Figuring out financing is a core part of how companies grow, manage cash flow, and take advantage of new opportunities. Australian businesses are no exception. The business-financing industry in Australia has been volatile in recent years, with big swings in interest rates, investment appetite, and economic conditions. But since lending rate hikes by the Reserve Bank of Australia from 2022 to 2023, the market has cooled.

There are still plenty of funding options, such as traditional business loans, equity, and a growing set of alternative lending tools, but it can be difficult to figure out what best fits your business. This guide explores the business financing options in Australia, how businesses secure external capital, and some of the practical trade-offs that shape smart funding decisions.

What’s in this article?

• What is business financing?
  
• Why do companies seek external capital?
  
• What debt-based financing options are available to businesses in Australia?
  
• What equity and alternative financing options are available to businesses in Australia?
  
• What challenges do businesses face when trying to secure financing in Australia?
  
• How can organizations effectively compare financing options?
  
• How Stripe Capital can help
  

What is business financing?

Business financing is how Australian companies raise outside capital to start, run, or expand their operations. It can span bank loans, overdrafts, credit lines, equipment finance, government grants, equity investment, and newer alternatives such as crowdfunding.

What largely separates one option from another is the level of obligation you take on. Debt comes with scheduled repayments and interest. Equity gives you capital without repayment pressure, but it also gives investors a stake in the company and a share in its upside. You don’t repay grants, but you do need to meet eligibility rules and reporting requirements.

Why do companies seek external capital?

Businesses might seek outside funding to accelerate growth or maintain day-to-day operations.

Here are some other motivations:

• Growth and expansion: Companies raise capital to move fast on opportunities such as opening new locations, entering new markets, launching products, or buying equipment.

• Working capital and cash flow: Late payments are a chronic issue that can tie up funds in unpaid invoices. Financing tools such as overdrafts, lines of credit, and invoice finance help businesses manage strains on liquidity.

• Startup and early-stage needs: New ventures often require capital before they generate revenue. Funding at this stage covers product development, hiring, office fit-outs, marketing, and compliance.

• Resilience and emergency funding: Companies can use financing to build buffers for seasonal dips and unexpected challenges, such as economic downturns or supply chain interruptions.

• Refinancing and restructuring: Some businesses seek capital to simplify or renegotiate existing debt. Consolidating multiple obligations into a cleaner structure can improve cash flow and free up management attention.

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

Debt financing gives businesses capital without making them give up ownership. The Australian market has many options for businesses considering debt financing.

These are the main methods:

• Term loans: A term loan is when a bank or other lender provides a lump sum that is repaid on a fixed schedule with interest. This kind of loan often requires strong financials, collateral, or a personal guarantee. While the approval process can be relatively slow, businesses that meet certain criteria can find comparatively lower rates. Variable-rate loans are the most popular type of term loan in Australia, particularly among large businesses.

• Lines of credit and overdrafts: With credit lines, businesses can draw funds as needed up to a preset limit and pay interest only on what they use. That flexibility makes this method effective for navigating financial swings or covering short-term needs.

• Equipment and asset finance: Lenders can fund machinery, vehicle, or technology purchases, with the asset itself serving as collateral for the loan. This preserves working capital and intertwines repayments with the asset’s useful life (i.e., the amount of time the asset contributes to the company’s cash flows). The trade-off is that missed payments can result in repossession.

• Invoice financing: Lenders advance a portion of the value of unpaid invoices, which gives businesses quick access to cash instead of waiting 30–90 days for customers to pay. It improves finances in industries with long billing cycles, though providers charge fees in exchange for the faster access.

• Trade credit from suppliers: Some suppliers let businesses buy now and pay later, effectively providing short-term, interest-free financing. This is helpful for inventory-intensive businesses but depends on supplier trust and timely payment to maintain good terms.

• Specialized financing: Funding options such as commercial property loans, trade finance—which helps with the challenges of international commerce—and merchant cash advances (MCAs) can support specific needs. These options can move quickly or offer tailored structures, but businesses should weigh speed and convenience against higher potential costs.

What equity and alternative financing options are available to businesses in Australia?

Equity and alternative financing can give businesses capital without the fixed repayment pressure of traditional loans.

Here are some common options:

• Equity investment: This can include angels and venture capitalists. Investors provide funding in exchange for ownership and a share in the company’s long-term upside. This route suits high-growth businesses that need capital and expertise, though it involves giving investors oversight.

• Friends and family capital: Early-stage founders often bring in people they know to fund initial product work or market testing. This form of capital is usually flexible and relationship-driven, but it should still have clear agreements to protect everyone involved.

• Crowdfunding: Businesses can raise money from the public through rewards-based, donation-based, or equity crowdfunding platforms. This method can help validate demand and build a community around a product, but there are potential trade-offs, such as platform fees, compliance requirements, and the marketing effort needed to hit funding goals.

• Peer-to-peer (P2P) lending: With P2P lending, online platforms connect businesses with individual lenders, bypassing traditional banks. These loans still require repayment, but the underwriting process can be more accessible for companies with limited collateral.

• Government grants and programs: Federal and state governments often fund activities such as research and development (R&D), export development, clean energy projects, and regional business growth. Grants don’t require repayment, though eligibility rules, competition, and reporting obligations can make them time-intensive.

• Fintech and alternative lenders: Nonbank providers have created options such as fast, unsecured loans, revenue-based financing, and MCAs. For example, Stripe Capital uses real transaction data to offer financing and deduct repayments as a percentage of sales, which gives businesses a way to access capital typically by the day after applying—without compounding interest or late fees.

• Specialized nonbank funding: Some lenders focus on niche needs such as import and export finance, inventory finance, or data-driven underwriting tied to accounting systems or point-of-sale (POS) data. These tools create more paths to capital for businesses that traditional lenders might overlook.

What challenges do businesses face when trying to secure financing in Australia

The issues with financing options tend to cluster around strict requirements, slow processes, and a funding market that doesn’t always match the pace or profile of growing companies.

Look out for the following:

• Strict lending criteria: Many lenders still rely on property as collateral. That leaves asset-light businesses at a disadvantage.

• Higher borrowing costs for small businesses: Small firms typically face higher rates because lenders can view them as higher risk. That gap can widen during periods of economic uncertainty when credit standards tighten across the board.

• Slow approval processes: Traditional applications often require detailed financial statements, forecasts, and supporting documents, which can stretch timelines when companies need capital quickly.

• Limited access to early-stage equity: Not every promising startup finds an investor. Founders can end up giving up more equity than they’d like or spending months trying to secure capital instead of building.

• Information gaps: Many businesses aren’t aware of the full range of debt, equity, and government programs available. Without a clear view of the options, owners can default to familiar choices.

• Market conditions: Interest rate cycles, sector biases, and broader economic shifts affect how lenders assess risk. That means companies can face tighter credit precisely when they’re under pressure.

How can organizations effectively compare financing options?

Choosing a funding option means finding the one that fits with your business model, time horizon, and appetite for trade-offs.

You’ll need to weigh a few core factors:

• Cost: Look at the full cost of capital. That includes interest, fees, charges for early repayment, and—if you’re considering equity—the long-term value of ownership you’re giving up.

• Risk: Debt introduces repayment risk and often ties to collateral or personal guarantees, while equity introduces dilution and shared control.

• Flexibility: Some funding moves with your revenue. Others lock you into fixed payments or narrow usage, which can be limiting if demand fluctuates or plans change.

• Suitability: A good financing match depends on what the capital is funding and for how long. Short-term needs might pair better with options such as overdrafts or invoice finance, while long-term bets might call for multiyear loans or equity that doesn’t require scheduled repayment.

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 (MCA) in minutes—without the lengthy application process and collateral requirements of traditional bank loans.

• Fit 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.