Business Line of Credit in Australia: What It Costs, Who It Suits and When Property-Backed Finance Works Better

2 days ago
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A business line of credit in Australia is a revolving credit facility that lets an eligible business draw up to an approved limit, repay, and redraw as cash flow allows. Indicative rates run from around 8% per annum for secured bank facilities to 18% or more for unsecured non-bank lines, plus establishment and line fees. Approval depends on trading history, revenue, security, and lender assessment, and larger urgent capital needs are often better funded by a short-term property-backed loan.

A business line of credit is a revolving facility that lets an approved business draw, repay, and redraw funds up to a set limit.
Secured facilities are usually priced 8% to 12% per annum in Australia. Unsecured facilities from non-bank lenders often price 14% to 25% per annum, plus fees.
Eligibility typically requires 12 to 24 months of trading, an active ABN, consistent revenue, and clean credit. Larger limits require property or business asset security.
For urgent working capital above roughly $150,000, a short-term property-backed loan through a private lender often settles faster and lends more than a bank line of credit.

What a business line of credit actually is

A business line of credit sits between a term loan and a business overdraft. The lender approves a maximum limit against your ABN. You draw what you need, when you need it, and only pay interest on the outstanding balance. As you repay, the limit refreshes and can be redrawn. The facility is written as revolving credit, so it does not amortise like a term loan. It stays open for a defined period, often 12 to 24 months, and is reviewed annually. Some facilities are unsecured. Larger limits, typically above $250,000, are usually secured by a first or second mortgage over property, a general security agreement over business assets, or a director guarantee. For a broader look at business finance options, see our private lending in Australia pillar guide.

Line of credit vs overdraft vs term loan

The three products get confused often. This table sets out the practical differences an Australian SME borrower actually cares about.

Feature	Business line of credit	Business overdraft	Business term loan
Structure	Revolving credit up to a limit	Attached to a business transaction account, lets it go into agreed negative balance	Lump sum, fixed schedule, fixed or variable rate
Typical use	Ongoing working capital, seasonal cash flow, planned expenses	Short unexpected shortfalls, day-to-day float	One-off purchase, equipment, expansion, buyout
Interest applied to	Amount drawn only	Amount overdrawn only	Full loan balance from day one
Typical term	12 to 24 months, reviewed	Reviewed annually, often rolling	1 to 15 years, amortising
Common rates	Secured 8 to 12% p.a. Unsecured 14 to 25% p.a.	9 to 20% p.a., often higher unarranged	Secured 7 to 11% p.a. Unsecured 12 to 30% p.a.
Fees	Establishment, line fee, annual review	Establishment, overdraft fee, unauthorised fees	Establishment, ongoing service, exit
Speed to settle with a major bank	4 to 10 weeks	2 to 6 weeks	4 to 12 weeks
Speed to settle with a private lender	Not typically offered	Not typically offered	Property-backed: 5 to 15 business days

Rates are indicative and shift with the cash rate, lender appetite, and security quality. Verify current pricing before you commit.

Secured vs unsecured business lines of credit

Australian lenders split business lines of credit into secured and unsecured, and the pricing gap is significant.

Secured business line of credit. Backed by a first or second mortgage over residential or commercial property, or by a general security agreement. Limits commonly range from $250,000 to $5,000,000. Rates sit in the 8% to 12% per annum band. Banks and larger non-banks dominate this space. Approval takes weeks, not days.
Unsecured business line of credit. No property or asset security, usually capped between $50,000 and $500,000. Rates typically sit in the 14% to 25% per annum band, and shorter approvals mean higher effective cost. Lenders such as Prospa, Lumi, and Moula operate in this space. Approval can be days rather than weeks, provided bank statement analytics, ABN age, and turnover check out.

For a comparison of secured and unsecured business borrowing beyond lines of credit, see our guide on secured vs unsecured business loans in Australia.

Who a business line of credit suits

A line of credit fits a business that:

Has recurring, predictable revenue and clean bank statements.
Faces regular, small cash flow gaps rather than one large capital need.
Wants a standby facility for seasonal dips or unexpected supplier bills.
Has time to wait through a bank credit process, or accepts a smaller unsecured limit at a higher rate.
Wants to preserve equity in property for a later purchase or refinance.

Common use cases include funding stock ahead of a peak season, covering wages during a slow month, bridging invoice payment cycles, and topping up working capital between larger contract milestones.

When a line of credit is the wrong tool

A line of credit is not a good fit when:

The capital need is large and urgent. Waiting six weeks for a bank credit decision does not help when a supplier deposit, contract obligation, or ATO deadline is due next week.
You need $500,000 or more against property equity. Most unsecured lines cap out before this. Secured bank lines can go higher but take longer to establish than a private loan.
The business has a recent default, missed BAS, or Director Penalty Notice. Unsecured lenders will decline. Banks will decline. A property-backed private lender may still assess.
The business is a special purpose vehicle or new trading entity with limited financials. Most line-of-credit assessments rely on 12 to 24 months of consistent revenue.
The purpose is a one-off asset purchase or property settlement. A term loan or bridging loan is a cleaner product structure.

Worked scenario: line of credit vs short-term property-backed loan

A Sydney-based building supplies wholesaler has $2,300,000 in annual turnover, a good bank conduct record, and owns a warehouse in Silverwater with a first mortgage of $950,000 against a $2,100,000 valuation. The business needs $350,000 in seven business days to secure a bulk stock order that will earn $95,000 gross margin over 90 days.

Option 1: Bank secured line of credit.

Indicative rate: 9.25% per annum on drawn balance.
Line fee 0.75% per annum on limit.
Establishment fee 0.85% of limit ($2,975).
Assessment timeline: 4 to 8 weeks.

Requires a full commercial credit submission, updated financials, a new valuation, and internal credit approval. Practical outcome: the stock order lapses before the facility settles.

Option 2: Unsecured non-bank line of credit.

Indicative rate: 18% per annum on drawn balance.
Establishment fee 2.5% ($8,750).
Limit cap $250,000 on this file, below what the business actually needs.
Approval possible in 3 to 5 business days.

Practical outcome: the facility settles in time but is $100,000 short of the requirement.

Option 3: Short-term second mortgage through a private lender.

Loan amount $350,000.
Combined LVR 61.9% ($950,000 first plus $350,000 second, against $2,100,000 valuation).
Indicative rate 12.5% per annum, capitalised for a 6-month term.
Establishment fee 2% ($7,000).
Legal and valuation costs estimated at $4,500.
Settlement in 8 to 10 business days.
Exit strategy: repay from the stock sale proceeds over 90 days, with a 3-month interest buffer built into the loan.

Practical outcome: full $350,000 settles in time. Interest cost across the actual 90-day hold is approximately $10,940, plus fees, against $95,000 in gross margin. The business retains its bank relationship and can pursue a formal secured line of credit later without time pressure.

The scenario is indicative. Actual pricing, LVR, and settlement timing depend on the property, the borrower, the exit strategy, and lender assessment. For property-backed short-term finance, see our secured business loan page.

What lenders actually look at

An Australian lender assessing a line of credit application will look at:

Trading history. Most lenders want 12 to 24 months of ABN activity, with 6 months of consistent bank statements as a minimum for unsecured lines.
Turnover and margin. Monthly deposits, average balance, ATO integrated client account activity, dishonours, and unarranged overdraft use.
Purpose. Working capital and stock funding are welcomed. Speculative use, related-party lending, and gambling are not.
Security. For lines above $250,000, expect a general security agreement over the trading entity and often a mortgage over property.
Guarantor position. Directors typically sign personal guarantees. Homeowner directors are viewed more favourably.
Credit file. Recent Equifax defaults, court actions, and Director Penalty Notices will usually stop an unsecured line but may not stop a property-backed private loan.
Exit and review. Even revolving credit has a review date. Lenders want to see how the facility is used and repaid, not just drawn to the limit and held.

Business-purpose lending sits outside the National Consumer Credit Protection Act in most cases, but lenders still apply responsible lending principles. Consumer lending is treated differently and requires NCCP-compliant assessment.

Typical timeframe from enquiry to settlement

Bank secured line of credit. 4 to 10 weeks, subject to valuation, updated financials, and internal credit approval. Reviews take another 2 to 4 weeks each year.

Non-bank unsecured line of credit. 2 to 10 business days, subject to bank statement analysis and ATO portal access.

Short-term property-backed loan through a private lender. 5 to 15 business days from executed term sheet to settlement, subject to valuation, lender assessment, and clear title. This is the option most SMEs choose when the cash flow gap is large or the calendar is unforgiving.

Exit strategy matters

Every commercial lender wants to understand how the facility will unwind. For a revolving line of credit, the exit is usually seen as an ongoing repayment cycle plus a periodic review. For a short-term property-backed loan, the exit strategy is more explicit. Common exits include refinance to a bank line of credit, refinance to a term loan, sale of stock or a project, or sale of the security property. Documenting the exit at term sheet stage sharpens pricing and shortens settlement.

How Innovate Funding helps

Innovate Funding works with a panel of private and non-bank lenders across Australia to structure short-term property-backed business loans, second mortgages, caveat loans, and bridging finance. Where a bank line of credit is the right long-term product, we say so. Where the cash flow gap is larger or the timeframe tighter than a line of credit can handle, we structure a business-purpose loan against property that can settle in 5 to 15 business days, subject to valuation and lender approval.

If you are weighing a business line of credit against a short-term property-backed loan, contact Innovate Funding with the amount, timeframe, property details, and exit strategy, and we will map the fastest path to funding for your file.

Frequently asked questions

Is a business line of credit tax deductible?

Interest and fees on a facility used for a legitimate business purpose are generally deductible against business income. Speak to your accountant about your specific structure, entity, and use of funds before claiming.

Do I need to own property to get a business line of credit?

Not always. Unsecured lines up to about $500,000 are available from non-bank lenders based on turnover and bank statements. Larger limits above $250,000 usually require property or business asset security to price competitively.

Can I get a business line of credit with bad credit?

Unsecured lenders will usually decline a file with recent defaults, court judgments, or ATO arrears. A property-backed private lender may still assess the file where equity, exit strategy, and business purpose are sound. See our bad credit business loans page for more detail.

How much does a business line of credit cost each month if I do not draw on it?

Most facilities charge a line fee of 0.5% to 1.5% per annum on the approved limit, whether drawn or not, plus an annual review fee. On a $500,000 line at 1% per annum, that is around $416 per month before any interest.

Line of credit vs business loan: which is cheaper?

For steady, ongoing borrowing, a term loan is usually cheaper because you avoid line fees on undrawn amounts. For irregular or peaky drawdowns, a line of credit is usually cheaper because interest only applies when you draw. Compare total cost over your expected usage pattern, not just headline rates.

How quickly can Innovate Funding settle a short-term property-backed loan as a line-of-credit alternative?

Where the property, borrower profile, and exit strategy support it, settlement in 5 to 15 business days is common. Timing depends on valuation availability, legal turnaround, and lender assessment.

Key takeaways

A business line of credit is a revolving facility, priced 8% to 12% p.a. when secured and 14% to 25% p.a. when unsecured, plus fees.
It suits businesses with steady turnover and small, recurring cash flow gaps, not one-off large or urgent capital needs.
Bank secured lines take 4 to 10 weeks to establish. Unsecured non-bank lines can settle in days but usually cap at $500,000 or less.
For urgent capital above $150,000, especially where property equity is available, a short-term property-backed private loan often settles faster and lends more.
Document your purpose, timeframe, and exit strategy before you apply. It sharpens pricing on every product option.
This article is general information and not financial advice. Consider your circumstances and seek independent legal, financial, and tax advice.