Business Line of Credit in Australia: Rates, Limits, and Property-Backed Alternatives

4 hours ago
9 min read

Cash flow rarely runs in a straight line. A supplier wants payment on the 15th, your customer pays on the 45th, and payroll sits stubbornly in the middle. A business line of credit is designed to smooth that gap without you refinancing your main loan every time.

A business line of credit in Australia is a revolving facility with an approved limit. You draw what you need, pay it back, and redraw when the next gap appears. Indicative rates from banks sit around 8% to 13% per annum for a secured facility, higher for unsecured. Limits typically range from $10,000 to $500,000, subject to security, servicing, and lender assessment.

A business line of credit is a revolving credit facility with an approved limit that a business can draw on, repay, and redraw as needed.
Bank facilities are usually offered secured (against property or business assets) or unsecured, with indicative rates around 8% to 13% per annum secured and higher unsecured.
A line of credit and a business overdraft do similar jobs but sit on different accounts and price differently. Overdrafts attach to a trading account, lines of credit sit on a separate loan account.
When a bank declines an unsecured facility or the limit is too small, private and non-bank lenders can arrange property-backed alternatives such as a second mortgage or equity-release loan against residential or commercial security.

How a business line of credit works in Australia

A business line of credit is a revolving credit facility. The lender approves a maximum limit, sometimes called a facility limit or facility ceiling. The business can draw funds up to that limit, pay them down, and draw again during the term of the facility, usually reviewed every 12 months.

Interest is charged only on the drawn balance, not the full limit. Most facilities also carry a line fee (sometimes called an unused-limit fee), typically 0.5% to 1.5% per annum of the total limit, charged whether or not you draw. That fee is the price of having the limit available on standby.

Repayment is flexible. The business can pay the balance down at any time, and can hold a drawn balance for as long as servicing is met. There is no fixed amortisation schedule the way a term loan has.

Business lines of credit are almost always business-purpose loans and sit outside the National Consumer Credit Protection Act (NCCP). That gives lenders more flexibility on structure and pricing, and gives the borrower more room to shape the facility around the trading cycle.

Typical limits, rates, and fees

Limits usually range from $10,000 to $500,000 at bank level, and can go higher for well-secured facilities against commercial or residential property. Indicative pricing at July 2026, subject to lender assessment:

Secured bank business line of credit: around 8% to 11% per annum, plus a line fee of 0.5% to 1% per annum.
Unsecured bank business line of credit: around 11% to 15% per annum, plus a line fee of 1% to 1.5% per annum.
Non-bank secured business line of credit: around 10% to 13% per annum.
Property-backed private lending facilities used as a working capital alternative: around 9.5% to 14% per annum for first mortgage security, higher for second mortgage.

Establishment fees usually sit between 1% and 2.5% of the facility limit for non-bank facilities, with legal and valuation costs on top. Bank facilities are often cheaper on establishment but slower to approve.

Rates and fees are indicative only and subject to valuation, credit assessment, security offered, industry, and current lender appetite.

Business line of credit vs business overdraft

Both are revolving credit products designed to bridge cash flow, but they sit on different account structures. A business overdraft attaches to your trading account, so drawdowns and repayments happen automatically as money moves in and out. A business line of credit sits on a separate loan account. You transfer funds into your trading account when you need them and pay the loan account down when cash comes in. The practical differences matter more than the wording:

Account structure: overdraft is attached to the trading account; line of credit sits on a separate loan account.
Typical limit: both range from $10,000 to $500,000, with lines of credit going higher against strong property security.
Indicative secured rate: overdrafts sit around 8% to 12% per annum; lines of credit around 8% to 11% per annum.
Indicative unsecured rate: overdrafts around 12% to 16% per annum; lines of credit around 11% to 15% per annum.
Line fees are common on both products, typically 0.5% to 1.5% per annum on the total or unused limit.
Best use: overdrafts suit daily float and small weekly gaps; lines of credit suit planned draws, project funding, or stock purchases.
Approval speed at bank: an overdraft is usually fastest for an existing customer; a line of credit usually needs a full servicing review.

For a business that dips in and out of a small deficit each week, an overdraft is often cleaner. For a business that needs to draw a specific amount for a specific project and pay it back over several months, a line of credit tends to be more transparent.

Secured vs unsecured lines of credit

Bank and non-bank lenders offer both. Security shifts the pricing and the limits.

A secured business line of credit is backed by property, business assets, or a General Security Agreement (GSA) over the company. Property security usually delivers the sharpest pricing and the largest limits, because the lender has a clean fallback if the facility defaults. Business asset security (equipment, receivables, stock) prices between property and unsecured.

An unsecured line of credit relies on trading history, ATO position, servicing, and director guarantees. Limits are lower, pricing is higher, and lenders look hard at BAS statements, industry, and the age of the business. Most Australian lenders want at least 24 months of trading, clean ATO history, and consistent turnover before they will look at an unsecured facility.

Where a business has property equity available, a secured facility is almost always cheaper and larger than an unsecured one. The trade-off is documentation and time to settle.

When the bank says no: property-backed alternatives

Banks decline business line of credit applications for reasons that have little to do with the underlying business. Common ones include ATO debt, a short trading history, a marginal industry (construction subcontractors and hospitality are frequent examples), fluctuating turnover, or a servicing test the borrower cannot meet on paper.

Where the borrower or director owns property with equity, private and non-bank lenders can often structure a property-backed alternative:

Second mortgage business loan against residential or commercial property, typically 12 to 24 months, indicative rates 10% to 14% per annum for business-purpose lending.
Caveat loan for very short-term needs (30 to 90 days) where a full second mortgage would be too slow, indicative rates 1.25% to 1.75% per month.
First mortgage refinance that consolidates working capital debt into a lower-rate property-backed facility, indicative rates 9.5% to 12% per annum.

These are not revolving facilities in the strict sense. They are lump-sum loans that can be used as working capital, then refinanced or paid out at the end of the term. For a business that needs $100,000 to $500,000 quickly and can wait 5 to 15 business days to settle a property-backed loan, this route often delivers a faster and larger outcome than chasing a bank line of credit.

Worked scenario: replacing a declined bank line of credit with a property-backed loan

Consider a Sydney-based building services company that turns over $2.4 million a year, employs 14 tradespeople, and owes the ATO $85,000 on a repayment plan. The company applies for a $200,000 unsecured business line of credit at its main bank. The bank declines on the strength of the ATO balance and a 12-month drop in gross margin.

The director owns a Ryde investment property with the following position:

Property value (bank valuation): $1,650,000
Existing first mortgage: $780,000
Available equity: $870,000

Innovate Funding arranges a $250,000 second mortgage against the Ryde property with a private lender. Indicative terms:

Loan amount: $250,000
Combined LVR: ($780,000 + $250,000) / $1,650,000 = 62.4%
Term: 12 months
Rate: 12.5% per annum, capitalised
Establishment fee: 2% of loan amount ($5,000)
Purpose: working capital and ATO payout

The funds pay out the ATO in full, cover payroll through a seasonal dip, and give the company 12 months to refinance to a bank facility once the ATO position is cleared and trading normalises. The exit strategy is a refinance to a bank business loan against the same property, subject to servicing at that point.

All figures indicative and subject to valuation, lender assessment, credit approval, and the security offered.

Who a business line of credit suits (and when it may not suit)

A business line of credit suits businesses with predictable but uneven cash flow, a defined use for the funds, and enough clear trading history for a lender to feel comfortable at the limit needed.

It may not suit:

Businesses expecting a single large lump-sum spend with a long payback (a term loan is usually cleaner and cheaper).
Very early-stage businesses without trading history (an unsecured facility will be small and expensive, and a secured facility depends on property equity).
Businesses that need funds inside a week and cannot wait for a full bank servicing review.
Businesses whose ATO or credit position will not survive a bank credit check.

In each of these cases, a short-term business loan or property-backed private lending option tends to fit the situation better than pushing a bank line of credit application that is likely to be declined.

Lender assessment and documentation

Bank lines of credit generally need: two years of financials, most recent BAS statements, an ATO Integrated Client Account, current management accounts, aged debtor and creditor listings, director financial position, and a completed servicing calculator. Approval commonly takes 2 to 6 weeks.

Non-bank secured facilities can move faster. Documentation focuses on the property security, exit strategy, and purpose of funds. Settlement is often 5 to 15 business days from a signed letter of offer, subject to valuation and legal work.

Business-purpose lending sits outside NCCP for the borrower, so responsible lending obligations differ from consumer lending. Borrowers should still take independent legal, financial, and tax advice before signing.

How Innovate Funding helps

Innovate Funding works with a panel of private and non-bank lenders to help Australian business borrowers structure secured working capital solutions when a bank line of credit is not available, is too small, or is too slow. Depending on the situation, that may mean a second mortgage business loan, a caveat loan for fast settlement, a first mortgage refinance to consolidate working capital debt, or a straight secured business loan against property or commercial security.

We do not act as the direct lender. We help the borrower and their accountant think through structure, LVR, exit strategy, and cost, and match the deal to a lender likely to fund it.

Frequently asked questions

Is a business line of credit tax deductible?

Interest and fees on a business-purpose line of credit are generally tax deductible where the funds are used for business purposes. Deductibility depends on the specific use of funds, not the facility itself. Speak to your accountant before drawing on the facility for mixed or personal purposes.

How is the interest calculated on a business line of credit?

Interest is calculated daily on the drawn balance and charged monthly to the loan account. If the balance is nil, no interest is charged, but a line fee usually still applies to the unused limit. The total cost is drawn interest plus line fee plus establishment costs.

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

A bank facility is unlikely with recent defaults, judgments, or unpaid ATO debt. A property-backed private lender may still fund a working capital loan against equity, subject to LVR, exit strategy, and lender appetite. The rate will be higher and the term shorter than a bank facility.

What is the difference between a business loan and a line of credit?

A business loan is a lump sum drawn at settlement and repaid to a schedule. A business line of credit is a revolving limit that the business draws, repays, and redraws as needed. Loans suit lump-sum spending. Lines of credit suit ongoing cash flow gaps.

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

Not always. Unsecured facilities are available for established businesses with clear trading history and servicing. Property security delivers larger limits and sharper pricing. Where a bank declines unsecured, property-backed alternatives are usually the fastest route to a similar outcome.

How quickly can a private lender settle a property-backed working capital loan?

Indicative settlement is 5 to 15 business days from a signed letter of offer, subject to valuation, legal work, and lender assessment. Very short caveat loans can settle in 2 to 5 business days where a full second mortgage is not required.

Key takeaways

A business line of credit is a revolving facility with an approved limit, indicative rates around 8% to 13% per annum secured and higher unsecured, and a line fee on the unused limit.
Lines of credit and business overdrafts do similar jobs on different account structures. Overdrafts suit daily float, lines of credit suit planned draws.
Secured facilities against property or business assets deliver larger limits and sharper pricing than unsecured facilities.
Where a bank declines, property-backed private lending (second mortgage, caveat, first mortgage refinance) can often deliver a similar working capital outcome in 5 to 15 business days.
Business-purpose lending is treated differently to consumer lending under NCCP. Independent legal, financial, and tax advice is recommended.

Talk to Innovate Funding

If a bank line of credit has been declined, if the approved limit is too small, or if the timeline does not work for your business, we can look at property-backed alternatives that might suit. Contact Innovate Funding to discuss your situation with a lender-neutral view of the options.