Australia has more than 2.6 million small businesses. They make up about 97% of all Australian businesses and contribute roughly one-third of the national gross domestic product (GDP). These companies often rely on outside capital when organic cash flow can’t keep pace with the demands of launching new products, expanding operations, or managing uneven cash cycles.

Small business funding options in Australia shape how companies grow, hire, and compete. The challenge for many business owners is understanding which funding options genuinely support their plans and which introduce issues they can’t afford.

This guide discusses the types of small business funding in Australia, how they work in real business conditions, and what teams should consider when they make funding decisions.

What’s in this article?

• What are small business funding options in Australia?
  
• When do Australian businesses typically seek external capital?
  
• What debt-based funding options are available to small businesses in Australia?
  
• What equity and alternative funding options support early-stage and growing Australian businesses?
  
• What challenges do small businesses face when accessing funding in Australia?
  
• How can businesses evaluate different funding options?
  
• How Stripe Capital can help
  

What are small business funding options in Australia?

Small business funding options are the types of capital founders use to start, run, and grow their businesses. These options span debt, where you borrow and repay, and equity, where investors buy a share of the business. They can also include alternative sources such as government grants and crowdfunding.

When do Australian businesses typically seek external capital?

Australian businesses might need to seek external funding when their plans outpace their available cash.

Here are the primary motivations:

• Starting something new: Founders often raise outside capital early to turn an idea into a working product, hire initial staff, and reach first customers.

• Scaling a proven business: When demand grows, businesses need capital to open new locations, expand production capacity, or hire ahead of schedule.

• Managing funding gaps: Long payment cycles and thin margins can leave even stable businesses short on cash. Short-term funding can help cover payroll, supplier payments, or inventory purchases without slowing momentum.

• Making major investments: Upgrading equipment, adopting new technology, or acquiring another business might require substantial spend up front that small businesses can’t finance from daily revenue.

• Expanding internationally: Entering new markets can come with high costs across compliance, hiring, logistics, and marketing.

What debt-based funding options are available to small businesses in Australia?

Debt funding gives small businesses a way to access capital while keeping full ownership.

There are a few different options:

• Bank loans (term loans): These are traditional lump-sum loans repaid over a fixed term, often at lower interest rates when secured against property or equipment. Banks might require strong financials and collateral, but the structure works well for long-term investments such as expansion, renovations, and major equipment purchases.

• Business lines of credit: These revolving facilities offer flexibility for day-to-day cash management, which allows businesses to draw only what they need and pay interest on the balance used. They’re useful for bridging timing gaps between paying suppliers and receiving customer payments, especially in industries with seasonal or uneven cash flow.

• Business credit cards: Many small businesses rely on credit cards for smaller, frequent expenses because they’re relatively easy to obtain and don’t require collateral. The high interest rates make this option best suited for balances that can be repaid quickly.

• Equipment and asset finance: Loans, leases, and hire purchase arrangements, in which a buyer pays in installments after an initial sum, let businesses acquire equipment or vehicles using the asset itself as collateral. This reduces the need for additional security and spreads the cost over the asset’s useful life.

• Invoice financing (debtor finance): If a business has slow-paying customers, borrowing against outstanding invoices provides access to cash that would otherwise be tied up for weeks. It’s generally faster to qualify for invoice financing than for unsecured loans. This type of financing grows alongside sales volume, although fees are often higher than those of traditional lending.

• Trade credit from suppliers: Many businesses effectively finance operations through supplier terms that allow payment 30 days or more after receiving goods. This credit is interest-free when paid on time, but missing deadlines can strain supplier relationships or incur penalties.

• Specialist nonbank lenders: Online lenders with fast turnarounds provide short-term unsecured loans with easy applications and flexible criteria. Rates are usually higher, but the speed and accessibility make these loans valuable for businesses that lack collateral or need immediate funds.

• Revenue-based financing and business cash advances: These advances are repaid as a fixed percentage of daily or weekly sales, which helps businesses manage repayment during slower periods. For example, Stripe Capital provides fast access to financing and collects repayments as revenue comes in without compounding interest or late fees.

What equity and alternative funding options support early-stage and growing Australian businesses?

Equity and alternative funding give businesses more access to capital.

This strategy involves a variety of different options:

• Friends and family investment: Personal networks often provide early capital before a business can attract investors. This can come with flexible terms and quick decision-making. It’s convenient but carries personal risk.

• Angel investors: Angels invest their own money in return for equity, and they typically get involved once a company has a prototype or early traction. Founders can also gain mentorship and industry connections.

• Venture capital (VC): VC firms invest large amounts into early-stage, ostensibly high-growth companies that can scale quickly, usually in exchange for a meaningful ownership stake and a governance role. They’re highly selective and often focused on sectors such as technology and software.

• Private equity and growth funds: More established businesses with steady revenue can access growth capital from funds designed for midsize companies. The Australian Business Growth Fund, for instance, invests minority stakes in growing small and medium-sized enterprises (SMEs) to help them expand without ceding control.

• Crowdfunding (rewards-based): Rewards-based crowdfunding lets product-oriented businesses raise money from supporters in exchange for perks such as early access. It works well for consumer products and creative projects.

• Crowdsourced equity funding (equity crowdfunding): Equity crowdfunding allows companies to raise money from hundreds of small investors, who each receive a share of the business. It’s useful for brands with strong communities and growth plans, although it comes with the responsibility of managing many shareholders and complying with crowdsourced funding regulations.

• Government grants and programs: Federal and state governments sometimes provide grants, tax incentives, and subsidies for activities such as innovation, export expansion, research and development (R&D), technology adoption, and workforce development. Grants don’t need to be repaid and can add credibility to a business, but applications might be competitive and often require detailed reporting.

• Accelerators: These programs often combine small equity investments with structured mentorship, training, and access to investor networks. They’re selective but can speed up product development and fundraising readiness.

• Owner funding (bootstrapping): Many founders use personal savings, home equity, or reinvested profits to finance early operations. This avoids dilution and debt but limits growth to the founder’s financial capacity.

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

Whether a business chooses debt or equity funding, different types of challenges can appear.

Here’s what to watch for:

• Strict lending criteria and collateral requirements: Banks often require detailed financials, strong credit history, and property or other assets as security, which shuts out newer businesses and those without real estate.

• High borrowing costs and mismatched terms: Smaller businesses generally face higher interest rates and tighter repayment schedules, especially when they borrow unsecured.

• Slow, involved application processes: Traditional loan applications can take weeks and involve heavy documentation.

• Limited access to equity funding: VC tends to be highly concentrated in specific sectors, and many growing SMEs fall outside common investor focus areas. Research shows that many Australian SMEs that seek equity can’t secure it.

• Low awareness of available options: With more funding choices than ever, many owners aren’t sure which path fits their needs or how each option works.

• Economic uncertainty tightening credit: Shifting economic conditions push lenders and investors to be more cautious. As a result, businesses that would qualify in more stable periods might struggle to access funds when they need them.

How can businesses evaluate different funding options?

Choosing the right funding comes down to understanding what the business needs now and how those needs will change.

Consider the following:

• Purpose and timing: Every funding decision should start with why the capital is needed and how long it will be used. Short-term gaps call for flexible tools such as lines of credit, while long-term investments are better suited to term loans or equity.

• Cost of capital: Loans come with interest and fees, while equity costs a share of future value. Comparing the true cost of each option after taxes, fees, and potential dilution helps determine which option delivers the best return on investment.

• Impact on finances: Fixed repayments can strain businesses with uneven revenue, while equity avoids monthly pressure but reduces ownership. Modeling cash flow under each option gives a clearer view of what’s sustainable.

• Control and ownership: Debt preserves full control but might require personal guarantees, while equity brings partners who might want oversight or a board seat. Founders should decide how much control they’re comfortable sharing.

• Speed and likelihood of approval: Urgent needs might narrow the choices to options that move quickly, such as online lenders and revenue-based financing. More involved paths, such as grants and equity raises, work best when timelines are flexible.

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.

• Align 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 payment data.

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