulatory protections referred to depend on your circumstances and the specific contract. Speak with a qualified adviser about your situation.
When a business needs a vehicle, a machine or a fit-out, there are two broad ways to fund it: equipment finance secured against the asset itself, or a general business loan used to buy it outright.
The choice affects your rate, your repayment term, what happens at the end, and in some cases how the purchase is treated at tax time. It is one of the more consequential funding decisions a business makes, and it is frequently made on the basis of whichever option the supplier happened to mention.
This guide explains how each option works, when each one suits, and the tax treatment business owners most often get wrong.
Equipment finance is usually the better option when you are buying a specific, identifiable asset that a lender will accept as security. Because the asset secures the loan, rates are generally lower than unsecured lending and terms can be matched to the asset’s useful life.
A general business loan is usually better when the purchase includes costs equipment finance will not cover, such as installation, freight, training or soft fit-out, or when the asset is too old, too specialised or being bought privately in a way lenders will not finance. It is also faster, since no valuation or asset verification is required.
Importantly, how you finance an asset does not usually determine whether you can claim a deduction for it. That depends on whether your business owns the asset, not on whether you paid cash.
A common belief is that you have to pay cash for an asset to claim an immediate deduction or depreciation on it. That is generally not correct.
Under a chattel mortgage, which is the most common structure for business vehicles and equipment in Australia, your business owns the asset from the moment of purchase. The lender simply registers a security interest over it. Because you are the owner, the asset generally enters your depreciation calculations at its full cost, even though you have only paid a deposit.
The practical effect is significant. A business can potentially claim a deduction based on the full cost of an asset in the year it is first used, while having outlaid only a fraction of that amount in cash. The interest on the finance is typically deductible as well, though the principal portion of repayments is not.
Structures where the lender retains ownership, such as a lease or a rental agreement, work differently. There you generally claim the payments rather than depreciation on the asset. Neither approach is automatically better, but they are not interchangeable, and the difference is worth understanding before you sign.
This is general information rather than tax advice. Confirm the treatment for your business with your accountant or registered tax agent before committing to a structure.
| Structure | Who owns the asset | Typical use | End of term |
|---|---|---|---|
| Chattel mortgage | Your business, from day one, with the lender holding a registered security interest | Vehicles, machinery, most business equipment | You keep the asset. A balloon amount may be payable if one was set |
| Finance lease | The lender | Equipment a business wants to use but not necessarily own long term | Pay the residual to acquire, refinance it, or return the asset |
| Operating lease or rental | The lender | Assets that date quickly, such as IT and some technology | Return the asset, upgrade, or extend the rental |
| Commercial hire purchase | The lender until the final payment | Less common now, largely displaced by chattel mortgage | Ownership transfers to you on completion |
One structural point worth knowing: where the business owns the asset under a chattel mortgage and is registered for GST on a non-cash basis, the GST credit on the purchase price can generally be claimed in the activity statement for the period of the purchase rather than spread across the repayments. For a substantial asset, that can be a meaningful cashflow event in the first quarter. Leases and rentals typically attract GST on each payment instead.
| Consideration | Equipment finance | General business loan |
|---|---|---|
| Security | The asset itself secures the loan, so additional security is often unnecessary | Unsecured, or secured against other assets or property |
| Pricing | Generally lower, because the lender holds tangible security | Generally higher where unsecured, reflecting the absence of collateral |
| Term | Matched to the asset’s useful life, commonly 1 to 7 years | Often shorter, commonly 3 months to 3 years for unsecured facilities |
| What it can fund | The asset only, and usually only assets the lender will accept | Anything, including freight, installation, training and soft costs |
| Speed | Slower, since the asset must be identified and often verified or valued | Faster, since there is no asset to assess |
| Asset restrictions | Age, type and condition limits apply, and private sales are often excluded | None, as the lender is not taking the asset as security |
| Effect on other borrowing | Ties up the asset but usually leaves other credit lines intact | Consumes general borrowing capacity and cashflow headroom |
| Risk if it goes wrong | The financed asset can be repossessed | Directors exposed through personal guarantees, or other pledged security at risk |
The pricing difference is the main reason to prefer equipment finance where it is available. If a lender can take the asset as security, you should generally expect a better rate than an unsecured alternative for the same amount. Paying unsecured pricing to buy a financeable asset is a common and expensive mistake.
Many businesses use both. Equipment finance covers the asset, and a smaller unsecured business loan covers the installation, freight and working capital needed to get it earning.
Asset purchase decisions are often driven by the instant asset write-off, so it is worth being precise about its current status, because a good deal of published commentary is not.
The $20,000 threshold is settled law for the 2025-26 income year. Assets first used or installed ready for use by 30 June 2026 are covered, and there is no uncertainty about those claims.
For 2026-27, the position is different. The 2026-27 Federal Budget of 12 May 2026 announced that the $20,000 threshold would become permanent from 1 July 2026 for small businesses with aggregated annual turnover under $10 million. The enabling legislation, the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, was introduced into the House of Representatives on 25 June 2026.
As at the date of publication, that measure has not completed its passage through Parliament, and the ATO’s own guidance states that it is not yet law. Until it passes, the standing legislated threshold for assets first used from 1 July 2026 is $1,000.
Passage is widely expected, and the measure is drafted to apply from 1 July 2026. But announced is not the same as enacted, and you should confirm the current position on the ATO website or with your accountant before making a purchase decision that depends on it.
Most business vehicles and serious machinery cost well over $20,000, so the write-off is not the main event for them. Eligible small businesses can generally place those assets in the small business simplified depreciation pool, which under the current rules is depreciated at 15% in the first income year and 30% in each year after that.
For passenger vehicles, a separate car cost limit caps the amount you can depreciate regardless of what you paid. It is indexed each year, so check the figure applying to your income year.
Two general points hold regardless of the threshold. The asset must be used or installed ready for use in the income year, so something on order or in transit at 30 June does not qualify for that year. And a deduction reduces taxable income rather than handing you the cash back, so it should never be the sole reason to buy something the business does not need.
Equipment finance often includes a balloon or residual, a lump sum payable at the end of the term. It lowers your monthly repayment by deferring part of the principal.
Used deliberately, this is a sensible cashflow tool. Used carelessly, it creates a problem years later. The risks worth weighing:
A reasonable test is whether the balloon is comfortably below the asset’s likely resale value at the end of the term. If it is not, you are deferring a problem rather than managing a cashflow one.
Equipment finance is only available if the lender will accept the asset. Common sticking points:
If your purchase falls into one of these categories, a general business loan is often the practical route rather than a sign that funding is unavailable.
A textbook equipment finance case. Identifiable asset, recognised supplier, strong resale market, revenue-producing over several years. A chattel mortgage over five years would generally price better than any unsecured alternative, and the business owns the asset from settlement.
Harder for equipment finance. Some items, such as a commercial oven or coffee machine, may be financeable individually. Joinery, plumbing, tiling and labour generally are not, and the premises are leased. A business loan covering the whole project is usually simpler, with equipment finance considered only for the larger discrete machines.
Most equipment financiers will decline this on asset age and the private sale. A secured or unsecured business loan is the realistic path, at a higher rate than equipment finance would have offered had the asset qualified. Worth factoring into whether the cheaper truck is actually cheaper.
Too small to justify separate equipment facilities. A small business loan, line of credit or rental arrangement is generally more practical, and each item may fall under the write-off threshold in its own right depending on the rules applying in your income year.
The right structure depends on the asset, its age and source, how long it will earn, what you can offer as security and how quickly you need to move. Supplier or dealer finance is convenient, but it is one option rather than the market.
Ezy Pzy Finance helps Australian businesses compare equipment finance, chattel mortgages, secured and unsecured business loans, low doc business finance and working capital facilities, so the structure matches the purchase rather than whichever product was offered first.
To talk through funding an asset purchase, get in touch with Ezy Pzy Finance. You may also find our guides to how much you can borrow and low doc versus full doc applications useful.
This article contains general information only and is not tax, legal or financial advice. It does not take into account your objectives, financial situation or needs. Tax treatment depends on your circumstances and on legislation in force at the relevant time, and the instant asset write-off measure referred to for 2026-27 was announced but not yet law as at the date of publication. Confirm the current position with the ATO and your registered tax agent before making a purchase or funding decision.
Most Australian business owners know they have a credit score. Fewer realise they have two credit files, that business lenders usually read both, and that the two are governed by different rules.
This matters because a director with an immaculate personal file can still be declined on the strength of the commercial file, and a business with clean commercial conduct can be declined because of something on the director’s personal record. Understanding which file holds what is the first step to protecting both.
This guide explains what sits on each file, what damages them, how long the damage lasts, and what you can realistically do about it.
Australian businesses have a commercial credit file held against their ABN or ACN, and directors have a separate personal credit file. Because directors almost always provide a personal guarantee on business finance, lenders typically assess both.
The fastest ways to improve and protect either file are the same: pay credit obligations on time every month, keep ATO lodgements current, avoid multiple credit applications in a short window, check all three bureaus at least quarterly, and correct genuine errors promptly. Accurate negative listings cannot be removed early, but their impact fades as recent positive history accumulates.
These are separate records, built from different data, and they behave differently.
| Feature | Personal credit file | Commercial credit file |
|---|---|---|
| Held against | You as an individual, by name and date of birth | Your business, by ABN or ACN |
| Governed by | Privacy Act 1988 and the Credit Reporting Privacy Code, with consumer protections | Privacy Act, but commercial credit information follows different rules and thresholds |
| Typical contents | Credit enquiries, repayment history on consumer accounts, defaults, court judgments, bankruptcy | Trade payment behaviour, commercial defaults, court actions, ASIC data, disclosed ATO tax debts, adverse director history |
| Who reports to it | Banks, lenders, telcos, utilities, buy now pay later providers | Suppliers, trade creditors, commercial lenders, the ATO in defined circumstances |
| Why business lenders care | Directors almost always give a personal guarantee, so their conduct is relevant | It is the primary record of how the business itself pays its obligations |
The practical implication: improving your business credit position means working on both files at once. Focusing on one while neglecting the other is how applications get declined for reasons owners find surprising.
Australia has three credit reporting bureaus: Equifax, Experian and illion, the last of which was formerly Dun and Bradstreet. Each holds its own file on you, receives data from an overlapping but not identical set of providers, and applies its own scoring model.
| Bureau | Personal score range | Commonly used by |
|---|---|---|
| Equifax | 0 to 1,200 | Most major banks and mainstream lenders |
| Experian | 0 to 1,000 | Many non-bank lenders and fintechs |
| illion | 0 to 1,000 | Telcos, utilities, and lenders drawing on commercial trade data |
Because the scales and the underlying data differ, the same person can hold three different scores on the same day and all three can be correct. A telco default might appear with one bureau and not another. A gap of a hundred points or more between bureaus is common and is not evidence of an error.
This is the reason to check all three rather than relying on whichever free app you already have installed. A lender may pull the one you have not looked at.
In rough order of severity:
The enquiry point deserves emphasis because it is the most avoidable and the most commonly self-inflicted. Applying directly to six lenders in a fortnight can leave you worse off than when you started, regardless of whether any of them approved you.
Retention periods are set by the Credit Reporting Privacy Code, not by the lender or the bureau. Approximate periods for personal credit files:
| Listing type | How long it stays | Clock starts from |
|---|---|---|
| Default | 5 years | The date it was listed, not the date you fell behind |
| Credit enquiry | 5 years | The date of the enquiry |
| Court judgment | 5 years | The date of judgment |
| Repayment history | 2 years | Rolling, month by month |
| Serious credit infringement | 7 years | The date it was listed |
One point that catches people out: paying a listed default does not remove it. The status changes to a paid default, which lenders view considerably more favourably, but the entry remains for the full five years. Paying is still worth doing, both for that status change and because unpaid debts tend to escalate.
Retention rules for commercial credit information differ from the consumer periods above. The Office of the Australian Information Commissioner publishes the current requirements.
There is no shortcut, but there is a reliable sequence.
It is the first question most business owners ask, and the one lenders are slowest to answer directly. The honest answer is that borrowing capacity is driven less by what you want and more by what your bank statements show.
The good news is that the calculation is not a mystery. Most Australian lenders work from a small set of inputs, and once you understand them you can estimate your own range before you speak to anyone.
This guide explains the numbers lenders actually use, what moves your capacity up or down, and how to work out a realistic range for your business.
As a general rule, Australian businesses can borrow between one and three months of turnover on an unsecured business loan. A business turning over $30,000 per month would typically see indicative offers in the $30,000 to $90,000 range. Unsecured business loans in Australia commonly run from around $5,000 to $500,000.
Where you sit in that range depends mainly on four things: monthly turnover, how long you have been trading, your credit and ATO position, and whether you can offer security. Secured lending is assessed differently again, with capacity driven largely by the value of the asset offered rather than a turnover multiple.
For unsecured business lending, most lenders start with a multiple of monthly turnover. It is a rough filter rather than a final answer, but it gets you close.
| Monthly turnover | Annual turnover | Indicative unsecured range |
|---|---|---|
| $10,000 | $120,000 | $10,000 to $30,000 |
| $20,000 | $240,000 | $20,000 to $60,000 |
| $30,000 | $360,000 | $30,000 to $90,000 |
| $50,000 | $600,000 | $50,000 to $150,000 |
| $100,000 | $1,200,000 | $100,000 to $300,000 |
| $200,000+ | $2,400,000+ | Often assessed on full financials rather than a multiple |
These are indicative market ranges to help you plan, not offers or quotes. Actual capacity varies significantly by lender, industry, security and credit profile.
One useful cross-check: many lenders view borrowing around 10% of annual turnover as comfortable, while requests approaching half of annual turnover attract much closer scrutiny. A $50,000 loan against $500,000 of annual revenue is a straightforward conversation. A $200,000 loan against the same revenue is not.
It is also worth knowing that many lenders begin asking for security once the amount passes roughly $150,000, even where their advertised maximum is higher. If you are hoping to borrow above that mark without offering an asset, expect a more detailed assessment.
The turnover multiple is a shortcut. Underneath it, lenders are testing one thing: whether the repayment fits inside your surplus cashflow with room to spare.
Two measures do most of the work:
This is why two businesses with identical turnover can receive very different answers. The one already carrying three equipment leases and an overdraft has far less headroom than the one carrying none.
Because most low doc assessments rely on bank statements, the detail inside them matters more than business owners expect:
A few dishonours can reduce an offer more than a modest drop in turnover. If you have three months before you need funding, keeping the account clean is one of the highest-return things you can do.
Before capacity becomes relevant, you need to clear the entry criteria. These vary by lender, but the common thresholds look like this:
That last point is the one most often misunderstood. Unsecured means no specific asset is pledged as collateral. It does not mean the directors carry no personal exposure.
Offering security changes the calculation entirely. Capacity stops being a turnover multiple and starts being a function of the asset.
| Consideration | Unsecured | Secured |
|---|---|---|
| How capacity is set | Multiple of monthly turnover, tested against cashflow | Largely driven by the value of the asset offered, tested against cashflow |
| Typical amounts | Around $5,000 to $500,000, with many lenders wanting security above $150,000 | Substantially higher where property or business assets support the loan |
| Typical terms | Shorter, commonly 3 months to 3 years | Longer, often 3 to 15 years or more against property |
| Pricing | Higher, because the lender has no asset to fall back on | Generally sharper where the security is strong |
| Speed | Faster, often days | Slower, since valuations and legal work are required |
| Risk if it goes wrong | Directors exposed through personal guarantees | The pledged asset is at risk, which may include the family home |
There is a middle ground many owners miss. Even on an unsecured application, being a homeowner tends to increase the amount lenders will offer, because it signals asset backing and stability without the property being formally pledged. Industry data suggests homeowners request and receive materially larger unsecured facilities than non-homeowners with comparable turnover.
For more detail on the trade-offs, see our guide to unsecured business loans.
Applying to several lenders in quick succession is a common and avoidable mistake. Each hard enquiry leaves a mark, and a cluster of them can reduce your capacity with the next lender in line. Working through a broker means one set of information is matched against a panel rather than fired at it.
Clean bank statements, no existing debt, non-homeowner, lodgements current. The turnover rule suggests $25,000 to $75,000. With no existing repayments consuming headroom, an offer toward the upper part of that range is realistic. Short trading history keeps pricing higher.
Two existing equipment loans totalling $4,500 per month, director owns property, financials current. The turnover rule suggests $60,000 to $180,000, but existing repayments already use a meaningful share of the cashflow test. Property ownership and a five-year history pull in the other direction. A full doc application would likely produce a better outcome than a low doc one here.
Turnover supports $40,000 to $120,000 in principle, but the tax debt changes the conversation. Whether lodgements are current and whether a payment plan is in place and being met will matter more than the turnover figure. See our guide to ATO tax debt loans for how lenders treat this.
Usually not, and it is worth being direct about why.
Your borrowing capacity is a ceiling, not a target. It represents the most a lender is willing to risk on your business, calculated on the assumption that current conditions hold. It says nothing about what your business can comfortably repay if a large customer pays late, a season underperforms, or costs rise.
Borrowing at the ceiling also removes your future options. Once your repayment headroom is fully consumed, you cannot borrow again for the opportunity you did not see coming, and you cannot refinance on better terms because no lender has room to work with.
A more useful question than “how much can I borrow” is “how much does this specific purpose require, and what does it return.” If the answer to the second part is unclear, the amount is probably too high.
Borrowing capacity and borrowing cost move together, and 2026 has been a tightening year. The RBA lifted the cash rate three times in the first half of 2026, taking it to 4.35%, before holding at that level in June. Business lending rates generally follow within weeks of each move.
For unsecured business lending, most borrowers are seeing rates in the range of roughly 9.5% to 18% per annum, with short-term products costing considerably more once fees are converted to an effective annual rate. Secured lending sits below that range where the security is strong.
Two practical implications. First, higher rates mean higher repayments, which consumes cashflow headroom and reduces the amount you can service. The same turnover supports a smaller loan than it did eighteen months ago. Second, be careful comparing quotes: lenders present pricing as a simple interest rate, an APR, or a factor rate, and these are not directly comparable. Always compare the total dollar cost of the facility over its full term.
This will not match a lender’s assessment exactly, but it will tell you whether you are in the right ballpark before you commit to an application and a credit enquiry.
Estimates are useful for planning, but only a lender assessment produces a real number, and different lenders will reach different conclusions about the same business.
Ezy Pzy Finance helps Australian businesses understand their realistic borrowing capacity across a range of options, including unsecured business loans, secured business loans, low doc business finance, working capital facilities and tax debt funding, without firing off multiple applications and damaging your credit file in the process.
If you would like an indication of what your business could borrow, get in touch with Ezy Pzy Finance.
This article contains general information only and does not take into account your objectives, financial situation or needs. All amounts, ranges and rates referred to are indicative market observations current as at the date of publication and are not offers of credit. Actual borrowing capacity, rates and terms are determined by individual lenders on assessment. Speak with a qualified adviser about your specific circumstances.