Every small business financing option in Australia, compared honestly

There isn't one way to finance a small business, there are about nine, and the reason so many owners overpay is that they reach for the one they've heard of rather than the one that fits. A term loan for a temporary cash-flow gap, or an overdraft for a one-off equipment purchase, both work and both cost more than they should.

This is the pillar guide to small business financing options in Australia. It compares all nine side by side, explains what each is genuinely for, what it costs, and who qualifies, then links out to a deeper guide on each. Start with the comparison table, then read the section for whichever options fit your situation.

The nine options at a glance

Rates and fees above are indicative and depend heavily on your lender, trading history and security. Treat them as a shape, not a quote.

Term loan

A business term loan is the product most people picture: a lump sum, repaid in regular instalments over a set term. It suits a defined, one-off purpose with a clear payback, a fit-out, a large one-time purchase, a specific project. Because the amount and schedule are fixed, it's the easiest option to budget around. How business loans work covers the mechanics.

Cost runs from bank rates for a secured, established borrower up to well above that for a non-bank unsecured loan. The whole process of getting one is straightforward once your statements are clean.

Best for: a specific purchase or project with a known payback. Avoid if: the need is recurring or the timing is uncertain, that's a revolving facility's job.

Line of credit

A line of credit is a reusable limit you draw on, repay, and redraw, paying interest only on what's drawn. It's built for recurring or unpredictable working-capital needs, seasonal stock, lumpy revenue, the gap between doing work and being paid.

The cost to watch isn't the interest rate but any fee charged on the limit itself, drawn or not. For newer businesses, a line of credit is often more accessible than an overdraft, which surprises most owners.

Best for: ongoing working capital you'll dip into most months. Avoid if: you'd barely use it, an overdraft is cheaper for a rare backstop.

Business overdraft

A business overdraft sits inside your bank account and absorbs the balance dipping below zero, up to a limit, topping back up automatically as money lands. Its strength is simplicity: nothing to draw, nothing to manage. What a business overdraft is covers it in full.

The trade-offs are that it usually comes only from your existing bank, tends to carry a smaller limit, and is reviewed annually, meaning the bank can reduce or withdraw it. Line of credit vs overdraft is the comparison worth reading before you choose between the two.

Best for: an occasional, small, short-term buffer. Avoid if: you'd lean on it every month, that's a line of credit decision.

Invoice finance

Invoice finance advances you most of the value of unpaid invoices straight away, then releases the rest (minus a fee) when your customer pays. It directly targets the most common cash-flow problem for B2B businesses: money earned but stuck on 30, 45 or 60-day terms. When invoice finance makes sense lays out the signals.

Because it's secured against the invoices, it's accessible to newer businesses and grows automatically as your sales grow. The catch is annualised cost: a few percent per invoice on a fast-revolving book adds up, so compare it to a loan properly.

Best for: a business invoicing other businesses on terms. Avoid if: you're mostly retail or paid on the spot, there are no invoices to finance.

Equipment and asset finance

Equipment finance funds a specific asset, a vehicle, machine, or fit-out, using that asset as the security. That structure makes it cheaper and more accessible than an unsecured loan, because the lender's risk is covered by the item itself. Asset finance vs equipment finance untangles the terminology.

It's often the first sizeable finance a newer business can get, precisely because the asset does the securing rather than years of trading history.

Best for: buying a vehicle, machine or other physical asset. Avoid if: you need general working capital rather than a specific thing.

Trade finance

Trade finance funds the gap between paying a supplier and getting paid by your customer, the classic importer's problem where stock must be paid for before it ships and sold months after it lands. What trade finance is explains the structure.

It's usually cheaper than a general working-capital facility for this specific job, because the goods and the trade cycle form part of the security. Trade finance vs a business loan shows when it wins.

Best for: importers and wholesalers paying suppliers upfront. Avoid if: there's no supplier-to-sale cycle to bridge.

Business credit card

A business credit card is the easiest revolving credit to obtain and a sensible tool for small, everyday expenses and short timing gaps, particularly if you clear the balance each month.

Its limitation is size and cost. Interest on carried balances is high relative to a proper facility, so it's a poor home for larger or longer borrowing. Treat it as a convenience layer, not a working-capital strategy.

Best for: small day-to-day spending, paid off monthly. Avoid if: you're carrying larger balances, a line of credit is cheaper.

Grants

Government grants (federal, state and council) provide capital you don't repay and don't give up ownership for. Most are modest, tied to a specific purpose like digital adoption, export, energy or hiring, and genuinely competitive.

The trade-offs are speed and certainty: decisions take months, funds are often reimbursed after you spend, and success rates on popular grants are low. A grant is a welcome bonus, not a funding plan you can rely on to a deadline.

Best for: a specific, eligible project you can wait on. Avoid if: you need money soon or with any certainty.

Equity

Equity means raising capital from investors in exchange for a share of the business. There are no repayments and no interest, which suits high-growth businesses investing ahead of revenue.

The cost is ownership and control, permanently. You're trading a slice of the business, and its future upside, for capital now. It's the right call for some, and an expensive way to fund ordinary working capital for most.

Best for: high-growth businesses raising to scale. Avoid if: you just need to smooth cash flow or fund a purchase, debt is cheaper than equity for that.

Match the option to the job

Three questions get you most of the way to the right product:

1. One-off or recurring? A defined, one-time need points to a term loan or equipment finance. A recurring or unpredictable need points to a line of credit, overdraft or invoice finance.
2. Is there an asset or an invoice involved? Buying a specific asset points to equipment finance. Money stuck in invoices points to invoice finance. Both are cheaper than a general loan because something concrete secures them.
3. Retail or B2B? If you invoice other businesses on terms, invoice finance is on the table. If you're paid on the spot, it isn't, and a revolving facility does the cash-flow job instead.

If you want help working through it, how to diagnose your business finance needs turns this into a proper checklist.

Five real scenarios

The retailer building seasonal stock. Needs $180,000 across spring, sells it down by January. Recurring and sizeable, so a line of credit fits, drawn as stock is bought, repaid as it sells.

The tradie buying a ute. Needs a $45,000 vehicle. Equipment finance secured on the ute is cheaper than an unsecured loan, because the vehicle is the security.

The recruitment agency waiting on invoices. Pays contractors weekly, paid on 45-day terms, $200,000 permanently outstanding. Invoice finance attacks the actual problem; a loan would just add debt on top of money already earned.

The importer paying a supplier upfront. Container must be paid before it ships, stock sells 90 days later. Trade finance sits exactly in that window and is usually cheaper than a working-capital facility.

The consultant with a one-off tax bill. Needs $30,000 to clear an ATO bill, strong ongoing revenue. A short term loan is clean and simple here, defined amount, defined payback.

The pattern across all five: the shape of the need chose the product, not the size of it.

What you need to qualify

Most of these options share the same core requirements: an active ABN, around six or more months of trading, consistent revenue, and clean recent bank statements. Equipment and invoice finance flex the trading-history requirement because the asset or invoice does the securing. Overdrafts and bank facilities ask for more, typically two years plus financials. The full requirements are here.

If the bank said no

A bank decline rules out one lender's policy, not the market. Non-bank lenders assess differently, weighting recent trading and cash flow over balance-sheet strength, which is why a business declined by a bank can be funded by a non-bank lender the same week. There are genuine alternatives after a bank decline, and the trade-off is honest: non-bank pricing sits above bank pricing, so if your bank has offered good terms, take them.

Common questions

What is the most common way to finance a small business?

Term loans and lines of credit are the most common debt options, alongside business credit cards for everyday expenses. But "most common" isn't "most suitable", the best option depends on whether you're funding a one-off purchase or an ongoing cash-flow need. Many businesses use two or three in combination.

What's the cheapest business financing option?

Generally, finance secured against something specific, equipment finance against an asset, or a secured bank facility, because security lowers the lender's risk and the rate. Grants are effectively free but slow and uncertain. The cheapest option you'll actually qualify for depends on your trading history, security and how fast you need the money.

Loan vs line of credit, which is better for a small business?

A term loan is better for a defined, one-off need with a clear payback. A line of credit is better for recurring or unpredictable working-capital needs, because you only pay for what you draw. Using a term loan for an ongoing cash-flow gap is one of the most common and costly mismatches.

How do businesses with no assets get finance?

Through unsecured loans (backed by a director's guarantee rather than an asset), invoice finance (secured against unpaid invoices), or equipment finance (where the asset being bought is the security). A lack of property narrows the options but doesn't close them, unsecured finance without property covers the market.

What financing can a business under 12 months old get?

More than most owners expect. Non-bank term loans and lines of credit are available from around six months of trading, and equipment and invoice finance can come earlier still because they're secured against something concrete. Business finance under 12 months trading goes through the realistic options.

General information only - it doesn't take your situation into account. Consider whether a product suits your business before acting, and get independent advice where you need it. No credit check to see your options. A credit check only happens if you choose to formally proceed with a lender.