Business loan rules in Australia for 2026: what protects small business borrowers (and what does not)

Most small business loans in Australia are not covered by the consumer credit regime, so responsible lending obligations, comparison rates and hardship rules under the National Credit Code generally do not apply. What does apply is a set of general protections in the ASIC Act 2001 (misleading and unconscionable conduct and unfair contract terms), the Banking Code of Practice for subscribing banks, the Personal Property Securities Act 2009 for security over business assets, and dispute resolution through the Australian Financial Complaints Authority (AFCA). Knowing which rules apply tells you what you can rely on and what you must check yourself.

This guide is part of the small business loan rates overview. It is general information, not legal advice.

Why consumer credit law usually does not apply

The National Consumer Credit Protection Act 2009 (NCCP Act) and the National Credit Code in its Schedule 1 regulate credit provided to individuals wholly or predominantly for personal, domestic or household purposes, or to buy, improve or refinance residential investment property. Credit for business purposes falls outside the Code, even if:

• the borrower is a sole trader rather than a company, or
• the security is the owner's home.

Lenders usually ask you to sign a business purpose declaration. Under the Code, a lender can generally rely on that declaration unless it knew or had reason to believe the credit was really for personal purposes. Do not sign one for a loan that is mainly personal: you would lose consumer protections you are entitled to.

Practical consequences for business borrowers:

Because many business lenders and brokers do not need an Australian credit licence, do not assume a lender is on ASIC's credit registers. Check the company details on ASIC's registers and whether the lender is an AFCA member.

Protections that do apply

Misleading or deceptive conduct. The ASIC Act prohibits misleading or deceptive conduct in relation to financial services, including business credit. An advert or broker statement that misrepresents the cost of a loan can breach it.

Unconscionable conduct. The ASIC Act also prohibits unconscionable conduct in connection with financial services, and courts look at factors such as relative bargaining power, whether terms were explained and whether undue pressure was applied.

Unfair contract terms. Unfair terms in standard-form small business contracts for financial products and services are covered by the ASIC Act (the Australian Consumer Law covers other goods and services). Since 9 November 2023, unfair terms in these contracts are prohibited, courts can impose penalties, and the definition of a small business contract was widened: broadly, one party employs fewer than 100 people or has annual turnover under $10 million and, for financial products and services under the ASIC Act, the upfront price payable (for a loan, broadly the amount borrowed plus disclosed fees, disregarding interest) is no more than $5 million. Terms commonly examined include broad unilateral variation rights, wide default triggers, and indemnities. Check ASIC's guidance for the exact tests.

Security interests. The Personal Property Securities Act 2009 governs security over business assets other than land and how it is registered on the PPSR. Land mortgages are governed by state and territory land titles legislation. See PPSR and general security agreements.

The 2025 Banking Code of Practice

The Australian Banking Association's Banking Code of Practice is an industry code that subscribing banks agree to follow and that is approved by ASIC. The current version, approved by ASIC in June 2024, took effect on 28 February 2025. It includes commitments specific to small business customers.

Under the 2025 Code, a business customer is a small business if, when it obtains the banking service, it (with its business group):

1. had annual turnover of less than $10 million in the previous financial year; and
2. has fewer than 100 full-time equivalent employees; and
3. has less than $5 million total debt to all credit providers.

The debt threshold was $3 million under the previous Code. The Code covers matters such as how banks assess small business lending, information about loan terms, protections for guarantors, notice when a bank decides not to continue a facility, and how financial difficulty is handled. The Banking Code Compliance Committee monitors compliance. The exact obligations are in the Code itself; read the relevant chapters before relying on them.

Non-bank lenders are not bound by the Banking Code. Some subscribe to other industry codes, such as the Australian Finance Industry Association's Finance Industry Code of Practice. Ask a non-bank lender which code, if any, it follows.

Directors' duties that affect borrowing

• Insolvent trading. Under the Corporations Act 2001, directors can be personally liable for debts a company incurs while insolvent. Borrowing to keep trading when the company cannot pay its debts as they fall due is risky for directors.
• Safe harbour. The Corporations Act provides a safe harbour for directors pursuing a course of action reasonably likely to lead to a better outcome than administration or liquidation, subject to conditions such as tax lodgements being up to date.
• Small business restructuring. Eligible companies with total liabilities not exceeding $1 million can use the simplified restructuring process introduced in 2021, run by a registered small business restructuring practitioner.
• Director penalty regime. Directors can become personally liable for unpaid PAYG withholding, GST and superannuation guarantee charge. The ATO explains how director penalty notices work.

State and territory differences

Lending law is mostly federal, but several things vary by state and territory:

• Land registration fees for mortgages and discharges, charged by each land titles office.
• Small business commissioners: NSW, Victoria, Queensland, South Australia and Western Australia (the Small Business Development Corporation) have bodies that offer low-cost dispute help and information; services and powers differ.
• Enforcement procedures for mortgages over land follow state law and court processes.
• State finance programs, such as rural and industry development authorities. See government-backed finance.

Mortgage stamp duty, once charged by several states, has been abolished; if you see a "duty" line on a loan quote, ask what it is and check with your state revenue office.

Where to complain

Start with the lender's internal dispute resolution. If unresolved, eligible small business complaints can go to AFCA, which has its own eligibility rules and monetary limits for small business credit disputes. The complaints and official sources guide explains the steps.

Related guides

For how these rules play out in practice, see how lenders price secured and unsecured loans and which fees and break costs may be open to challenge as unfair terms.

Frequently asked questions

I am a sole trader. Am I a consumer for credit purposes?

Only if the credit is mainly for personal, domestic or household purposes. A loan for your business is business credit even though you borrow in your own name.

Does the Banking Code apply to online lenders?

No, only to banks that subscribe. Check whether a non-bank lender follows another code and whether it is an AFCA member.

Can an unfair term in my loan contract be removed?

A court can declare an unfair term void, and since November 2023 penalties can apply. Get legal advice; AFCA may also consider the fairness of terms in a complaint.

Do the Banking Code protections apply to a $6 million facility?

If total debt to all credit providers is $5 million or more, the small business chapters generally do not apply, though other parts of the Code may.

Sources

• Federal Register of Legislation — NCCP Act 2009, ASIC Act 2001, Corporations Act 2001, PPSA 2009
• ASIC — unfair contract terms guidance and registers
• Australian Banking Association — Banking Code of Practice — 2025 Code text and small business definition
• Australian Financial Complaints Authority — small business eligibility and limits
• ATO — director penalty notices