The most common reason a business loan fails isn't the business — it's a mismatch between the deal and the lender. Getting the sequence right, from purpose to product to lender selection, is what separates a clean approval from a declined application and a damaged credit file.
This guide covers commercial-purpose borrowing. Consumer credit sits under different rules.
Step 1: Match the purpose to the product
Purpose drives product. The facility type you need follows directly from what the money is for — not from what a bank happens to advertise.
| Purpose | Product to consider |
|---|---|
| Acquire plant, equipment, or vehicles | Asset finance or equipment finance |
| Cover working capital gaps or seasonal variation | Line of credit |
| Fund outstanding invoices | Invoice and debtor finance |
| Buy or refinance commercial property | Commercial mortgage |
| Fund growth, acquisitions, or a project | Term loan via commercial lending |
Getting this wrong early creates problems downstream. A lender specialising in debtor finance won't price a term loan competitively. A bank property team won't write a working capital line efficiently.
Step 2: Size the borrowing and the serviceability
Before approaching any lender, establish two numbers: what you need to borrow, and what the business can comfortably service.
Lenders calculate serviceability using the business's net operating income against the proposed repayment. Most commercial lenders want a debt service coverage ratio (DSCR) above 1.25 — meaning the business generates at least $1.25 for every $1.00 of debt repayment. Below 1.0, you're asking the lender to fund a shortfall.
Borrow to the deal's actual requirement. Asking for more "to give yourself room" invites questions about purpose and inflates repayments unnecessarily.
Step 3: Know what lenders assess
No single number gets a commercial deal approved. Lenders weigh six things together.
Trading history
Most non-bank lenders require a minimum of six months' active ABN trading. Major banks typically want two years of financials. Less history means fewer lenders, but there are specialists who write early-stage and low-doc deals.
ABN and GST registration
An active ABN is a baseline requirement. GST registration is expected for any business turning over $75K p.a. or more.
Financial statements and BAS
Full-doc applications require two years of business tax returns, financial statements, and the directors' personal tax returns. BAS lodgments give lenders a real-time view of turnover — outstanding BAS obligations are a near-universal decline trigger. Get them current before you apply.
Cash-flow serviceability
Three to six months of business bank statements are the primary serviceability document for most non-bank lenders. They look for consistent inflows, manageable outflows, and no habitual overdraft usage.
Security
Secured lending carries lower rates and higher borrowing limits. Commercial property, director-held residential property, or the asset being financed all work. Unsecured facilities are available but typically cap at $500K–$1M with non-bank lenders and carry a rate premium.
Credit history
Lenders pull both the business credit file and the directors' personal files. Defaults, court judgments, and multiple recent credit enquiries all carry weight. Each lender enquiry lodges on your credit file whether the loan proceeds or not.
Step 4: Pull your documents together
A standard commercial loan application requires:
- Last two years' business tax returns and financial statements
- Last two years' personal tax returns for each director and guarantor
- Six months of business bank statements
- Current BAS lodgments (up to date, no gaps)
- ABN, ACN, and trust deed if the borrowing entity is a trust
- A clear statement of loan purpose, amount, and proposed security
Low-doc deals — where BAS and bank statements substitute for full financials — require fewer documents but attract a rate loading. Applications that arrive complete settle materially faster than those chased for missing documents.
Step 5: Know the four tiers of lender
The lender you approach matters as much as the product. Australia's commercial lending market has four broad tiers.
Major banks (the Big Four)
Lowest rates, most restrictive credit policy. Want two-plus years of trading, strong serviceability, and usually property security. Application to approval runs three to eight weeks for most commercial deals.
Second-tier banks
Judo Bank, Macquarie, BOQ, Bankwest, and others. More flexible credit appetite than the majors, particularly for specialist sectors and smaller deals. Turnaround typically runs two to four weeks.
Non-bank lenders
The widest range of credit appetite. This tier spans fintech platforms offering same-day to 48-hour decisions on working capital, specialist asset finance lenders, and commercial mortgage funders. Rates are higher and terms are often shorter, but they write deals the banks won't touch.
Private credit
Structured facilities for complex transactions — higher LVRs, shorter terms, bridging positions, or scenarios where standard bank policy doesn't fit. See commercial lending and private lending for how these work.
A $300K equipment deal and a $4M commercial mortgage belong with different lenders entirely. Matching the deal to a lender with genuine appetite for that credit profile is where a broker earns their keep. For a fuller breakdown of how the tiers compare, read bank vs non-bank commercial finance and six categories of business lender in Australia.
Step 6: Application to settlement — realistic timeframes by product
| Product | Typical timeframe (clean application) |
|---|---|
| Non-bank working capital or term loan | 24–72 hours to approval; funded 1–5 business days |
| Asset and equipment finance | 1–5 business days from signed documents |
| Second-tier bank — commercial loan | 2–4 weeks from application |
| Major bank — commercial loan | 3–8 weeks from application |
| Commercial mortgage (non-bank) | 2–6 weeks depending on valuation |
| Commercial mortgage (major bank) | 6–12 weeks |
The bottleneck in almost every deal is document return from the borrower. A complete pack on day one does more for your settlement date than anything else in this guide.
Step 7: Common decline reasons — and how to avoid them
Most declines fall into one of two categories: a viability problem (the business can't service the debt) or a matching problem (the business can service it, but the lender's policy doesn't fit the deal). The matching problem is more common — and almost always avoidable.
The most frequent avoidable triggers:
- Outstanding tax obligations. ATO payment plans, overdue GST, or unpaid super close most bank doors immediately. Formalise any arrangement before you apply.
- BAS not current. Missing lodgments signal non-compliance. Fix this first.
- Scattergun applications. Every application lodges an enquiry on your credit file. Applying to five lenders simultaneously doesn't improve your odds — it signals credit stress and compounds the damage if each one declines. This is the strongest practical argument for using a broker who reads lender appetite before any application goes in.
- Wrong lender for the deal. A hospitality business with strong cash flow but no property security is a good non-bank deal and a poor bank deal. A bank decline followed by a non-bank application means the second lender sees an existing enquiry — and a prior decline.
- Thin credit file. A business with no borrowing history is harder to assess than one with a track record of repayment. Trade accounts and a vehicle loan build the file ahead of a larger ask.
For what a business loan actually costs once you factor in fees, structure, and term, see the true cost of a business loan.
A broker's value in commercial lending
A broker's job here isn't form-filling. It's structuring the deal before it goes to market, reading which lenders have appetite for it today, and protecting the credit file from applications that were always going to fail.
Aurelius Capital writes commercial deals across the major banks, second-tier lenders, and the non-bank specialist market. The full lender panel covers over 130 active lenders across every product type.
If you've got a deal in mind and want a view on structure and lender fit before committing to an application, the application form is below. Most enquiries get a response within four business hours.