How lenders assess a business loan application in Australia

Every lender has a credit policy: a set of rules and preferences that decide who it lends to and on what terms. Two lenders can look at the same application and reach different decisions because their policies differ. Understanding the common building blocks helps you pick lenders whose policies fit your business.

1. Eligibility basics

Before anything else, lenders check whether you fall inside their box.

• ABN and GST registration. Most lenders want an active ABN, and some require GST registration or a minimum ABN age.
• Time trading. Minimums range from a few months with some online lenders to two years or more with banks and many non-bank lenders.
• Turnover. Many lenders publish a minimum monthly or annual turnover.
• Industry. Some industries are excluded or restricted by particular lenders.

If you fall outside these basics, the application usually stops there. That is why our marketplace lets you filter by time in business and turnover.

2. Bank statements and cash flow

For cashflow lenders, bank statements are the main event. Many connect directly to your bank feed. They look at:

• average monthly deposits and how consistent they are
• the average and lowest account balances
• dishonours and overdrawn days
• repayments to other lenders
• large one-off transactions that need explaining

Larger loans usually also need financial statements, tax returns or management accounts, and sometimes access to your ATO portal.

3. Credit history

Lenders check the business credit file and usually each director’s personal file. They are looking for defaults, court actions, insolvency history, payment behaviour and recent enquiries. A clean file opens up the widest choice of lenders and the sharpest pricing.

4. ATO position

Tax debt is one of the most common issues in business lending. Lenders want to know how much is owed, whether lodgements are up to date, and whether any payment plan is being met. Honesty matters: an undisclosed ATO debt discovered during assessment is far more damaging than one declared up front.

5. Existing debt and serviceability

Lenders add up your existing commitments and check that the business can comfortably afford the new repayment. Several short-term loans with daily repayments can limit your options even when turnover is strong. Refinancing them into one facility is sometimes the better first step.

6. Security

Where security is offered, the lender values it and applies a maximum loan-to-value ratio (LVR). Strong security can offset weaker financials or credit history, which is why property-secured and private lenders can often approve scenarios that cashflow lenders cannot.

7. Purpose and exit

Finally, lenders want to know what the money is for and, for short-term loans, how it will be repaid. A clear purpose and a realistic exit strategy, such as a refinance, a property sale or a contract payment, make an application stronger.

Putting it together

The best-priced product is only valuable if you fit the lender’s policy. Start by filtering for products whose published criteria you meet, prepare the documents in our business loan documents checklist, and if your scenario has complications, ask us to match you.