Short Term Business Loans in Australia

What Is a Short Term Business Loan?

A short term business loan is a loan facility provided for a limited period, typically to address a temporary funding requirement.

In private lending, short term business loans are generally:

• Structured for terms between a few months and two years

• Secured against property or other acceptable assets

• Used for business or investment purposes

• Assessed primarily on security quality and exit certainty

These loans are designed to solve immediate funding needs rather than provide ongoing working capital finance.

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When Are Short Term Business Loans Used?

Short term business loans are used when businesses need capital quickly and for a clearly defined purpose.

Common scenarios include:

• Managing short-term cashflow constraints

• Funding time-sensitive business opportunities

• Covering temporary funding gaps pending refinance

• Addressing urgent liabilities or settlement deadlines

• Supporting business transitions or restructures

These facilities are most effective when there is a clear plan to repay or refinance the loan within a short timeframe.

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How Private Lenders Assess Short Term Business Loan Risk

Private lenders assess short term business loans with a strong focus on downside protection.

Key considerations include:

Security Quality

Lenders review:

• The type and location of the secured asset

• Market depth and resale liquidity

• Valuation reliability and conservatism

The underlying security plays a central role in approval decisions.

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Loan-to-Value Ratio (LVR)

Short term business loans are assessed using conservative LVR limits to protect against market volatility.

Where a short term facility sits behind an existing loan, it may involve a second mortgage loan, which requires additional equity buffers due to subordinate ranking.

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Exit Strategy

The exit strategy is critical.

Acceptable exits commonly include:

• Refinance into a longer-term facility

• Sale of the secured asset

• Cash inflow from a confirmed business event

For a broader explanation of how private lenders evaluate exit strategies, see Private Lending in Australia.

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LVR and Security Considerations for Short Term Business Loans

Short term business loans rely heavily on security quality and valuation accuracy.

Private lenders typically require:

• Independent valuations

• Conservative assumptions around market value

• Clear equity buffers above peak debt

A first mortgage private loan may allow higher leverage where security is strong and the exit is clear. More complex or subordinate structures are assessed more conservatively.

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Exit Strategy Requirements

Every short term business loan must be supported by a realistic and time-bound exit. Private lenders assess:

• The certainty and timing of the exit

• The borrower’s ability to execute the proposed strategy

• Sensitivity to delays or market changes

Applications are commonly declined where exit strategies rely on assumptions rather than documented evidence.

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Common Reasons Short Term Business Loan Applications Are Declined

Short term business loan applications may be declined for several reasons, including:

• Insufficient equity in the secured asset

• Weak or unsupported exit strategies

• Over-reliance on optimistic valuations

• Inappropriate security for the loan size

• Consumer-purpose use incorrectly presented as business-purpose

These issues are structural and can often be addressed through improved planning and structuring.

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How Short Term Business Loans Are Structured

Private short term business loans are typically structured as:

• Short-term facilities, often between 3 and 24 months

• Interest-only or capitalised interest arrangements

• First or second mortgage security

• Fixed repayment aligned with the exit strategy

Pricing reflects transaction urgency, risk profile, security quality, and loan duration. These loans are designed to provide speed and flexibility rather than low-cost long-term funding.

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How Innovate Funding Structures Short Term Business Loans

Innovate Funding structures short term business loans by focusing on security strength and exit clarity.

This includes:

• Reviewing asset quality and valuation fundamentals

• Assessing LVR and peak debt exposure

• Structuring facilities aligned with business objectives

• Matching transactions with suitable private lenders

Each short term business loan is assessed individually to ensure it is viable, executable, and aligned with the borrower’s exit strategy.

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Short Term Business Loans – Frequently Asked Questions

How short can a short term business loan be?
Some facilities can be structured for as little as a few months, depending on the exit strategy.

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Are short term business loans secured?
Most private short term business loans are secured against property or other acceptable assets.

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How quickly can short term business loans settle?
Once valuations and documentation are complete, settlement can occur within days.

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Can short term business loans be refinanced later?
Yes. These loans are commonly refinanced into longer-term facilities once the short-term funding need has passed.

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Are short term business loans expensive?
They typically carry higher costs due to speed, flexibility, and risk profile, but provide access to capital where banks cannot assist.

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Understanding Your Options

Short term business loans play an important role in Australia’s private lending market by providing fast, flexible funding for temporary business needs.

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When structured correctly, these facilities allow businesses to navigate short-term challenges while maintaining a clear pathway to exit.

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For a broader understanding of how short term business loans fit within private finance, visit
Private Lending in Australia.