Business loans in Australia

Australia's small and medium enterprise (SME) sector is the backbone of the national economy. According to the ABS, there are over 2.5 million actively trading businesses in Australia — with SMEs accounting for approximately 99.8% of all businesses and employing around 7.4 million Australians. Access to appropriate funding is one of the most critical factors determining whether these businesses succeed, grow, or stagnate.

The lending landscape has evolved significantly. While the four major banks (CBA, Westpac, ANZ, NAB) remain significant players, the rise of alternative lenders has dramatically expanded the options available. Alternative lenders introduce faster approvals, more flexible eligibility, and technology-driven assessments focused on real-time business performance rather than historical financials alone.

This shift has been particularly beneficial for newer businesses, sole traders, and SMEs that may not meet traditional bank criteria — and the growth in non-bank market share continues year over year.

Factor rates are commonly used by alternative lenders. A factor rate (e.g. 1.20) is multiplied by the loan amount to give you the total repayment amount. For example, a $100,000 loan with a factor rate of 1.20 means you repay $120,000 in total. Factor rates provide clarity because you know the exact total cost upfront.

Interest rates are the traditional pricing model used by banks. These can be fixed or variable. While headline rates may appear lower, the total cost depends on compounding, term length, and fee structure.

Establishment fees are one-off fees charged when the loan is set up, typically 1–4% of the loan amount. Some lenders include this in the loan; others charge it separately.

Always ask for the total amount repayable, not just the rate. A $100,000 loan with a factor rate of 1.20 over 12 months costs $20,000 in fees, while the same amount at 1.15 over 6 months costs $15,000 — the shorter term with higher monthly payments is cheaper overall.