Basic Eligibility Criteria for Business Loans in Australia

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Key Takeaways

Key Point Description
Common Eligibility Requirements
Some common business loan eligibility requirements are demonstrating a capacity to repay the loan, acceptable credit score and history, appropriate security (if not applying for an unsecured business loan), guarantees, as well as appropriate supporting documents.
Factors Influencing Eligibility
Factors that can affect your eligibility include serviceability, the type of loan you're applying for, the lender's risk appetite, the availability of security, and the industry your business is operating in.
Improving Eligibility
Improving your loan eligibility includes improving your business revenue and cash flow, minimising other debts and, making sure you have good account conduct. For instance, you should have no direct debit dishonours.

Securing financing is crucial for any small or medium-sized business looking to start, grow, or sustain operations. Business loans can provide the necessary capital, but lenders have specific eligibility criteria that applicants must meet. Understanding these core requirements is essential for securing loan approval in Australia.

Common Eligibility Requirements for Business Loans in Australia

While the exact criteria vary across lenders and loan products, some of the most common eligibility factors include:

Capacity to Repay the Loan

First and foremost, lenders want to ensure that your business has the capacity to repay the  loan. To do that, lenders look at your business’s cash flow, current debts, assets and liabilities. They do this by examining your business’s financials, which include balance sheets, income statements, and cash flow statements. They may also make use of the Debt Service Coverage Ratio, which calculates your business’s net operating income and total debts. This ratio tells lenders if your income is enough to handle the new debt on top of your current debts. 

If you’re applying for an unsecured loan, lenders will analyse your income and expenses from via read only view of your business bank accounts.  They’ll use this data to assess your capacity to repay as well ensuring there’s no red flags, like direct debit dishonours.

Credit Score and History

Many lenders put high importance on a director’s credit score when approving loans. A good credit score and a robust credit history indicate that a business is more likely than not to meet loan repayments. 

Legal Documents and Registrations

Businesses are usually required to provide legal documents such as their business licence, Australian Business Number, franchise agreements, permits, and more, depending on the nature of their business.

Business Age

Some financial institutions have a minimum business age requirement, typically at least one to two years of operational history, to apply for a loan. However, options are also available for startups and new businesses with limited history.


Some types of loans, like secured loans, may require you to offer security, such as real estate, equipment, or other assets. If you fail to repay the loan, the lender can protect their interests by taking possession of the security.


Personal guarantees from the business director can help with loan approval and securing better loan terms. A signed guarantee allows lenders to access the business owner’s personal assets in case the business defaults on the loan.

Factors Influencing Eligibility

The eligibility criteria and thresholds used by lenders can vary based on several key factors:

  • Loan Type and Purpose
    • Different loan products will have unique eligibility requirements tailored to their intended use. For instance, those applying for secured loans will need to provide acceptable assets to secure the loan whereas unsecured loans can often be secured with just a director’s guarantee.

  • Lender’s Risk Appetite
    • Different lenders, from banks of all sizes to non-bank institutions, may have varying risk tolerances. Traditional banks may be more strict when it comes to approval, but they provide the lowest interest rates and have the broadest range of products. Meanwhile, non-bank lenders may be more risk tolerant, but will generally have rates that aren’t as low as banks and their terms are often shorter.

  • Industry and Business Profile
    • Lenders may adjust their criteria based on the industry, size, and growth of the applicant’s business. Certain sectors and company profiles are considered higher risk. For instance, communications and real estate construction may be considered low risk, while restaurants and personal services may be considered riskier. 

  • Security
    • The availability and quality of security can influence a lender’s willingness to approve loans with good terms. An eligible asset that’s non-perishable, titled, in good condition, and easy to liquidate is valuable to a lender. If a borrower can access acceptable security, it can lead to loan approval with higher principals, lower interest rates, and longer loan durations.

Improving Eligibility

To enhance their chances of securing business loan approval, applicants can implement the following strategies:


  • Strengthen Personal and Business Credit: Make timely payments on all debts and reduce your credit utilisation to improve your credit score. Address any delinquencies, defaults, or other negative items on credit reports well in advance. 


  • Manage Debt and Improve Cash Flow: Work on lowering your debt levels and improving your business’s cash flow. A strong cash flow indicates your ability to repay a loan, making you a less risky proposition for lenders.


  • Apply for the Right Type of Loan: Ensure the loan product you apply for suits your business needs and credit circumstances. If your needs, your qualifications, and the loan type do not align, it can lead to rejection. Even if you get approval, you may end up with unfavourable terms.


  • Explore Different Lenders: Besides traditional banks, consider non-bank lenders as well. They often have more flexible requirements than traditional banks and are willing to lend to businesses despite issues like tax debt or bad credit. 


  • Partner with Lending Experts: Consulting experienced financing experts like ensures your application is aligned with appropriate loan products and lenders.


Find Tailored Loan Solutions for Your Business

Every business will have unique needs and circumstances, so the loan application process will always vary. Some businesses are in very good financial standing, while some may have issues with their credit score or their financial statements.

Whatever the case may be, there are plenty of solutions that can address a business’s specific needs. 

If you’re looking for funding for large purchases, working capital, or any business need, we can help you find loans tailored to your situation. We’ll direct you to lenders who can get you the financing you need with low rates and turnaround times as fast as one to three days. 

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