How to Get a Small Business Loan in Australia

Small business means big business in Australia.

In 2025, small business owners – both new and established – took out almost $59billion in loans to help realise their dreams.¹ That’s a jump of nearly 40% in just three years.¹

But the sheer volume of money changing hands doesn’t mean business financing isn’t daunting for first-timers – it can be overwhelming for some.

Strict lender requirements, interest rates, the need to put private property or personal assets up as collateral, and the application processing times can all make financing a small business challenging.²

If you’re about to take the exciting step of starting your own venture, you might be wondering how to get a small business loan – that's why we've put together this step-by-step guide.

We’ll break down how small business loans work, how to apply for a loan and how small business insurance fits into the picture. We also explain the industry jargon you may need to know, including terms such as cash flow, overdraft, line of credit, and secured and unsecured business loans.

We’ve also included some useful links to official government tools and resources so that you can explore any of these steps in more detail, depending on which stage of the small business loan journey you’re at.

Step 1 – Know your financial position

Starting a small business is a big commitment, and the financial responsibilities that come with it can be too.

Understanding your starting position – including your income, expenses, debts and cash flow – is an important first step.³

The Australian Government recommends setting up a cash flow statement to track all the money flowing into and out of your business or, if you’re just starting out, to estimate your cash flow.⁴

You might even consider doing this 30-minute free online course by the Australian Taxation Office to better understand small business cash flow: Cash flow for small business success.

Once you have a clearer picture of your financial status, you can start to figure out:³

• The maximum loan repayments you can afford
• Whether you need the money upfront, or whether you want to draw on it when needed
• What assets you can offer as security – if needed
• Who will guarantee your loan if you need a guarantor.³

If this check-up reveals some financial problems, the resources listed below can help with practical advice and support.

Explore more:

• Review your financial health
• Financial counselling services and resources
• Small Business Debt Helpline
• Financial assistance hub – business loans
• Financial wellbeing resources

Step 2 – Create and share your business plan

Before financing a small business, banks and other lenders will typically want to see a business plan.³

Being organised and clear about your objectives may not only help you get a loan, it might assist with the running of your business too.⁵

If you don’t have a business plan, the Australian Government’s handy business plan tool and business plan template could help get you started.³

Explore more:

• Tips to help you develop your business plan

Step 3 – Compare loans and business finance options

When you start researching small business loans and other business financing, some key points you may wish to keep in mind might include:³

• The amount you can borrow
• The loan term – how long you will take to repay the loan
• Business loan interest rates
• Whether the interest rate is variable or fixed – whether it stays the same for part of or the whole of the loan term
• Set-up costs and ongoing fees.³

Types of small business loans

The best loan for your new venture will depend on many things, including what you need the money for, how quickly you need it and your assets.⁶

Here’s an overview of the main categories of small business loans and loan features potentially available to Australian businesses:

Secured or unsecured loan

A secured loan is backed by an asset, such as personal property, vehicles or equipment.^{6, 7} If you’re unable to meet your repayments, the lender may be entitled to sell your secured asset to recoup their money.⁷

An unsecured loan is the opposite of a secured loan, as no asset is used as security.⁸ Unsecured loans are typically capped at around $250,000 and come with higher interest rates6 because there is a higher risk to the lender.⁸

Less than 5% of small or medium-sized businesses have an unsecured business loan.²

Line of credit

Sometimes called a revolving loan, a line of credit allows you to borrow money when you need it – as long as it’s under the pre-approved limit and repaid within the agreed period.³

This type of finance can help business owners manage cash flow fluctuations.⁸ For example, if you’re a tradie waiting for clients to pay their invoices, and you wish to use your line of credit to buy equipment in the meantime.

Overdraft

This is an arrangement with your lender that allows you to withdraw more funds than you have in your account.⁹

However, this convenience often comes at a price, such as compounding interest if you don’t pay back the money on time, and the condition that your overdraft is repayable on demand.¹⁰

Invoice and trade finance

These are borrowing options to help you manage cash flow.

Invoice financing lets you borrow money against customer invoices you’ve sent that haven’t been paid yet – your entitlement to payment is considered an asset.¹¹

Trade finance may help when there’s a gap between paying suppliers and getting paid by customers.³

Equipment and vehicle finance

Some loans are designed specifically for buying equipment, machinery or vehicles.⁸ If you’re a florist, for example, you could buy your delivery van with an automotive business loan.

Government grants

Some businesses might be eligible for state or federal government grants, so you might wish to check your eligibility if you’re still undecided on your small business financing.

Explore more:

• Choose a loan type

Step 4 – Compare small business lenders

Just like loans, there are also different types of small business lenders:

Traditional lenders

These are the major banks – where about 58% of small or medium-sized businesses in Australia get their business finance.¹²

Credit unions and building societies

While they hold banking licences like traditional banks, credit unions and building societies are customer-owned Authorised Deposit-taking Institutions (ADIs)¹³ and may offer different loan products or a different service experience compared to the major banks.

Non-bank financial institutions

Non-bank lenders are finance companies that don’t hold a banking licence.¹⁴ They often have more flexible loan criteria than traditional banks but may charge higher interest rates and fees.¹⁵

Alternative lenders

Due to the difficulties some small businesses have in securing finance, “alternative” or lower-tier14 lenders can sometimes be another option.¹⁶

These lenders may offer faster access to money and less stringent criteria; however, they usually charge higher interest rates and there is less legal protection for consumers if things go wrong.¹⁴

As with all significant financial decisions, it’s a good idea to seek advice first from an expert, such as an accountant, financial advisor or broker.¹⁴

What questions to ask lenders

When researching business loans for small businesses, it can be a good idea to check:

• Upfront and ongoing charges,³ including establishment fees, late payment fees and early repayment fees⁶
• The interest rate – and whether it’s fixed or variable³
• Minimum and maximum loan amounts³
• Available term lengths³
• Whether you need to provide security³
• Any restrictions or other conditions.³

Explore more:

• Choose your funding
• Alternative sources of small business finance
• How small business loans are assessed

Step 5 – Check the legitimacy of your lender

Sometimes some offers of finance – especially quick cash¹⁷ – may be too good to be true.

Some less reputable online lenders have been known to charge unsuspecting small business owners interest rates and fees of up to 300% of the value of their loans.¹⁷

Here are some steps you may wish to consider to feel more confident that you’re dealing with a legitimate lender:

• Check it’s a real company – search the name or ABN on the Australian Securities and Investments Commission (ASIC) register³
• Read online reviews³
• Use a lender that’s an Australian Financial Complaints Authority (AFCA) member¹⁸
• Check Moneysmart’s investor alert list.³

Explore more:

• Check who you’re dealing with

Step 6 – Prepare your documents and identification

Once you’ve identified the lender you’d like to approach, you can compile your documentation.

Small business loan requirements will vary between lenders and loan products, but you may need to provide:³

• Proof of identification
• A business plan
• Financial reports, including cash flow statements and bank statements
• Financial forecasts
• Lease agreements
• Personal financial information.³

Lenders will also want to check your “creditworthiness”,¹⁹ so you might like to check your own credit scores and credit reports.

Once you’ve gathered your documentation, compile it in one report that looks professional. As well as financial viability, the success of your application could also depend on how well you’ve researched your proposal, and its presentation.²⁰

Explore more

• Application checklist for small business finance
• Financial statements template

Step 7 – Apply for a small business loan

Once your paperwork is in order, you might feel that you’re ready to apply for a loan.

The process of applying for loans can vary between lenders, but the steps you’ll need to follow will usually be clearly outlined.³

Be prepared to be invited for an interview. If you’re not comfortable answering financial questions, you might want to take along a business advisor or accountant.³

Does having insurance help with loan approval?

It may be a case-by-case situation. When lenders assess small business loans, they consider the risk-management arrangements of applicants – as well as other factors – and their ability to continue making payments if circumstances change,²¹ and small business insurance is typically viewed as an important way to reduce risk.²² In some circumstances, some types of insurance are also legal requirements for small businesses.²²

For example, under Australian law, employers must have workers’ compensation insurance in case their employees get sick or are injured because of work.²² Public liability insurance is also a legal requirement for some occupations in some states and territories.²²

“At Youi, we offer Small Business Insurance designed to help eligible businesses manage risks, and one way we do this is by including public liability insurance as standard with all our small business policies,” says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.²³

So, there you have it: A step-by-step guide on how to apply for a small business loan in Australia. If you’re ready to start putting the wheels in motion, or you just want to review your current business insurance cover, you can check out our small business insurance options or start a quote to find out if Youi is the right fit for you.

This article contains general information only and does not constitute financial, taxation, lending or legal advice.

¹Source: Australian Banking Association – New lending to SMES, n.d.
²Source: Reserve Bank of Australia Bulletin – Small Business Economic and Financial Conditions, 23 October 2025
³Source: Australian Government Business – Apply for a business loan, n.d.
⁴Source: Australian Government Business – Set up a cash flow statement, n.d.
⁵Source: Australian Government Business – Develop your business plan, n.d.
⁶Source: Australian Financial Services Directory – How to Get a Small Business Loan in Australia, March 2026
⁷Source: Moneysmart – Glossary – Secured loan, n.d.
⁸Source: Moneysmart – Glossary – Unsecured loan, n.d.
⁹Source: Moneysmart – Glossary – Overdraft facility, n.d.
¹⁰Source: InfoChoice – How to overdraw your bank account, January 2024
¹¹Source: Business Victoria – Sources of finance, December 2022
¹²Source: Scale Suite – Australian Small Business Loan Approval Rates and Lending Statistics (2026), n.d.
¹³Source: APRA  – Types of banking institutions covered under the Financial Claims Scheme, n.d.
¹⁴Source: NSW Small Business Commissioner – Non-bank and alternative lenders: What small businesses need to know, September 2025
¹⁵Source: Australian Government Business – Choose your funding, n.d.
¹⁶Source: Small Business and Trade Council – The State of Small Business Lending in Australia: What the Data Tells Us, August 2025
¹⁷Source: ABC News – ‘Predatory’ lenders circle small businesses struggling to pay ATO debts and desperate for cash, May 2024
¹⁸Source: Australian Small Business and Family Enterprise Ombudsman – Financial wellbeing, n.d.
¹⁹Source: Xero – How to get a business loan, August 20214
²⁰Source: Business Victoria – Apply for a business loan, December 2022
²¹Source: Australian Banking Association – How loans are assessed, n.d.
²²Source: Australian Government Business – Types of business insurance, n.d.
²³Limits and additional fees may apply. For full details, see the Small Business Insurance PDS.