Small business finance types compared
How the main kinds of Australian small business finance work, what they suit and what to watch for.
This table compares types of small business finance, not individual lenders. Rates and fees vary widely by lender, security, industry and trading history, so the table describes how each option is usually structured. Use the repayment calculator and the net proceeds calculator to compare actual offers.
Select a column header to sort.
| Finance type | How it works | Usually suits | Watch out for |
|---|---|---|---|
| Secured term loan (property) | Lump sum repaid over a set term, secured by a registered mortgage over commercial or residential property | Larger amounts, buying a business or premises, long-term needs | Your home may be at risk if it is the security; valuation and legal costs; break costs on fixed rates |
| Secured term loan (business assets / GSA) | Lump sum secured by a general security agreement over business assets registered on the PPSR | Established businesses without property to offer | GSA may cover all present and after-acquired property; usually also a director guarantee |
| Unsecured business loan | Shorter-term loan with no specific asset as security, often with a personal guarantee | Smaller, fast working capital needs | Higher rates, percentage establishment fees, daily or weekly repayments, guarantee still exposes directors |
| Business overdraft | Limit on a transaction account; interest charged on the drawn balance, plus a fee on the limit | Smoothing cash flow timing gaps | Line or limit fees whether used or not; lender can review the limit; not for long-term assets |
| Line of credit / revolving facility | Approved limit you draw and repay as needed, separate from the transaction account | Recurring seasonal needs, stock purchases | Annual reviews, undrawn fees, may be secured by property |
| Invoice finance (discounting or factoring) | Advance of a percentage of approved unpaid invoices; repaid when customers pay | B2B businesses with long payment terms | Service fees plus discount charges; factoring means the financier contacts your customers; concentration limits |
| Equipment finance (chattel mortgage) | Loan to buy a vehicle or equipment that you own from the start, secured over the asset | Vehicles, machinery, tools with a long useful life | Balloon payments; asset may be worth less than the balance; GST and tax treatment depends on your situation |
| Finance lease / operating lease | Financier owns the asset; you pay rent for its use, with or without a residual | Assets you upgrade often or prefer off your balance sheet | Residual value obligations, end-of-term conditions, early termination costs |
| Merchant cash advance / revenue-based finance | Lump sum repaid as a share of card takings or revenue until a fixed total is repaid | Card-heavy retail and hospitality with short needs | Priced as a factor rate; the equivalent annual cost can be very high if repaid quickly |
| Trade finance | Short-term funding to pay overseas suppliers, repaid when goods are sold | Importers and exporters | Currency risk, documentation, short terms; check Export Finance Australia for export-related support |
The table is general information and does not rank lenders. Business lending is mostly outside the National Consumer Credit Protection Act 2009, so comparison rates and consumer responsible-lending rules usually do not apply; ask each lender for the total cost in dollars. Check lender details and licences on the ASIC professional registers, banking protections in the Banking Code of Practice, and dispute options at the Australian Financial Complaints Authority.