Chartered Accountant Timothy Quinn leads Tax & Accounting at Lawpath. 16+ years in tax advisory, specialising in startup growth and expansion. Passionate about supporting entrepreneurial clients with early-stage investment incentives, restructuring, international exit strategy planning, and more.
Running a business in Australia means contending with constant cash flow pressures, from slow-paying customers to unexpected expenses. If you’ve ever lain awake at night, worried about a looming payroll or an urgent invoice, you’re not alone. For many Australian business owners, finding a fast, flexible way to bridge cash flow gaps is absolutely vital.
That’s where a business line of credit can make a huge difference. Unlike restrictive loans or high-interest credit cards, a business line of credit gives you ongoing access to funds as you need them. This can help you navigate challenges and grab opportunities without the financial stress.
Table of Contents
What is a business line of credit?
A business line of credit is a flexible, revolving finance tool tailored for Australian businesses. It gives you access to a pre-approved pool of funds (for example, $50,000), which you can tap into at any time.
Lines of credit are revolving and flexible because:
- You only pay interest on the amount you use. Say you draw $10,000. You only pay for that, even if your limit is $50,000.
- As you repay (e.g., $5,000 back), your limit is restored (now $45,000 available).
- There’s no need to undergo repeated applications. Funds are always available within your approved credit limit.
Here is how they compare to other business credit products:
| Business Line of Credit | Business Credit Card | Term Loan | |
| Fund Access | Flexible drawdown, ongoing | Purchases only, ongoing | Lump sum, once-off |
| Interest | Only on the amount used | On the outstanding balance | On the full amount |
| Repayments | Flexible, interest-only minimum | Monthly, balance-based | Fixed regular instalments |
| Purpose | Working capital, short-term needs | Purchases, small spends | Specific one-off expenses |
Usage example
Imagine a small construction business wins a major contract but needs to buy materials upfront while waiting 60 days to get paid. With a business line of credit, the owner draws $20,000 to cover costs. When clients settle invoices, the owner repays the amount, with interest charged only on what was used during those weeks, not on the total approved limit.
Types of business lines of credit
There are two main types of business lines of credit: secured and unsecured.
- Secured business line of credit: Ideal for businesses that own significant assets and want a larger credit amount at a lower interest rate.
- Unsecured business line of credit: Preferred if your business is growing, has little collateral, or needs quick access to flexible funds.
Let’s look at how these two compare:
| Feature | Secured | Unsecured |
| Collateral | Required (e.g., property, vehicles) | Not required – based on creditworthiness |
| Credit Limits | Higher ($50,000–$750,000) | Lower ($10,000–$250,000) |
| Interest Rates | Lower (from ~6–10% p.a.) | Higher (from ~14% p.a.) |
| Approval Time | Longer, more paperwork | Faster, fewer documents |
| Requirements | Strong security, proven financials | Good credit score, revenue, ABN/ACN |
| Best for | Asset-heavy, established businesses | Young/small businesses that need flexibility |
Benefits of business lines of credit
Business lines of credit offer several distinct advantages for Australian SMEs.
Cash flow flexibility
You can access funds instantly to cover shortfalls, seasonal slowdowns, or delayed payments. For example, an independent freight company regularly faces customer payment delays, sometimes up to 60 days. To cover urgent fuel and maintenance costs while waiting for invoice settlements, they use a business line of credit for instant access to funds.
Cost efficiency
You only pay interest on what you use, not the entire amount you are eligible to borrow. Let’s say a suburban veterinary clinic requires updated medical supplies and minor equipment upgrades but doesn’t want to commit to a term loan for occasional shortfalls.
By drawing only what they need on a revolving line of credit, they pay interest solely on the utilised amount. This flexible approach keeps borrowing costs lean and manageable.
No need to reapply
Once approved, businesses can instantly withdraw funds within their limit as needed. An example would be a digital marketing agency that experiences unpredictable bursts of client projects.
Their approved line of credit allows them to quickly withdraw funds to hire contractors or cover campaign costs, without the hassle of reapplying for finance each busy season.
Supports growth
Business lines of credit enable rapid responses to opportunities. Imagine a supermarket chain suddenly offers a major supply contract to a family-run food wholesaler. The owners can draw on their business line of credit to purchase extra inventory and expand their delivery fleet.
The immediate funding lets them scale operations swiftly, secure the contract, and increase annual revenue.
Tax advantages
Interest and certain fees are generally tax-deductible as business expenses (see later section). For example, an IT consultancy uses its line of credit for approved business expenses, such as travel, hardware, and temporary staffing for large projects. At tax time, the business can fully claim interest and facility fees as deductions.
Business line of credit eligibility requirements
To qualify for a business line of credit in Australia, most lenders require you to meet certain minimum standards:
- Registration: Your business must be registered and have an Australian Business Number (ABN) and possibly an Australian Company Number (ACN).
- Activity: It must have been trading for at least 6–12 months.
- Residence: The business owner must be an Australian citizen or permanent resident.
- Monthly/Annual revenue threshold: This amount varies, but the minimum is often $5,000–$10,000/month.
- Business bank account: You’ll need to provide statements for assessment.
- Credit score: Both the business and its directors must fit the lender’s policy.
- GST Registration: Some lenders may require your business to be registered for Goods and Services Tax (GST).
- No prior bankruptcies
Banks typically have stricter lending criteria. They often require collateral for higher credit limits and more detailed documentation, which can lead to a lengthier approval process.
In contrast, non-bank lenders generally offer unsecured business lines of credit with faster approvals. These rely heavily on digital reviews of your business accounts and trading history to assess eligibility.
As a result, non-bank lenders are a quicker and often more accessible option for many Australian businesses. That said, banks may be safer and offer better interest rates. It is important to weigh your options and choose a credible lender, which is not always the cheapest or fastest one.
Required documentation and preparation
You’ll need to prepare several documents to apply for a business line of credit in Australia. Here is a list of key requirements:
- Business bank statements (last 6–12 months)
- Profit & Loss Statement
- Balance Sheet
- BAS (Business Activity Statements)
- Tax returns (most recent, business and personal)
- Identification (director/beneficial owner)
- Business plan (sometimes required for newer businesses)
Lender expectations and common documentation mistakes
Lenders expect your financial statements and supporting documents to be up-to-date, accurate, and complete. Missing pages, errors, or inconsistencies in bank statements, profit and loss records, or tax returns are common reasons for application rejection.
It’s also crucial to maintain consistent and clear record-keeping regarding your business’s revenue, expenses, and ownership structure. Discrepancies or poor organisation can create doubts about your financial reliability and delay or derail your application.
To avoid these pitfalls, prepare comprehensive annual financial statements, recent bank statements, and tax documents that accurately reflect your trading history. This will speed up the process and provide better chances of accessing a reduced interest rate.
Interest rates and fees in Australia
Interest rates and fees for lines of credit vary widely based on the lender, security, and credit profile.
Here are some indicative ranges for costs associated with a business line of credit in 2025:
| Type | Typical Limit | Interest Rate (p.a.) | Fees |
| Secured | $50,000–$750,000 | 6–10% | Establishment ($0–$700+), annual ($0–$250), drawdown, unused |
| Unsecured | $10,000–$250,000 | 14–24% | Similar structure, generally higher |
Beyond interest rates, consider the following fees:
- Establishment/Setup: Once-off, ranges $0–$700+
- Monthly/Annual charges: Ongoing account keeping, $0–$250/year
- Drawdown fee: Some lenders charge a fee per withdrawal.
- Unused credit fee: Applies if you don’t utilise the facility enough.
Rate determinants
Several key factors influence interest rates on business lines of credit in Australia. Lenders heavily consider both your business and personal credit scores, as a stronger credit history signals lower risk and often unlocks more competitive rates.
Whether assets, like property or equipment, secure your line of credit also plays a major role. Secured credit typically attracts lower interest rates compared to unsecured options, reflecting the reduced risk for lenders.
Other important considerations include your business’s revenue and trading history, which demonstrate financial stability and repayment capacity, alongside the age of your business and overall financial strength. Established companies with consistent cash flow and solid financials usually receive more favourable rates than newer or less stable enterprises.
Tax implications and deductions
Despite the costs, remember that you can claim many of the expenses associated with a business line of credit. In fact, you can usually deduct interest paid and most eligible fees under the Australian Taxation Office (ATO) rules.
To make an eligible claim, the funds must be used for business purposes. Mixing personal and business use can lead to penalties and confusion, so make sure to keep these separate.
Throughout the process, make sure to keep detailed records of all interest paid and fees charged. This will help you claim the deductions and substantiate them if there is a future audit. Make sure to deduct the interest in the year you incur it; otherwise, you might miss out on eligible deductions.
How to apply for a business line of credit
A successful application involves clear preparation, accurate documents, and the right lender fit. Below is your step-by-step guide.
- Assess your needs: Decide how much credit limit you require and whether a secured or unsecured option suits you best.
- Prepare documentation: Gather all required evidence (see above).
- Compare lenders: Look at rates, terms, eligibility, and service reputation.
- Apply online or in branch: Fill out the application and provide the requested documents.
- Undergo a credit assessment: The lender reviews financials, credit history, and business profile.
- Receive an approval and terms: The lender may require an interview or clarification of documents before this happens.
- Set up the facility: Sign the business line of credit agreement and access the funds.
Approval times for business lines of credit vary significantly. Non-bank lenders that offer unsecured lines of credit can often approve applications as quickly as the same day. In contrast, traditional banks typically take longer, with approval timelines ranging from three to ten business days or even more.
Tips for success
To increase your chances of approval, make sure to:
- Provide complete and accurate documentation that clearly separates your business and personal finances.
- Keep your personal credit report in good shape as lenders consider both business and personal credit scores.
- For a higher credit limit, strengthen your business’s balance sheet to demonstrate financial stability and reduce lending risk.
Common reasons for rejection
Applications often get declined due to incomplete or inconsistent documents, such as missing financial statements or contradictory figures. Insufficient trading history or weak turnover can also hurt your chances, as lenders want assurance of your business’s ongoing viability.
Additionally, a poor credit score or previous defaults by business owners frequently lead to application refusals, underscoring the importance of creditworthiness for successful lending.
Managing your line of credit effectively
Securing a line of credit is only the first step. Smart management is essential to avoid excessive costs and maintain eligibility.
- Strategic use: Only draw what you need and repay promptly to minimise interest charges.
- Monitor usage: Regularly check your balances, limits, and repayment schedules.
- Minimise interest: Repay as soon as possible; avoid maintaining high outstanding balances.
- Ensure compliance: Use the credit strictly for business purposes; keep records for every drawdown.
- Optimise performance: Regularly review your line of credit. Does your limit need to be adjusted as your business grows?
Ultimately, you’ll need to adjust the way you use and manage your business line of credit according to your business’s unique needs. For example, if you run a seasonal company, plan ahead by preparing for slower periods. Meanwhile, a professional services agency might need to use the credit line to manage cash flow while waiting for payments against invoices.
The main goal is to rely on credit only when you need it — this will save you money on fees and interest, keeping your business finances healthy.
Common mistakes to avoid
- Overdrawing/Over-borrowing: Tempting as it is, overextending leads to high fees and risk of default.
- Mixing personal and business funds: Hurts tax deductions and can cause compliance headaches.
- Ignoring interest rate changes: Variable rates may lead to higher costs if not monitored closely.
- Poor record-keeping: Leads to tax issues, audit flags, and potential rejection for future applications.
- Using as long-term debt: Credit lines are for short-term gaps, not major investments or asset purchases.
To avoid these common mistakes, maintain a clear budget and borrow only what you truly need to prevent overextending your credit. Always keep personal and business finances separate by using dedicated accounts and thorough record-keeping.
When in doubt, work with a professional accountant to help you manage your line of credit effectively.
Securing a business line of credit in Australia
A business line of credit empowers you to take control of your cash flow, seize new opportunities, and weather financial storms without burdensome debt. Whether you’re a start-up needing flexibility or an established SME managing seasonal volatility, a line of credit could be your business’s financial safety net.
Let Lawpath’s experts guide you along the way, ensuring business tax compliance and higher chances of approval. Get in touch today!
FAQ
What’s the difference between a line of credit and a business loan?
A business line of credit lets you borrow flexibly as needed, only paying interest on what you use, while a business loan gives you a fixed lump sum upfront with regular repayments.
How much can I borrow with a business line of credit?
Most Australian lenders offer business line of credit limits between $10,000 and $750,000+, with your eligibility determined by business size, security, and financials.
