Accessing the right small business loan in Australia can shape how a business grows, manages cash flow, and navigates unpredictable markets. In 2025, small to medium-sized enterprise (SME) loans accounted for around half of total business credit in Australia. For businesses, a well-matched loan can create room to invest, help stabilize day-to-day operations, or offer enough runway to adapt when conditions shift.

Below, we’ll explain how small business loans in Australia work, how lenders make decisions, and what to expect at every stage of the funding process.

What’s in this article?

• What are small business loans in Australia?
  
• What lending options are available in Australia?
  
• How do Australian small businesses choose the right type of loan?
  
• How do lenders evaluate loan applications?
  
• What challenges do small businesses face when accessing finance in Australia?
  
• How can Australian small businesses best manage and monitor loans once funding is secured?
  
• How Stripe Capital can help
  

What are small business loans in Australia?

A small business loan in Australia is any form of commercial financing designed for businesses that operate at a small scale (small businesses usually have fewer than 20 employees). These loans are defined by the purpose of the funding. The money must be used for business needs such as buying stock, covering operating costs, upgrading equipment, or expanding operations.

Unlike equity, a loan doesn’t dilute ownership. It’s debt repaid over time, typically from future revenue and with interest.

Common loan types include:

• Term loans: A lump sum repaid over a set number of years

• Lines of credit: Flexible funds you can draw down as needed, paying interest only on what you use

• Equipment finance: Funding tied to an asset that often acts as its own collateral

• Invoice finance: Financing based on cash tied up in unpaid invoices

• Business cash advances: Advances you can repay through a small share of daily sales

Some loans require collateral, while others rely on business performance and personal credit. Interest is generally tax-deductible, which helps offset borrowing costs.

Loans matter because they enable businesses to act when opportunities or pressures arise. Whether it’s investing in growth, smoothing out cash flow gaps, or weathering economic uncertainty, access to credit provides the stability and flexibility small businesses need to stay competitive and resilient.

What lending options are available in Australia?

Australia’s lending ecosystem is diverse and gives small businesses a wide array of choices. Each option has its own strengths depending on speed, cost, and eligibility.

These are the lending options available for Australian small businesses.

Banks

Banks remain the go-to for larger, longer-term loans with comparatively low interest rates. They provide secured term loans, lines of credit, and equipment finance. The trade-off is time. Applications involve a lot of paperwork, and approvals can take weeks. Banks are often the most affordable path for established businesses with strong financials and collateral.

Online nonbank lenders

Fintech lenders focus on speed and accessibility. Applications take minutes, decisions often arrive within a day, and unsecured loans are common. Funding limits tend to be smaller and interest rates higher, but these lenders serve businesses that need fast, flexible financing without property as security.

Peer-to-peer platforms

Peer-to-peer (P2P) lenders connect businesses with individual investors. They offer secured and unsecured loans, with rates set according to perceived risk. This model suits businesses with clean financials seeking alternatives to traditional lenders.

Government-supported programs

Federal and state initiatives occasionally provide loans or guarantees, often in response to economic shocks or industry-specific challenges. They’re not consistently available, but when they are, they can improve access or reduce borrowing costs.

Invoice finance

Ideal for businesses dealing with long payment cycles, invoice finance provides upfront access to the majority of an invoice’s value. Costs are higher than traditional loans, but it can be a practical solution when cash is trapped in receivables.

Business cash advances and revenue-based funding

Repayments rise and fall with revenue, which helps businesses with fluctuating sales, particularly retail or hospitality. These products require no collateral and provide fast access to cash, but often carry higher effective costs. Providers that already process your payments, such as Stripe, can grant funding based on real transaction data. The appeal is simplicity and speed for businesses already operating on the platform.

How do Australian small businesses choose the right type of loan?

Finding the right loan starts with understanding what your business is trying to accomplish. The goal is to match the loan to the purpose, repayment capacity, and financial foundation of your business.

Here’s how.

Start with purpose

Short-term needs, such as slow periods, handling late-paying customers, or covering unexpected expenses, are well-suited to lines of credit or short-term unsecured loans. Long-term investments such as machinery, vehicles, or renovations are often funded with secured term loans or equipment finance that match the asset’s lifespan.

Assess repayment capacity

Cash flow determines what you can safely borrow. Secured loans usually have lower rates because the lender’s risk is reduced. Unsecured loans move faster, but cost more and often require quicker repayment. Beyond interest rates, consider the fees, repayment frequency, and whether variable rates could strain cash flow.

Evaluate collateral

Property or equipment can open the door to larger or cheaper loans. Early-stage businesses without assets often rely on unsecured loans, invoice finance, or revenue-based products that assess actual cash flow instead.

Factor in business longevity and track record

Lenders typically look at trading history supported by business activity statements (BAS) and bank activity documentation. Faster-growing or younger businesses might find fintech lenders who rely on transaction data more suitable.

How do lenders evaluate loan applications?

Lenders assess risk using several criteria, which include financial behavior, stability, assets, and context. Australian lenders often use what’s known as the “five Cs.”

Here’s the criteria used by lenders in Australia.

Character

Lenders review how reliably you’ve paid past obligations and how long you’ve been in business. Personal credit is important when the business credit file is thin.

Capacity

Capacity is your ability to repay the loan through ongoing cash flow. Lenders analyse BAS statements, bank activity, and existing debts. Projections help, but proven performance carries the most weight.

Capital

This refers to the business’s overall financial position, including assets, liabilities, retained earnings, and owner’s equity. If the company is young, lenders might look at the owner’s personal financials to complete the picture.

Collateral

If the loan is secured, lenders assess the value and reliability of the asset. Property is generally what they look for, but vehicles and equipment also count. Strong collateral can improve loan terms.

Conditions

This includes the loan’s purpose and the economic conditions surrounding the business. Lenders consider whether the funding structure lines up with the intended use and how your industry’s outlook might affect repayment. A clear, grounded plan strengthens the application.

What challenges do small businesses face when accessing finance in Australia?

Accessing finance, even for businesses with strong fundamentals, can be a difficult process.

Here’s what to expect:

• Strict lending criteria: Banks tend to favor established businesses with solid financials and property-backed collateral. Many small firms don’t meet all requirements.

• Collateral and personal guarantees: Property plays a major role in Australian lending. Without it, options narrow.

• Higher borrowing costs: Perceived risk means higher interest rates, especially for unsecured loans.

• Slow or complex applications: Traditional lenders require extensive documentation and move slowly, which clashes with the urgent nature of many funding needs.

• Limited financial expertise: Not all owners are comfortable preparing lender-ready financial statements or realistic cash-flow forecasts.

• Economic headwinds: High rates, softened demand, and market uncertainty make lenders more cautious, which tightens access for otherwise healthy businesses.

How can Australian small businesses best manage and monitor loans once funding is secured?

Securing a loan is the first step. Once the funds land, using them effectively will drive impact.

Here’s how to keep cash flow stable and maintain lender confidence:

• Stay lined up with the loan’s purpose: Track spending to ensure funds are used as planned and deliver the expected results.

• Build repayments into your cash-flow routine: Treat them as fixed commitments and forecast around them, especially if the loan has variable rates.

• Automate where possible: Direct debits reduce the risk of missed payments. If extra payments are allowed, use strong months to reduce the principal early.

• Monitor balances and terms: Keep an eye on statements, interest charges, and any loan covenants. Address potential issues with your lender early.

• Track your full debt picture: Maintain a simple schedule of all loans, balances, and due dates to plan, consolidate, or refinance strategically.

• Keep communication open: Lenders usually respond better when you’re proactive, especially if challenges arise.

• Measure the loan’s return: Compare results to your original projections. If the loan isn’t performing, adjust quickly so debt doesn’t outweigh the benefit.

How Stripe Capital can help

Stripe Capital offers revenue-based financing solutions to help your business access the funds it needs to grow.

Capital can help you:

• Access growth capital faster: Get approved for a loan or merchant cash advance in minutes—without the lengthy application process and collateral requirements of traditional bank loans.

• Line up financing with your revenue: Capital’s revenue-based structure means you pay a fixed percentage of your daily sales, so payments scale with your business performance. If the amount that you pay through sales doesn’t meet the minimum due each payment period, Capital will automatically debit the remaining amount from your bank account at the end of the period.

• Expand with confidence: Fund growth initiatives such as marketing campaigns, new hires, inventory expansion, and more—without diluting your equity or personal assets.

• Use Stripe’s expertise: Capital provides custom financing solutions informed by Stripe’s deep expertise and payments data.

Learn more about how Stripe Capital can fuel your business growth, or get started today.